vendor disclosure & warranty - australian institute of ... · vendor disclosure and warranty...

AUSTRALIAN INSTITUTE OF

CONVEYANCERS (NSW DIVISION)

2017 EDUCATION PROGRAM

Vendor Disclosure &

Warranty

PRESENTED BY:

TONY CAHILL

10 APRIL, 2017

CROWNE PLAZA NEWCASTLE CNR MEREWETHER STREET & WHARF ROAD, NEWCASTLE

AUSTRALIAN INSTITUTE OF CONVEYANCERS (NSW DIVISION)

– – i –

Vendor disclosure and warranty

Tony Cahill Legal Commentator and Author

TABLE OF CONTENTS

About the author ..................................................................................... iii

Purpose of investigations 1

The general law duty of disclosure 2

Statutory intervention – the “anti-gazumping” legislation 6

The range of investigations 7

The timing of investigations by the purchaser 7

Some issues regarding section 149 certificates 8

Some issues regarding drainage diagrams 19

Building certificates 20

Swimming pools 23

Home Warranty Insurance and Vendor Disclosure 25

Changed disclosure obligations as from 15 January 2015 33

A summary of the home warranty provisions 37

Mine Subsidence Compensation Act – a “special” warranty 41

– – ii –

– – iii –

ABOUT THE AUTHOR

Tony Cahill started practice in 1981. After 13 years with a medium-sized

city law firm, Tony commenced practice on his own account at Chatswood

until June 2002. Tony is currently undertaking a ’sabbatical’ from private

practice to concentrate on projects in continuing professional education.

Tony is a member of the Law Society’s Property Law Environmental,

Planning and Development Committees. He has been a member of the Re-

Draft Committees for the 2000 and 2004 editions of the Contract for the

Sale of Business, and the Contract for the Sale of Land since the 1992

edition.

Tony was a co-author with Russell Cocks and Paul Gibney of the first New

South Wales edition of 1001 Conveyancing Answers, and is currently a co-

author of the Conveyancing Service New South Wales, and Annotated

Conveyancing and Real Property Legislation New South Wales, both

published by LexisNexis. Tony is also the General Advisor on the recently

released online product LexisNexis Practical Guidance – Property Law

Module.

Tony has been a part-time lecturer at the University of Technology,

Sydney, in subjects including Construction Law, Legal Studies, and Real

Estate Law, and a part-time lecturer at the Sydney and Northern Sydney

Institutes of TAFE in various law subjects. He lectures in the Applied Law

Program at the College of Law, Sydney.

– – iv –

– 1 –

Vendor disclosure and warranty

Tony Cahill

____________________________________________________________

Purpose of investigations

When acting for a vendor, investigations can be undertaken for several

purposes:

➢ to enable the vendor to comply with disclosure obligations

imposed under the general law;

➢ to enable the vendor to comply with statutory disclosure

obligations (principally under the Conveyancing (Sale of Land)

Regulation 2010 Schedule 1, but also, for instance, under the

Home Building Act 1989);

➢ to determine whether there are circumstances which may give rise

to a breach of statutory warranty (Conveyancing (Sale of Land)

Regulation 2010 Schedule 3);

➢ to preclude objection to a breach of an implied term

(Conveyancing (Sale of Land) Regulation 2010 Schedule 2);

➢ to comply with non-statutory disclosure obligations imposed

under the contract (for example, the provision of a section 109

certificate);

➢ to check whether it is necessary to preclude objection to a matter

affecting the property via an express term of the contract

(typically clause 10.1.9, but also note clause 17 dealing with

disclosure of tenancies); and

➢ to facilitate the transaction – even where disclosure is not strictly

necessary, it may be helpful in the marketing of the property or in

encouraging a cautious purchaser to proceed to exchange.

From the purchaser’s perspective, investigations may be undertaken:

➢ to investigate the quality of the property being sold;

➢ to test the validity of statutory warranties;

➢ to verify information supplied by third parties (for instance,

obtaining certificates of currency to verify information in a section

184 (formerly section 109) strata information certificate);

Vendor disclosure and warranty Tony Cahill

– 2 –

➢ to quantify any adjustable rates, levies and charges affecting the

property; and

➢ to determine whether any amount is owing to an authority which

may give rise to a charge on the land.

The general law duty of disclosure

The general principles regarding the vendor’s duty of disclosure are as

follows:

1. The vendor will generally have to disclose any latent defects in

title. A latent defect is one which is generally not discoverable on

an inspection of the property. Some examples include: drainage or

sewerage easements not discoverable from a surface inspection

(Micos v Diamond (1970) 72 SR (NSW) 392); restrictive

covenants (Re Roe and Eddy’s Contract [1933] VLR 427); or an

undisclosed public or private right of way (Ashburner v Sewell

[1891] 3 Ch 405).

2. A purchaser’s remedies for failure to disclose a latent defect in

title will depend on the gravity of the defect. If the defect is

“serious” or “substantial”, the purchaser can terminate the

contract, or seek specific performance with compensation. In any

other case, the purchaser’s remedy will be the usual “error or

misdescription” remedy of compensation.

3. Whether or not the vendor knew about the defect at the time of

making the contract is irrelevant. The purchaser’s state of

knowledge is relevant. If the defect in title was irremovable (that

is, could not be rectified by a payment of money – for example, a

mortgage would not be an irremovable defect, and so the fact that

the purchaser knew of an existing mortgage would not of itself

mean the purchaser was taking title subject to the mortgage) and

known to the purchaser (which knowledge includes an awareness

that it is intended that the purchaser take subject to the

encumbrance), then the purchaser will have to “put up with” the

defect, in the absence of an express contractual obligation to

provide an unencumbered title.

4. A vendor does not have to disclose a patent defect in title – one

which is visible to the eye, or which is discoverable by the

exercise of reasonable care when inspecting the property. For such


– 3 –

defects the principle of caveat emptor – let the buyer beware –

applies. Courts have been reluctant to find that a defect in title is

patent in any but the most clear-cut cases. For example, in Yandle

& Sons v Sutton [1922] 2 Ch 199, a track was situated on the

property. The track ran, irregularly, from one side of the property

to the other, and showed signs of periodical use by a number of

people. The Court held the matter was latent rather than patent on

the basis that even though the track’s use was reasonably apparent

to the naked eye, this did not necessarily indicate a legal right to

use the track (it was, in fact, a public right of way).

5. If the defect is a defect in quality – whether latent or patent – the

principle of caveat emptor again applies. Some common examples

of defects in quality include:

➢ town planning restrictions (Pottinger v George (1967)

116 CLR 328; Lavery v Nelson (1984) NSW ConvR

¶55-169; Carpenter v McGrath (1996) 40 NSWLR 39);

➢ breach of development consent provisions (Sullivan v

Dan (1997) NSW ConvR ¶55-805);

➢ structural danger of a building (Kadissi v Jankovic [1987]

VR 225);

➢ termite infestation (Eighth SRJ Pty Ltd v Merity (1997)

NSW ConvR ¶55-813);

➢ flood-prone land (Maybury v Constantinou (1984) NSW

ConvR ¶55-171);

➢ a consolidated coal mining lease (Borda v Burgess

[2003] NSWSC 1171: 11 December 2003, per Young CJ

in Eq); and

➢ the lack of home warranty insurance (or its predecessor)

under the Home Building Act 1989 (Festa Holdings Pty

Ltd & anor v Adderton & ors [2004] NSWCA 228,

13/7/2004, discussed in more detail below).

The caveat emptor rule is subject to a number of important qualifications.

1. Where the vendor has fraudulently concealed a defect in the

property (for example, a serious structural fault is concealed by

the vendor), the vendor intending that the purchaser acts on the


– 4 –

concealment and the purchaser does so. Some of the leading cases

have involved papered-over settlement cracks (Anderson v

Daniels (1983) NSW ConvR ¶55-144); subsidence (Gronau v

Schlamp Investments (1975) 52 DLR (3d) 631); or, in one case,

even a cockroach infestation (Rowley v Isley [1951] 3 DLR 766).

2. Where the vendor has made a representation about the property,

and that representation is untrue, the fact that the matter is one of

quality will not necessarily preclude action.

3. Where the contract involves a house under construction or to be

constructed by the vendor, there is an implied term that the house

will be constructed in a proper and competent manner, using

proper materials, and the end result will be reasonably fit for

human habitation (Barber v Keech (1987) 64 LGRA 116). If these

matters are expressly dealt with in the contract there will, of

course, be no room for the implied term to operate.

4. The failure by a vendor to disclose an important defect in quality

may be relevant to the exercise of a court’s discretion regarding an

action commenced by the vendor for specific performance of the

contract or an action by the purchaser seeking a refund of deposit

under section 55(2A) of the Conveyancing Act 1919.

5. The purchaser may in some situations have a remedy under the

Competition and Consumer Act 2010 for misleading or deceptive

conduct relating to an otherwise non-actionable defect.

For a useful discussion of the principles see Clancy v Prince [2001]

NSWSC 85; [2001] ANZ ConvR 354; (2001) NSW ConvR ¶55-981;

[2001] ACL Rep (Issue 5) 355 NSW 24.

A recent case of interest raising issues of misleading conduct by silence is

Hinton & Ors v Commissioner for Fair Trading [2006] NSWADT 257;

affirmed on appeal – Hinton & Ors v Commissioner for Fair Trading,

Office of Fair Trading (GD) [2007] NSWADTAP 17. The agent held the

listing for a property which had been the scene of a notorious triple

murder. The agent formed the view that this was not a positive marketing

feature, and so, to put the matter neutrally, downplayed how the property

had come to be for sale. An intending buyer with no knowledge of the

property’s history exchanged contracts, but discovered prior to settlement

the history of the property. The buyer sought rescission and this was

ultimately agreed to. The Office of Fair Trading took disciplinary action


– 5 –

against the corporate licence holder, the licensee-in-charge and the

salesperson. Fines of the order of $28,000 were imposed. An appeal to the

ADT confirmed the OFT decision. The judgment contained an interesting

discussion of the law relating to ’stigmatized’ properties, and the duty of

an agent to disclose such a matter to prospective buyers. The law regarding

properties where a son has murdered his parents and sister is now clear.

Issues such as ‘how stigmatized’ the property has to be, whether there is a

statute of stigma limitations, and whether the principles are different if the

adjoining property to the one being sold was the scene of the crime await

clarification. An important practical issue is how does the vendor (or, for

that matter, the purchaser) investigate the possibility of “stigma”.

One point of note for legal practitioners arising from the Hinton case is that

the agent did seek legal advice in the circumstances set out at [8] of the

decision at first instance:

8 In response to the questions as to whether he had received any

legal advice as to how he should comply with his ethical and legal

obligations in respect of the sale of the house, Mr Hinton said that

he had spoken to the vendor’s solicitor who told him there was no

obligation to disclose that the house was the scene of the

Gonzales murders. He had not sought independent legal advice

with respect to his own obligations as agent, rather than the

vendor’s obligations. He thought marketing the property as a

deceased estate was, “the way I saw best to market the property in

the absence of any other indication.” He conceded that the

nomination of the property as a deceased estate conveyed an

explanation for the state the property was in.

It appears that whatever may be the position of a vendor regarding

disclosure, the vendor’s agent may be subject to different principles, and

have different interests.

Editions of the standard contract since its inception have contemplated the

possibility of contractual disclosure. As long as vendor disclosure was

based purely as a matter of contract, there was a risk that the contract

would be amended to limit, or, in an extreme case, even remove, the rights

of a purchaser as regards defects in the property. This could be achieved

either by use of a blanket clause requiring the purchaser to put up with a

number of generically described items, or by what was to be dealt with by

an attachment to the contract instead being summarised or paraphrased on

the face of the contract. Users of earlier editions of the standard contract

have long been encouraged to attach a zoning certificate to the contract.

Some chose to delete reference to an attached certificate, and instead to


– 6 –

state the import of such a certificate. The problems which can arise with

this practice are evidenced by cases like Sargent v ASL Developments Ltd

(1978) 48 ALJR 410 and Champtaloup v Thomas [1975] 2 NSWLR 38.

Statutory intervention – the “anti-gazumping” legislation

For many years purchasers of real property, and those advising them,

operated under certain disadvantages derived from contract law and

conveyancing practice. With a buoyant and rising real property market,

a practice known as ‘gazumping’ grew up. Vendors, who had agreed to

sell the subject property, later executed contracts with a different

purchaser whilst the first purchaser was still securing the certificates of

relevant information concerning the property, necessary for completion

of the purchase.

Different views may be held about this practice. For some, it was simply

the market forces at work. For others, it indicated a decline in

honourable standards and a retreat from agreements solemnly arrived at

but not formalised. Between the two views was an opinion that an

attempt should be made to reduce the burden on purchasers of the costs

thrown away upon a conveyance which would not proceed and the

frustration of dislocated plans, given the frequent interrelationship of

one conveyancing transaction with others.

It was to attain the objective of reducing the burden on purchasers,

diminishing the risks of gazumping and shifting obligations to the

vendor that the Conveyancing (Vendor Disclosure and Warranty)

Regulation 1986 (the Regulation) was made, pursuant to section 52A(9)

of the Conveyancing Act 1919.

The above (Copmar Holdings Pty Ltd v The Commonwealth (1989) NSW

ConvR ¶55-451, per Kirby P), while part of a dissenting judgement,

provides perhaps the most succinct summary of the policy issues behind

the introduction of what is commonly (although, perhaps, slightly

misleadingly) called the “anti-gazumping” legislation. After a false start

with the infamous “preliminary agreement” era, the legislation has settled

down and has produced comparatively little judicial commentary. In the

rest of this session, the main features of the group of legislation dealing

with formation of the contract and the purchaser’s remedies for

non-disclosure, will be discussed.

The anti-gazumping provisions are contained in a number of different

statutes, and have significantly different ‘triggering’ requirements and

consequences which are occasionally confused by practitioners. Time will

limit consideration to what might be described as “conveyancing statutes”

(Conveyancing Act 1919, and Property Stock and Business Agents Act

2002) and one other statute (Home Building Act 1989). The important


– 7 –

subordinate legislation is now Conveyancing (Sale of Land) Regulation

2010 and Property Stock and Business Agents Regulation 2014. More

general statutes, such as the Australian Consumer Law in the Competition

and Consumer Act 2010 (particularly, for instance, sections 18, 29 and 30

of the ACL – the former sections 52, 53 and 53A of the 1974 Act), and

non-statutory rights, such as contractual warranties, are important enough

to merit a separate session.

The range of investigations

For a vendor, investigations prior to the formation of the contract should, at

a minimum, include:

➢ those necessary to comply with statutory disclosure obligations;

➢ determining whether there has been any residential building work

which could be the subject of disclosure under the Home Building

Act 1989;

➢ ascertaining whether there has been any unauthorised building

work;

➢ subject to instructions, those necessary to check whether there

may be a breach of a statutory warranty – the remedy for breach

can be precluded; and

➢ where documents are attached to a contract for other reasons,

checking whether those documents are accurate (not misleading,

deceptive or likely to mislead or deceive).

For a purchaser, and again subject to instructions, investigations should

include at least:

➢ relevant quality reports;

➢ those investigations necessary to test relevant statutory warranties;

➢ for residential properties, whether there has been any work subject

to the provisions of the Home Building Act 1989, and whether the

vendor has complied with any obligations imposed under that Act

(see sections 95, 96, 96A and 96B); and

➢ relevant rate and levy inquiries.

The timing of investigations by the purchaser

When should inquiries be undertaken on behalf of a purchaser?


– 8 –

➢ Quality reports should be undertaken prior to exchange (or at least

prior to the contract becoming unconditional).

➢ Matters relating to the Home Building Act 1989 should also be

investigated prior to exchange, since lack of home warranty

insurance will frequently be a matter going to quality rather than

title – see the discussion below.

➢ Inquiries to test the statutory warranties should be made shortly

after exchange of contracts (since the warranty obligations are

assessed as at the date of the contract).

➢ Rating inquiries and land tax clearances should be obtained

shortly prior to settlement (frequently these can be made at the

same time as the testing of statutory warranties; where there will

be a substantial delay between exchange and settlement, such as in

an off-the-plan purchase, the rating inquiries should be postponed

until the proposed plan is approaching registration).

➢ A search of the Torrens Register can usefully be made shortly

after the contract becomes unconditional. Some practitioners

would argue that in the age of vendor disclosure a purchaser need

only make a final search. My difficulty with that approach is that

the title disclosure documents attached to the contract may be out

of date by the time of the exchange; and finding out there is a

problem only at the time of getting a final search result may not

allow sufficient time to address the problem.

Some issues regarding section 149 certificates

Should the vendor obtain a section 149(2) certificate, or the additional

information under section 149(5)?

For the purposes of statutory vendor disclosure and warranty, a section

149(2) certificate suffices (see the definition of “section 149 certificate” in

clause 3 of the Conveyancing (Sale of Land) Regulation 2010). Following

the introduction of the more limited form of section 149(2) certificate in

February 2009 (limited to dealing with complying development), the

definition was amended to confirm that the limited section 149(2)

certificate will not suffice for disclosure and warranty purposes.


– 9 –

For the purposes of contractual disclosure, the additional information under

section 149(5) may disclose information which can be precluded from

objection.

For the purpose of facilitating the transaction, the full s 149 certificate will

be welcomed by the purchaser.

It should be said that the practices of councils relating to s 149(5) vary

widely. Some councils include most useful information (such as whether

there are outstanding notices affecting the property). On the other hand, I

have seen a certificate where the information provided under s 149(5) was

to the effect that “Council has resolved not to provide any information

under section 149(5)”.

When does a section 149 certificate “go stale”?

For the purposes of statutory disclosure, a section 149 certificate has no

expiry date.

For the purposes of vendor warranty, a section 149 certificate may become

problematic the day after its issue, since a change in council policy may

mean the certificate no longer shows the “true status” of the property

regarding the matters which must be contained in a section 149(2)

certificate.

For the purposes of satisfying the requirements of an incoming mortgagee,

the policy of the individual mortgagee will be relevant.

Local councils frequently take decisions which are of a type which will be

recorded on the planning certificate. The Regulation does not prescribe a

lifespan for a planning certificate, but some judicial guidance is now

available from the Supreme Court decision of Mandalidis v Artline (1999)

47 NSWLR 568; [1999] NSWSC 909; (1999) 9 BPR 16,845 (9 September

1999, Austin J).

By contract dated 14 November 1996, the plaintiffs, as vendors, entered

into a contract (substantially in the form of the standard 1992 edition of the

joint copyright form) with the first defendant, as purchaser, relating to a

warehouse and office near Kingsford Smith Airport. The section 149

certificate attached to the contract was dated 18 June 1996, and stated that

the land was not affected by any council policy to restrict development by

reason of land slip, bushfire, tidal inundation, subsidence, or any other risk.

(The certificate also included separately a circular letter, suggesting that if


– 10 –

information about aircraft noise was required, a written inquiry could be

made of the Federal Airports Corporation.) After exchange, the purchaser

obtained a section 149 certificate, dated 19 December 1996, which stated

that the property was affected by a council policy to restrict development

by reason of land slip, bushfire, tidal inundation, subsidence, or any other

risk. The policy was adopted on 4 June 1996 and amended on 18 June

1996. Details of that affectation were contained in an attachment to the

certificate. Stripped of technical detail, the attachment effectively provided

that, given the variation from time to time of flight paths, council would

assume a “worst case scenario” in determining whether a property was

affected by aircraft noise. If the property was affected, any development

consent would be a “Deferred Commencement” consent to ensure that the

development had been certified by the FAC and/or Air Services Australia

to a specific Australian Standard. By letter dated 13 January 1997, the

solicitors for the purchaser sent a copy of the second certificate to the

solicitors for the vendor, and by letter dated 21 January 1997 purported to

rescind. The purported rescission was resisted by the vendor, who treated

the purported rescission as a repudiation and purported to terminate the

contract. The vendor sought declarations as to the validity of the purported

termination and the purchaser cross-claimed seeking a declaration of the

validity of the rescission, or alternatively an order for recovery of the

deposit under section 55 of the Conveyancing Act 1919.

The Court found for the purchaser, holding that the purchaser was entitled

to a refund of deposit for breach of the statutory warranty. The Court also

held that, even if the purchaser had not been entitled to rescind for breach

of statutory warranty, the purchaser would have been entitled to relief

under section 55(2A) of the Conveyancing Act 1919 for a refund of the

deposit, because the contract was misleading because of the failure of the

certificate to refer to the policy on aircraft noise.

It is tempting to suggest that aircraft noise should not be considered as a

risk at all, or at least not as a risk of the same type as “land slip, bushfire,

tidal inundation, and subsidence”, and so the council should not have

mentioned this particular policy under the heading specified in the

certificate. This argument was rejected by His Honour (at paragraphs [53]

to [58]; 9 BPR at 16,858 to 16,860).


– 11 –

The right to rescind for breach of a statutory warranty is not unfettered.

Clauses 16(3) and 16(4) of the 2010 Regulation (clauses 19(3) and 19(4) in

the predecessor Regulations) must be considered.

The purchaser was aware that the property may have been affected by

aircraft noise – either from extrinsic evidence (properties in Mascot would,

by definition, be affected by aircraft noise), or from the reference in the

earlier certificate. The matter affecting the land was not the aircraft noise

itself (a matter which has long been regarded as a matter of quality rather

than going to title), but the policy restricting development because of the

noise issue.

The defendant also argued that the failure of the purchaser to make the

further inquiry suggested in the earlier planning certificate should count

against the purchaser. This submission was also rejected by His Honour (at

paragraph [63], 9 BPR at 16,861):

The fact that prior to the contract, the first defendant made no evaluation

of the policies of the Council in regard to development applications and

the likely impact of any such policies on the value of the property is not

to the point. In light of s52A and the legislative policy underlying it, a

purchaser of the Property was entitled to assume, in the absence of

anything unusual in the s149 certificate or other parts of the contract,

that any necessary development application would not encounter any

unusual difficulties, provided that it fitted the requirements of the

appropriate zoning category.

His Honour also held that, in order to give best effect to the remedial

nature of the legislation, the test in what was then clause 19(3)(c) should be

construed subjectively (that is, would this purchaser have entered into the

contract) rather than objectively (would a reasonable person in the

purchaser’s shoes have entered into the contract (at paragraph [66], 9 BPR

at 16,861-16,862)?

Mandalidis v Artline gives guidance to practitioners about the practice of

updating section 149 certificates. It is probably impossible to treat planning

certificates on the same basis as foodstuffs, with a legislative, regulatory,

or judicial ‘use by date’ on the certificate. Practitioners will need to

consider issues such as the land use, the relative “activism” of the council,

the pace of development and redevelopment in the area, and so forth. What

is clear is that, whether because of the statutory warranty or the operation

of section 55 of the Conveyancing Act 1919, a certificate of the order of six

months old imposes significant risks on the vendor.


– 12 –

One final point – the first planning certificate postdated by two weeks the

adoption of the council policy on aircraft noise. By coincidence, the date of

amendment of the policy was the very day the first certificate issued. To

that extent, the certificate did not disclose council’s policy as at the date of

issue.

Will a section 149 certificate need updating when the prescribed content of

the certificate changes?

The above discussion needs to be read in the light of the changes to the

content of section 149 certificates which have taken effect progressively

since 27 February 2009.

From time to time there have been changes to the prescribed content to be

set out in a section 149(2) certificate. The key provision listing that content

is Schedule 4 of the Environmental Planning and Assessment Regulation

2000.

What should practitioners acting for vendors do in the light of the content

in the Schedule changing from time to time?

1. Applicants for a section 149 certificate should ensure that the

application form specifies that the applicant requires the “full”

rather than the “limited” certificate. The Department of Planning

(in Planning Circular PS-005 issued on 20 February 2009) has

recommended that Councils modify their application forms to

mention the possibility of obtaining a limited certificate, and has

advised that by default all other section 149 certificates should set

out all of the matters mentioned in Schedule 4. Presumably all

Councils have now done this.

2. Recipients of a section 149 certificate should verify that the

Council has supplied a full certificate setting out all the matters

mentioned in Sch 4 of the EP&A Reg.

3. Where a contract (or option) has not been entered into,

practitioners should seek instructions from, and the informed

consent of, the vendor as to whether exchange should be delayed

until a fresh section 149 certificate is obtained; if not, whether the

vendor can make a contractual disclosure by other means. For risk

management purposes those instructions should be in writing. Any

additional provision in the contract should be so drafted that it


– 13 –

would not be construed as breaching section 52A (4) Conveyancing

Act:

(4) Except in so far as the regulations may otherwise provide, a

provision, whether in a contract for the sale of land or any other

agreement:

(a) which purports to exclude, modify or restrict any

provision of this section or a regulation made for the

purposes of this section, or

(b) which would, but for this subsection, have the effect of

excluding, modifying or restricting any such provision,

is void.

4. Where a proposed contract has been issued to an agent or

auctioneer and the instructions are to update the certificate, the

holder of that contract should be informed of the vendor’s

instructions, and warned about the dangers of a premature exchange

of contracts.

5. Where a fresh section 149 certificate is obtained after a draft

contract has been issued to a prospective purchaser, it may be

prudent, notwithstanding provision 20.1 of the standard contract, to

seek specific confirmation that the later certificate was annexed to

the contract prior to execution by the purchaser (see the discussion

of formation of contract in Zhang v VP302 SPV Pty Ltd [2009]

NSWSC 73; BC200900869).

6. Where the contract (or option) was entered into on or after a

relevant “change date”, and the planning certificate does not

disclose the true status of the land, instructions and informed

consent should be obtained from the vendor as to whether to make

a post-exchange disclosure of the status of the land. On the one

hand, prompt disclosure may be relevant to any later argument

about whether the purchaser has elected to affirm the contract (this

aspect is discussed in more detail below). On the other hand, any

disclosure may alert the purchaser to an opportunity which might

otherwise have escaped the purchaser’s notice. It is strongly

suggested that any disclosure be limited to answering the question

raised by the relevant item in Schedule 4 (and if necessary

specifying the reason why the Codes SEPP does not apply). Any

mention of failure to comply with the Conv (SoL) Reg, or


– 14 –

mentioning the remedies available for breach would be, it is

suggested, unnecessary and unwise.

What are the implications for practitioners acting for purchasers?

1. Purchasers and prospective purchasers of properties which are

prima facie within the operation of the Codes SEPP should be

advised of the commencement (or extension) of the Codes SEPP.

2. Whether the practitioner is obliged to give more detailed advice

about the effect of the Codes SEPP on the property will depend on

the scope of the practitioner’s retainer (see the observations of

Bryson AJ in Luxford v Sidhu (2008) NSW ConvR ¶56-203; [2007]

NSWSC 1356 at [48] to [56]. That case is discussed below).

3. The importance of testing the vendor warranties by obtaining an

up-to-date section 149 certificate on behalf of a purchaser (rather

than relying on the certificate annexed to the contract) is

highlighted by the successive changes to the Regulation.

4. The contents of a section 149 certificate attached to a contract

exchanged on or after a relevant date should be considered to

determine whether there is a breach of warranty. If so:

❖ The purchaser should be informed of the breach.

❖ Instructions should be taken to determine whether any of the

restrictions mentioned in the Conv (SoL) Reg apply.

❖ If the purchaser is inclined to rescind, the purchaser should be

warned that any entitlement to rescind may be challenged by the

vendor (and that a challenge is even more likely when reliance is being

placed on a ground which has only recently been introduced into the

vendor disclosure and warranty provisions). It would also be

appropriate to advise that a vendor will in general be more likely to

resist rescission in a static or falling property market. If the purchaser

were found to have wrongfully rescinded, the vendor could elect to

treat the purported rescission as a repudiation, terminate the contract,

keep or recover the deposit and sue the purchaser under provision 9 of

the standard contract. The advice and subsequent informed consent

should be readily provable.

❖ If the instructions of the purchaser are to rescind care should be

taken that a right to rescind is not lost by waiver, election, affirmation


– 15 –

or estoppel. In particular, the right to rescind should be exercised

promptly, and in the manner prescribed by Conv (SoL) Reg clause 17.

What restrictions apply to a purchaser’s entitlement to rescind for breach

of statutory warranty?

The right of a purchaser to rescind for breach of a prescribed warranty is

limited both by the Conv (SoL) Reg itself, and, it seems, by principles of

affirmation, election or waiver.

Clause 16 of that Regulation relevantly provides:

16 Circumstances under which purchaser may rescind contract or

option

(1) The purchaser under a contract for the sale of land may rescind the

contract:

...

(b) for breach of the warranty section 52A (2) (b) of the Act.

(2) The purchaser under an option to purchase residential property to

which a proposed contract for the sale of the land concerned is

attached may rescind the option for breach of the warranty

prescribed under section 66ZA (1) of the Act.

(3) A purchaser may not rescind a contract or option under subclause

(1) (b) or (2) unless:

(a) the breach constitutes a failure to disclose to the purchaser the

existence of a matter affecting the land, and

(b) the purchaser was unaware of the existence of the matter

when the contract or option was entered into, and

(c) the matter is such that the purchaser would not have entered

into the contract or option had he or she been aware of its

existence.

A specific disclosure in the contract independent of the section 149

certificate (for example, by way of an additional provision in the contract)

would preclude rescission by the purchaser because of the effect of clause

16(3)(a) and (b). Clause 19(3)(b) is more likely to be of relevance to an

experienced or sophisticated purchaser, or one with a working knowledge

of the planning reforms.

The predecessor to clause 16(3)(c) has been held to operate subjectively

rather than objectively (Mandalidis v Artline, cited above, at [66]). Given

the novelty of the expanded complying development regime, it is difficult

to predict how a purchaser would subjectively view a parcel being (or not

being) excluded from the operation of the Codes SEPP. Proponents of the


– 16 –

planning reforms may argue that if a purchaser acquired a site which was

prima facie amenable to complying development (for example, a parcel on

which construction of a single storey or two storey dwelling is not

prohibited) and then discovered that the Codes SEPP did not apply the

purchaser should have an entitlement to rescind. On the other hand, should

a purchaser who buys a parcel which is clearly outside the Codes SEPP

(for example, a site on which a multi-storey commercial tower is

constructed) be entitled to rescind for a failure to disclose that the land is

land on which complying development may not be carried out under the

Codes SEPP? The attitude of a purchaser who discovers after exchange and

prior to completion that the property is a parcel to which the Codes SEPP

does apply may also be difficult to predict.

Can a purchaser lose the right to rescind for breach of vendor warranty by

affirmation, waiver or election? “It is a well known principle of law that a

man may by his conduct waive a provision of an Act of Parliament

intended for his benefit.” (Sandringham C.C. v Rayment (1928) 40 CLR

510 at 527 per Isaacs J). This principle is subject to a number of limitations

commonly summarised as “there can be no estoppel in the face of a

statute”. Whether the limitations operate in any given case will depend in

part on the wording and purpose of the statute (see for example the analysis

in the Court of Appeal of the rights of rescission under Part 6 Division 2 of

the Home Building Act 1989 in Tudor Developments Pty Ltd v Makeig

[2008] NSWCA 243). There have been cases where a purchaser has been

held to have affirmed the contract and elected against the purchaser’s right

to rescind for breach of a warranty prescribed under section 52A: Zucker v

Straightlace Pty Ltd (1987) 11 NSWLR 87; NSW ConvR ¶55-360; Molotu

Pty Ltd v Solar Power Ltd (1989) 6 BPR 13,460; NSW ConvR ¶55-490. It

should be noted that these two cases considered the operation of a

differently worded warranty, and that the Regulation as it then stood did

not contain a provision limiting the right of rescission as is found in clause

19 in the 2005 Regulation.

To what extent does the purchaser’s practitioner need to advise on matters

mentioned in the s149 certificate which do not presently affect the property

being purchased?

The standard of care expected of a purchaser’s solicitor in explaining to

their client the effect of a section 149 certificate was considered in the case

of Luxford v Sidhu [2007] NSWSC 1356. The purchasers sued their


– 17 –

solicitor alleging negligence in failing to explain the effect of the section

149(2) certificate annexed to the contract, in particular a notation of the

existence of SEPP 53 and its (potential) effect on the property. The

purchasers failed against their solicitor. This aspect of the case is

considered at [48]–[56]:

48 The duties of a solicitor to his client are largely the product of the

express and implied terms of his retainer: what the solicitor is

asked to do and agrees to do.

49 When narrating what he told Mr McBride he wished Mr McBride

to do Dr Sidhu used expressions to the effect that he wished to be

told whether the contract was in order or whether everything was

in order. That is to say, Mr McBride was not told anything

specific which altered his ordinary responsibilities.

50 The form of contract proposed to be exchanged was given to Mr

McBride in a context which shows that he was to advise on

entering into the contract, but without any instructions that might

define his responsibility or extend it beyond what a reasonable

solicitor giving such advice with reasonable care would ordinarily

do. Annexed to the contract was a Planning Certificate of

Ku-Ring-gai Council under s 149(2) of the Local Government Act

which stated (accurately) that the zoning of the property was

Residential 2(C) under the provisions of the Ku-Ring-Gai

Planning Scheme Ordinance. The Planning Certificate also

contained much other information including para 7 the heading

“What other planning instruments affect this property?” and a list

of the names of 25 State Environmental Planning Policies all of

which applied to Ku-Ring-Gai.

51 The respect in which SEPP 53 affects 10B Beechworth Avenue is

(and is no more than) that the property is within Ku-ring-gai

Local Government Area and it is within power, by some future

amendment to Schd 4, to make Part 4 and the planning controls

under it apply to the land, and supervene other planning controls

including planning powers of Ku-Ring-gai Council, restrictive

covenants and other prior instruments; but none of this has

happened.

52 Mr McBride had no particular knowledge of how SEPP 53

operated or what it said about parcels of land in Ku-Ring-Gai. If

he had investigated the matter further (and he was not given time

to do so) the most that it can be supposed he would have told Dr

Sidhu is to this effect – that under SEPP 53 land in Ku-Ring-Gai

can be brought under special powers relating to medium density

development, but this land has not been. If he had found that out

and told Dr Sidhu, it would have had no relevant effect.

53 The primary responsibility of a solicitor to a client who is

purchasing a property relates to the property itself; and at the

centre of that responsibility is that it is the solicitor’s

responsibility to see that the client gets title to the property which

the client wishes to acquire. The solicitor’s responsibility extends


– 18 –

beyond title to other matters which closely affect the land being

acquired including its zoning under Town Planning law; the

availability of the land under Town Planning law for use for the

purpose for which the purchaser requires it. I do not accept that in

reasonable practice of solicitors in New South Wales dealing with

residential property, solicitors do or should investigate the impact

of town planning on neighbouring or other nearby property. In

doing this I accept and rely on the evidence of Mr Moses, a

solicitor who gave expert evidence, and also on the evidence of

Mr McBride, whose practice handles a very great number of

property sales. I respectfully do not accept views expressed by Mr

Bluth; notwithstanding Mr Bluth’s very wide experience, it seems

to me that his views and evidence were affected by practice in

dealing with commercial and development properties, which in

turn should be taken to be affected by the purpose, known to the

solicitor, for which purchasers wish to acquire property; attaining

that purpose would often involve the client having some

understanding of a wider town planning context than a person

wishing to use the property as his residence would usually need.

A solicitor’s practice when acting for persons purchasing

commercial property and development property is probably also

affected by communication by clients of additional requirements,

widening the scope of the retainer beyond what should ordinarily

be taken to be the terms of a retainer relating to residential

property. If a solicitor acting for a purchaser investigated the town

planning controls applicable to properties other than the property

being purchased, his conduct should be attributed to an indication

by the client that a wider investigation was required, or to some

general knowledge of the client’s purposes and requirements

which indicated that that was so.

54 Mr McBride’s usual practice, of which he gave evidence, is fairly

highly defined in a routine which is followed in the large number

of matters which he has handled and continues to handle. In his

affidavit evidence about his practice he said that “I usually say to

my clients words to the effect ‘We do not search with regards to

surrounding properties but only the property you are buying. As

to what goes on in the neighbourhood, you must make your own

enquiries of Council.’” In two earlier transactions in which he had

acted for Dr or Mrs Sidhu, he had given advice to this effect in

writing; the probability that he observed his routine and gave

advice to that effect while speaking to Dr Sidhu on 2 May 2005 is

very high, in my view. In the two letters of advice about two

purchases in December 2000 Mr McBride said:

We advise that all of the searches and enquiries that we do

relate to the property that you are proposing to purchase and

none of them relate to adjoining properties or the surrounding

area. If you should wish to obtain details as to what is

proposed or possible under current Council Zonings, it will

be necessary for you to consult the local Council. We will

take the opportunity to discuss this aspect with you.

55 In his letter of advice about a purchase in October 2003 Mr

McBride said the same things, word for word.


– 19 –

56 It was Mrs Sidhu’s evidence that in the earlier transaction she did

not see the letters in which Mr McBride gave this advice. Dr

Sidhu said that he had not received one of them. I do not doubt

that he received the other and saw what it said: and these letters

are part of the proof of Mr McBride’s practice of advising in those

terms. I do not accept Dr Sidhu’s evidence that he was not told to

that effect by Mr McBride on 2 May 2005. Dr Sidhu denied that

Mr McBride said to him to the effect that Dr Sidhu should make

sure that finance was right, that the builder’s reports and pest

reports were organised and that the Sidhus have done their

enquiries with regard to the local area; he said “(t125/27) A. He

said none of those three things”. I find it markedly improbable

that Mr McBride said none of them. In my finding, Dr Sidhu and

Mrs Sidhu were very committed to acquiring the property, and

pursued their object of an immediate exchange that day, and Mr

McBride’s advice had little effect on the course they took.

Some issues regarding drainage diagrams

Sewerage Service Diagram or Service Location Print (formerly sewer

reference sheet)?

Two different diagrams are available from Sydney Water – one relating to

the connections to the relevant property (and frequently including a sketch

of improvements on the property), and another which gives a view of

adjoining properties and connections.

For the purposes of vendor disclosure, it seems either diagram fits the

requirement.

For the purposes of vendor warranty (and general law disclosure), neither

diagram is guaranteed to disclose all sewers which might affect a property.

Prudently, a vendor could obtain and attach both diagrams; a purchaser

testing the warranty may also be well-advised to obtain both.

The availability of two diagrams appears to be an issue unique to Sydney

Water; my understanding is that Hunter Water has a single diagram, as do

most councils where the council has responsibility for sewerage and

drainage matters.

What if a diagram is unavailable?

The vendor disclosure requirement is limited to where the diagram is

“available from the authority in the ordinary course of administration”. To

forestall inquiry from a purchaser about the lack of a certificate, it may be

appropriate to include a special condition explaining the absence.


– 20 –

For the purposes of statutory warranty and general law disclosure,

alternative means of disclosure (attaching plans) or a special condition

would be appropriate.

What if the diagram is known to be inaccurate?

For vendor disclosure compliance, the diagram should be attached.

The disclosure should be accompanied by a special condition explicitly

identifying the inaccuracy, and, to the extent possible, disclosing the true

position.

Building certificates

Until about 1996, it was considered that, where a purchaser found after

exchange of contracts that illegal building work had been undertaken on a

property, the possibility that the council could order demolition of the

offending work may constitute a defect in the vendor’s title, and the failure

to disclose the illegal work in the contract grounded rights in the purchaser.

(See Borthwick v Walsh (1980) 1 BPR 9259; Maxwell v Pinheiro (1979) 1

BPR 9225, and note the discussion in the first edition of Peter Butt’s The

Standard Contract for Sale of Land in New South Wales at 564-572). On

that basis, common practice was for a purchaser to investigate legality of

building work after exchange. But that line of authority has been overruled

by the Court of Appeal in Carpenter v McGrath (1996) 40 NSWLR 39.

That case is authority for the proposition that the risk of the council

ordering demolition of a structure passes on exchange – the normal

equitable principles apply (as reflected in clause 11 of the standard

contract). On similar reasoning, the failure of an owner to comply with

certain council conditions of consent was held not to be a defect in the

vendor’s title – Sullivan v Dan (1997) NSWConvR ¶55-805. The

purchaser is protected where an actual order pre-dates the contract, but not

against the potential for an order.

The Conveyancing (Sale of Land) Regulation 1995, and its predecessor the

Conveyancing (Vendor Disclosure and Warranty) Regulation 1986, each

gave some measure of protection to purchasers against illegal building

work. If the council has issued an order to demolish, repair or make

structural alterations to a building, and that order has not been fully

complied with as at the date of the contract, that order will constitute an

“adverse affectation” which will ground a breach of vendor warranty. The


– 21 –

purchaser will then have a statutory right to rescind (although that right has

been restricted under the versions of the Regulation since 1995 – see clause

16 of the 2010 Regulation).

The more problematic area is whether a mere breach of council

requirements, without the further step of the issue of an order, gives rights

to the purchasers. This issue was addressed in both the 1986 and 1995

Regulations by the incorporation of an implied term in contracts for the

sale of land. The implied term attempted to preclude a blanket removal of

rights of purchasers by way of a general clause in a contract, requiring

rather that any non-compliance be disclosed and clearly described in the

contract. This approach has been used, and remains in use, in relation to

encroachments. The problem with this approach is that the implied term

effectively preserved the common law rights of a purchaser, and, since

Carpenter v McGrath, those rights are, in a practical sense, non-existent.

The Conveyancing (Sale of Land Amendment (Vendor Warranty)

Regulation was gazetted on 18 December 1998, and commenced on 1

January 1999. The key effect of the Regulation was to move

non-compliance with the Local Government Act 1993 (and now,

relevantly, the Environmental Planning and Assessment Act 1979) out of

the realm of an implied term and into the realm of a vendor warranty.

The regulation expired as part of the subordinate legislation program with

the commencement on 1 September 2000 of the Conveyancing (Sale of

Land) Regulation 2000. The 2000, 2005 and 2010 Regulations continue the

regime of the 1995 Regulation as amended.

What are the consequences of this move?

➢ The matter is not a vendor disclosure requirement. In other words,

it is not compulsory for the vendor to obtain and attach a building

certificate.

➢ Being a vendor warranty matter, the right to rescind for breach of

warranty is not unfettered – in addition to the matters already dealt

with in clause 16 of the Regulation (whether there was a failure to

disclose the matter to the purchaser, the purchaser’s state of

knowledge when the contract was entered into, whether the

purchaser would have entered into the contract had the purchaser

been aware of the existence of the matter), the issue of a building


– 22 –

certificate relating to the property “cancels” the right of rescission

under the Regulation.

Not every breach of the planning legislation falls within the warranty. The

warranty only is relevant to “upgrading and demolition orders” as defined

(Schedule 3, Part 1, item 2(d)). Only four of about 20 different types of

possible orders are within the scope of an “upgrading or demolition order”

– notably fire safety orders, and orders relating to cessation of use where

the use has not been council approved, are not covered by the new

warranty.

The new Regulation is designed to provide a greater level of protection to

purchasers as regards illegal building work. Does this mean that the

contract need say nothing about those matters? I suggest parties and their

advisers still need to think carefully about these matters.

1. From the vendor’s perspective, the key question is whether there

is any work which will (or may) be caught by the amended

Regulation. If so, should the vendor/vendor’s practitioner:

➢ apply for a building certificate for the whole of the

building on the property?

➢ apply for a building certificate for the relevant part of the

building on the property?

➢ disclose the problem in the contract (and, in this case,

how comprehensive and particular does the disclosure

need to be)?

➢ fix the problem?

➢ remove the offending item or exclude it from the sale?

2. From the perspective of the purchaser or their practitioner:

➢ Is the Regulation sufficient protection? In particular, if a

Building Certificate is required by the purchaser, or

perhaps more importantly by its mortgagee, what if the

certificate is refused for a reason not on the list?

Furthermore, what if the vendor argues that one of the

threshold requirements in clause 16 has not been met,

and therefore there is no right to rescind.


– 23 –

➢ Should the purchaser disclose the intended use of the

property to the vendor or its representatives? If the

purchaser is thinking about developing the site or

demolishing the existing building, is there any potential

prejudice in releasing this information?

If a problem arises, the purchaser should ensure that a right to rescind is

not lost through waiver (Zucker v Straightlace Pty Ltd (1987) 11 NSWLR

87).

Swimming pools

The most obvious change to conveyancing procedure following the

commencement of the Conveyancing (Sale of Land) Regulation 2010 was

the introduction of a prescribed notice about swimming pools. The new

notice was included in Schedule 1 to the Regulation at the request of the

Department of Local Government following Government concern about a

spate of backyard drownings (compare the history of the smoke alarms

warning as a prescribed document). As with the smoke alarms warning, the

swimming pools warning must be in all contracts (even properties without

a backyard pool, vacant land, multi-storey commercial etc). Since the new

warning is a prescribed document, a copy of the warning must be in the

hands of the agent (or vendor if the sale occurs without the intervention of

an agent) prior to marketing the property. The warning states:

WARNING—SWIMMING POOLS

An owner of a property on which a swimming pool is

situated must ensure that the pool complies with the

requirements of the Swimming Pools Act 1992. Penalties

apply. Before purchasing a property on which a

swimming pool is situated, a purchaser is strongly

advised to ensure that the swimming pool complies with

the requirements of that Act.

Since the Warning is generic, it is open to a vendor to sell a property

with a non-complying swimming pool, possibly with the inclusion of

an additional provision precluding objection to the non-compliance.

The disclosure requirements relating to sale of properties on which a

swimming pool (within the meaning of the Act) is situated will change

with effect from 29 April 2014, the date which is 18 months after the

date of assent to the Swimming Pools Amendment Act 2012. The

amending Act, which largely but not entirely commenced on 29


– 24 –

October 2012, imposes new obligations on the owner of a swimming

pool to which the Act applies. For conveyancing purposes the key

features of the amendment Act are:

i. Extension of the operation of the Act to a wider class of

premises. Prior to the amendments section 4 of the Act

stated that the Act applied to swimming pools situated,

or proposed to be constructed or installed, on premises

on which a residential building, a moveable dwelling, a

hotel or motel is located (with an exclusion for

premises occupied by the Crown or a public authority).

Section 4 (among other provisions) has been amended

to replace the reference to “hotel or motel” with “tourist

and visitor accommodation”, which is defined by

reference to the Standard Instrument. The Dictionary to

the Standard Instrument (Local Environmental Plans)

Order 2006 defines “tourist and visitor

accommodation” as follows:

tourist and visitor accommodation means a building or

place that provides temporary or short-term

accommodation on a commercial basis, and includes any

of the following:

(a) backpackers’ accommodation,

(b) bed and breakfast accommodation,

(c) farm stay accommodation,

(d) hotel or motel accommodation,

(e) serviced apartments,

but does not include:

(f) camping grounds, or

(g) caravan parks, or

….(h) eco-tourist facilities.

ii. Limiting the scope of exemptions contained in sections

8, 9 and 10 of the Act (which relate to pools constructed

prior to August 1990, existing pools on small properties

or large or waterfront properties).Those amendments

commenced on assent.

iii. A new Part 3A (sections 30A to 30E) requires

registration of the pool with a central registry

(registration to be effected either directly by the owner,

or indirectly by the owner notifying the local authority

(typically the Council) which in turn informs the

registry). Part 3A commenced on 29 April 2013.

iv. A new Part 2 Division 5 of the Act inserts sections 22A

to 22G which in summary: requires local councils to

develop a mandatory pools inspection regime; allows


– 25 –

an owner to apply to either the council or an accredited

certifier for an inspection; sets out the contents of a

“section 22D” certificate of compliance (to replace the

existing section 24 certificate); imposes an obligation

on an accredited certifier to issue a written notice to the

owner if the pool does not comply (and send a copy to

the council). Part 2 Division 5 also commenced on 29

April 2013, although a six-month moratorium on

enforcement was put in place..

v. Amends the Conveyancing (Sale of Land) Regulation

2010 with effect from 29 April 2014 (since extended

twice, most recently to 29 April 2016) to add a new

prescribed document to Schedule 1 if the contract

relates to land on which there is a swimming pool

covered by the Act: either

(a) a valid certificate of compliance; or

(b) a relevant occupation certificate plus evidence that

the swimming pool is registered.

vi. Requires a landlord on entering into a residential

tenancy agreement to ensure that the swimming pool is

registered and that the pool has either a valid certificate

of compliance or a “relevant occupation certificate”

(one less than three years old and that authorises the use

of the pool) and that a copy of the document is provided

to the tenant. This amendment is also to commence on

29 April 2016.

Note the modifications to the originally proposed scheme announced in

March 2016 – the introduction of a ‘certificate of non-compliance’

disclosure path; the exclusion of properties in strata and community

schemes comprising more than two lots from the sale disclosure

obligations; and the exclusion of off the plan sale contracts.

It is not clear whether the existing Swimming Pools Warning will be

considered otiose now that the more detailed documentation has to be

attached. That issue will be addressed as part of the next review of the

Conveyancing (Sale of Land) Regulation.

Home Warranty Insurance and Vendor Disclosure

Some, but not all, vendors have disclosure obligations under the Home

Building Act 1989.


– 26 –

The legislation identifies a number of classes of “players” in the industry,

including:

➢ a holder of a licence;

➢ a holder of an owner-builder permit;

➢ a supplier of a kit home;

➢ a developer;

➢ a “person who does residential building work otherwise than under a

contract”; and

➢ a holder of a building consultancy licence (this category has now been

removed from the statutory scheme).

A “developer” is defined in section 3A as follows:

3A Application of provisions to developers

(1) For the purposes of this Act, an individual, a partnership or

a corporation on whose behalf residential building work is

done in the circumstances set out in subsection (2) is a

developer in relation to that residential building work.

(1A) Residential building work done on land in the

circumstances set out in subsection (2) is, for the purpose of

determining who is a developer in relation to the work, deemed

to have been done on behalf of the owner of the land (in

addition to any person on whose behalf the work was actually

done). Note. This makes the owner of the land a developer even if the work is actually done on behalf of another person (for example, on behalf of a party to a joint venture agreement with the owner for the development of the land). The other person on whose behalf the work is actually done is also a developer in relation to the work.

(2) The circumstances are:

(a) the residential building work is done in connection

with an existing or proposed dwelling in a building or

residential development where 4 or more of the existing

or proposed dwellings are or will be owned by the

individual, partnership or corporation, or

(b) the residential building work is done in connection

with an existing or proposed retirement village or

accommodation specially designed for the disabled

where all of the residential units are or will be owned by

the individual, partnership or corporation.

(3) A company that owns a building under a company title

scheme is not a developer for the purposes of this Act.


– 27 –

The concept of a “person who does residential building work otherwise

than under a contract” may seem a little strange, given the requirements for

a written contract under, for example, section 7 of the Act. The provision is

most likely to be relevant to ‘do-it-yourself’ builders, who will rarely, if

ever, enter into a contract. The concept also deals with what, at first,

appears to be a gap in the definition of “owner-builder”. The definition of

an owner-builder set out above means that someone is not caught by the

definition of owner-builder unless that person holds a permit.

Finally, the successors in title to the builder, developer, owner-builder, etc.

have rights (and occasionally obligations) under the Act.

The disclosure obligations on sale as they stood prior to 15 January 2015

were set out in sections 95, 96, and 96A of the Act. Those sections are set

out in full below:

95 Owner-builder insurance

(1) An owner-builder must not enter into a contract for the sale

of land on which owner-builder work is to be or has been done

by or on behalf of the owner-builder unless a contract of

insurance that complies with this Act is in force in relation to

the work or proposed work.

Maximum penalty: 1,000 penalty units in the case of a

corporation and 200 penalty units in any other case.

(2) An owner-builder must not enter into a contract for the sale

of land on which owner-builder work is to be or has been done

by or on behalf of the owner-builder unless a certificate of

insurance evidencing the contract of insurance, in a form

prescribed by the regulations, is attached to the contract.



(2A) A person who is the owner of land, and to whom an

owner-builder permit was issued under Division 3 of Part 3

after the commencement of this subsection and not more than 6

years previously must not enter into a contract for the sale of

the land in relation to which the permit was issued unless the

contract includes a conspicuous note:

(a) that an owner-builder permit was issued under

Division 3 of Part 3 to the person in relation to the land,

and

(b) that the work done under that permit was required to

be insured under this Act.


– 28 –



(3) This section does not apply:

(a) to a sale of the land more than 6 years after the

completion of the work, or

(b) if the reasonable market cost of the labour and

materials involved does not exceed the amount

prescribed by the regulations for the purposes of this

section, or

(c) if the owner-builder work is of a class prescribed by

the regulations.

(4) Subject to subsection (4A), if an owner-builder contravenes

subsection (1) or (2A) in respect of a contract, the contract is

voidable at the option of the purchaser before the completion of

the contract.

(4A) A contract is not voidable as referred to in subsection (4)

if:

(a) the owner-builder obtained a certificate of insurance

evidencing a contract of insurance that complies with this

Act in relation to the work or proposed work before

entering the contract concerned, and

(b) before completion of the contract, the owner-builder

served on the purchaser (or an Australian legal

practitioner acting on the purchaser’s behalf) a certificate

of insurance, in the form prescribed by the regulations,

evidencing that contract of insurance.

(5) (Repealed)

96 Insurance in relation to residential building work not carried out under contract

(1) A person must not do residential building work otherwise

than under a contract unless a contract of insurance that

complies with this Act is in force in relation to that work.



(2) A person who does residential building work otherwise

than under a contract must not enter into a contract for the sale

of land on which the residential building work has been done,

or is to be done, unless a certificate of insurance evidencing the

contract of insurance required under this Part for that work, in a

form prescribed by the regulations, is attached to the contract

of sale.




– 29 –

(2A) (Repealed)

(2B) A person who does residential building work otherwise

than under a contract must, before entering into a contract for

sale of land on which the residential building work has been

done, or is to be done, give the other party to the contract a

brochure, in a form approved by the Director-General,

containing information that explains the operation of the

contract of insurance, and the procedure for the resolution of

disputes under the contract.

Maximum penalty: 40 penalty units in the case of a corporation

and 20 penalty units in any other case.

(3) This section does not apply:

(a) to an owner-builder, or

(b) to a person who does owner-builder work within the

meaning of Division 3 of Part 3 that does not involve:

(i) the construction of a dwelling, or

(ii) the alteration of, or additions to, a dwelling, or

(iii) the construction of an inground swimming

pool, or

(c) to an individual who is exempted by the regulations

from the requirements of section 12, or

(d) to a sale of the land more than 6 years after the

completion of the work, or

(e) the reasonable market cost of the labour and materials

involved does not exceed the amount prescribed by the

regulations for the purposes of this section.

(f) (Repealed)

(3A) Subject to subsection (3B), if a person contravenes

subsection (2) in respect of a contract for the sale of land, the

contract is voidable at the option of the purchaser before the

completion of the contract.

(3B) A contract is not voidable as referred to in subsection

(3A) if:

(a) the person obtained a certificate of insurance


Act in relation to the residential building work before


(b) before completion of the contract, the person served

on the purchaser (or an Australian legal practitioner

acting on the purchaser’s behalf) a certificate of

insurance, in the form prescribed by the regulations,



– 30 –

(4) (Repealed)

96A Obligations of developers in relation to insurance

(1) A developer must not enter into a contract for the sale of

land on which residential building work has been done, or is to

be done, on the developer’s behalf unless a certificate of

insurance evidencing the contract of insurance required under

section 92 by the person who did or does the work for the

developer, in a form prescribed by the regulations, is attached

to the contract of sale.



(1A) A developer must, before entering into a contract, give the

other party to the contract a brochure, in a form approved by

the Director-General, containing information that explains the

operation of the contract of insurance, and the procedure for the

resolution of disputes under the contract.

Maximum penalty: 40 penalty units in the case of a corporation

and 20 penalty units in any other case.

(2) Despite anything to the contrary in section 3A, a reference

in this Part to a person who does residential building work:

(a) does not include a reference to a developer, and

(b) includes a reference to a person who does the work on

behalf of a developer.

(3) Subject to subsection (3A), if a person contravenes

subsection (1) in respect of a contract, the contract is voidable

at the option of the purchaser before the completion of the

contract.

(3A) A contract is not voidable as referred to in subsection (3)

if:

(a) the person obtained a certificate of insurance


Act in relation to the residential building work before


(b) before completion of the contract, the person served

on the purchaser (or an Australian legal practitioner

acting on the purchaser’s behalf) a certificate of

insurance, in the form prescribed by the regulations,


(4) This section does not apply to a sale of the land more than 6

years after the completion of the work.


– 31 –

Given the practical difficulties which occasionally arose in complying with

the requirements set out above, section 97 is also significant:

97 Exemptions from insurance requirements

(1) A person may apply to the Director-General to be exempted

from the operation of a provision of section 95 or 96 in a

particular case.

(1A) A person may apply to the Director-General to be

exempted from the operation of any other provision of this

Part, but only if:

(a) the person is, or is a member of a class of persons

who are, prescribed as entitled to apply for the

exemption, or

(b) circumstances prescribed by the regulations as

entitling the making of an application apply to the

person.

(2) The Director-General may, by notice in writing, grant an

exemption under this section, either unconditionally or subject

to conditions, if satisfied that:

(a) there are exceptional circumstances, or

(b) full compliance is impossible or would cause undue

hardship.

(3) An exemption under this section operates to exempt the

person from the operation of the provision concerned, subject

to compliance with any conditions of the exemption.

Finally, practitioners considering (or confronted with) “special conditions”

in contracts for sale attempting to “deal with” a non-compliance with the

above provisions should have regard to sections 103D and 134:

103D Part may not be excluded

A provision of a contract or another agreement that purports to

restrict or remove the rights of a person under this Part is void.

134 Aiding and abetting etc

A person who:

(a) aids, abets, counsels or procures a person to commit,

or

(b) induces or attempts to induce a person, whether by

threats or promises or otherwise, to commit, or

(c) is in any way, directly or indirectly, knowingly

concerned in, or party to, the commission by a person of,

or


– 32 –

(d) conspires with another to commit,

an offence against this Act or the regulations is guilty of the

same offence and liable to be punished accordingly

One of the difficult issues with the exemptions set out in sections 95(3)(a),

96(3)(d) and 96A(4) is that, prior to 1 February 2012, the Act did not

comprehensively define when work was taken to be complete for the

purposes of the Act. Section 3B (and, since 15 January 2015, section 3C)

attempt to deal with that lacuna:

3B Date of completion of residential building work

(1) The completion of residential building work occurs on the

date that the work is complete within the meaning of the

contract under which the work was done.

(2) If the contract does not provide for when work is complete

(or there is no contract), the completion of residential building

work occurs on practical completion of the work, which is

when the work is completed except for any omissions or

defects that do not prevent the work from being reasonably

capable of being used for its intended purpose.

(3) It is to be presumed (unless an earlier date for practical

completion can be established) that practical completion of

residential building work occurred on the earliest of whichever

of the following dates can be established for the work:

(a) the date on which the contractor handed over

possession of the work to the owner,

(b) the date on which the contractor last attended the site

to carry out work (other than work to remedy any defect

that does not affect practical completion),

(c) the date of issue of an occupation certificate under the

Environmental Planning and Assessment Act 1979 that

authorises commencement of the use or occupation of the

work,

(d) (in the case of owner-builder work) the date that is 18

months after the issue of the owner-builder permit for the

work.


– 33 –

(4) If residential building work comprises the construction of 2

or more buildings each of which is reasonably capable of being

used and occupied separately, practical completion of the

individual buildings can occur at different times (so that

practical completion of any one building does not require

practical completion of all the buildings).

(5) This section applies for the purposes of determining when

completion of residential building work occurs for the purposes

of any provision of this Act, the regulations or a contract of

home warranty insurance.

Changed disclosure obligations as from 15 January 2015

In September 2013 the Government issued a Position Paper which

canvassed significant amendments to the Home Building Act 1989. Many

of the proposed amendments have been carried through resulting in a

radical change to the obligations of an owner-builder when selling. Section

6.3 of the Position Paper stated:

6.3 Prohibit owner-builders from obtaining home warranty insurance

The 2012 Issues Paper discussed the current situation where builders

who carry out work for owner-builders are required to provide the

owner-builder with home warranty insurance if the value of that

work exceeds $20,000. In addition, if an owner-builder wishes to sell

the property within six years of the work’s completion (‘completion’

for an owner-builder is deemed to be 18 months after the owner-

builder permit was issued), they need to obtain a further home

warranty insurance certificate for all the works combined.

These requirements give rise to duplicated insurance coverage. In

addition, requiring owner-builders to obtain home warranty

insurance when selling their property blurs the distinction between

properties where work has been performed by an owner-builder and

properties where work has been performed by a licensed builder and

could act as an inducement for owner-builders to be more

commercially orientated.

Although the Act currently seeks to draw a distinction between

licensed builders and owner-builders by requiring owner-builders

who sell their property to disclose that owner-builder work has been


– 34 –

undertaken, it does not also apply to the subsequent purchaser of the

owner-builder property.

Policy position: Prohibit owner-builders from obtaining home

warranty insurance. To ensure potential purchasers are aware

that owner-builder work has been undertaken on a property,

contracts for sale of owner-built properties will be required to

contain a conspicuous note stating the date the owner-builder

permit was issued and any other necessary information. This

would draw a sharper distinction for prospective purchasers

between work undertaken by an owner-builder and work

undertaken by a licensed, qualified builder. To minimise

compliance costs, the current register of owner-builder permits

maintained by NSW Fair Trading would be made available for

online inspection, free of charge.

Unhappily, the Position Paper also indicated that the current high-rise

insurance exemption will be continued “at this stage”.

Upon commencement the 2014 amending Act made significant changes to

the Act as it affects conveyancing practice (among many other topics):

Home warranty insurance is renamed as “insurance under the Home

Building Compensation Fund”

A new definition of “completion date” applies to a new building in

a strata scheme (new section 3C)

3C Date of completion of new buildings in strata

schemes

(1) This section applies to residential building work

comprising the construction of a new building in a strata

scheme (within the meaning of the Strata Schemes

Management Act 1996) where the issue of an occupation

certificate is required to authorise commencement of the

use or occupation of the building.

Note. Section 3B provides for the date of completion

of other residential building work.

(2) The completion of residential building work to which

this section applies occurs on:


– 35 –

(a) the date of issue of an occupation certificate that

authorises the occupation and use of the whole of the

building, unless paragraph (b) applies, or

(b) the occurrence of some other event that is prescribed

by the regulations as constituting completion of the work.

(3) If a contract to do residential building work (the

primary contract) comprises the construction of 2 or

more separate buildings, the date of completion of that

work is to be determined as if there were a separate

contract for each separate building (with each contract on

the same terms as the primary contract) so that the work

for each building will have a separate completion date.

For the purposes of this section, a building is separate if

it is reasonably capable of being used and occupied

separately from any other building.

Note. Separate buildings can still have the same

completion date if they are completed at the same

time.

(4) This section applies for the purpose of determining

when completion of residential building work occurs for

the purposes of any provision of this Act, the regulations

or a contract of insurance under the Home Building

Compensation Fund.

(5) In this section:

building means any structure that, as a new building,

requires the issue of an occupation certificate to authorise

its use and occupation.

occupation certificate means an occupation certificate

under the Environmental Planning and Assessment Act

1979.

Note. A swimming pool, tennis court or detached

garage can be a building for the purposes of this

section if an occupation certificate is required to

authorise its use and occupation. If a structure in a

strata scheme does not require an occupation


– 36 –

certificate, section 3B will apply to it instead of

section 3C.

The distinction between structural and non-structural defects is

replaced with concepts of “major defects” and “major elements of a

building” (s 18E(3) and (4))

Most significantly for property practitioners, the new section 95:

➢ Abolishes statutory cover for owner-builder work (s 95(1))

➢ Requires disclosure by way of a conspicuous note of details of the

owner-builder permit and the absence of owner-builder insurance (s

95(2))

➢ The new section does not apply where the sale occurs more than 7

years and 6 months after date of the permit (s 95(3))

➢ The consumer warning requirement applies not only to the owner-

builder but to successors in title (s 95(4))

A new section 96B(1) provides: “A contract for the sale of land

comprising a house or unit that is excluded from the definition of

dwelling in this Act because it was designed, constructed or

adapted for commercial use as tourist, holiday or overnight

accommodation must contain the warning required by this section

if work has been done on the land in the previous 6 years that

would have been residential building work had the house or unit

not been excluded from the definition of dwelling.”

The 96B warning is a “prominent statement” to the effect that the

property does not have protection under the Act.

The section prohibits entering into the contract unless the statement

is attached; the contract is voidable if no statement in contract.

Savings and transitional provisions affect ss 95, 96B. Schedule 4

clauses 131 and 132 of the Act provide.

131 Insurance obligations of owner-builders

Section 95 (and sections 97 and 101 in their operation in respect of

that section) as in force before being amended by the amending Act

continues to apply to and in respect of the following contracts:

(a) a contract of insurance or a contract for the sale of land

entered into before the commencement of the amendment of

section 95,


– 37 –

(b) a contract for the sale of land entered into after that

commencement if a contract of insurance that complies with

this Act is in force in relation to the work concerned when the

contract is entered into.

132 Contracts for sale of exempt dwellings

Section 96B (Obligations of sellers of excluded dwellings (houses

and units used for commercial purposes)) does not apply to a

contract for the sale of land entered into before the commencement

of that section.

A summary of the home warranty provisions

1 This home warranty insurance scheme has changed frequently. A

statement of basic principles in 2017 would not be identical to one

in 2014, much less 2009.

2 There are several classes of persons who are affected by the Act,

and the provisions relating to insurance and the provision of proof

of insurance are inconsistent between these classes.

3 The major classes of persons affected by the Act are, as

mentioned above:

➢ holders of a contractor licence (a person who does

residential building work under a contract)

➢ suppliers of kit homes;

➢ developers (defined in s 3A of the Act);

➢ owner-builders (defined in Schedule 1);

➢ persons who do residential building work otherwise than

under a contract (not defined in the Act, but presumably a

‘spec builder’ would fall within the scope of the term, as it

seems would a person doing owner-builder work without an

owner-builder permit);

➢ successors in title to any of the above;

➢ (For the sake of completeness, the Act for a time envisaged

the licensing of building consultants who undertake

domestic pre-purchase inspections, but they are a

significantly different class of licence-holder and in any

event have not been the subject of licensing or regulation

since September 2009).

4 (a) A person who does residential building work under a contract

is required to provide a certificate of insurance to the other party


– 38 –

to the contract (not necessarily to attach it to the relevant contract,

which typically will not be a contract for sale) – see s 92.

(b) One area of uncertainty in the operation of section 92 is what

are the obligations where the “other party to the contract” is an

owner-builder. Section 95(6) as it stood prior to 15 January 2015

provided:

To avoid doubt, this section extends to residential building

work that is also owner-builder work.

The subsection was amended (and clarified) with effect from 15

January 2015:

To avoid doubt, this section extends to residential building

work that is also owner-builder work (when the work is done

under a contract between the person who contracts to do the

work and the owner-builder).

5 Prior to September 2009, a supplier of a kit home had

corresponding obligations (see the now repealed section 93).

6 The developer must attach a certificate of insurance to the

contract for sale (section 96A), unless the developer complies

with cl 61 of the Home Building Regulation 2014, or unless the

construction work is the construction of a multi-storey building

where work commenced on or after 31 December 2003 (see cl 56

of the Regulation).

7 An owner-builder is not required to effect home warranty

insurance whenever he or she undertakes residential building

work. Prior to 15 January 2015, the rationale was that what might

be called the “attaching” obligations for an owner-builder were

triggered not by the doing of the work but rather by the entering

into a contract for sale. As from 15 January 2015, the product is

simply not available to owner-builders (see s 95(1) as amended

with effect from 15 January 2015).

8 The owner-builder who did obtain insurance prior to its abolition,

and the person who does residential building work otherwise than

under a contract, must attach a certificate of insurance where he

or she enters into a contract for sale within six years after

completion of the work (ss 95 as it stood prior to the January 2015

amendment and 96).


– 39 –

9 The owner-builder must include a conspicuous note in the contract

which complies with section 95 (the content of the note changed

with effect from 15 January 2015). The developer and the person

who does building work otherwise than under a contract has the

obligation to provide a NSW Fair Trading brochure (ss 96A(1A)

and 96(2B)).

10 (a) A successor in title to either a developer or a person who does

residential building work otherwise than under a contract (or for

that matter the client who contracts with a licensed builder) is not

required to provide (whether by attaching to the contract or

otherwise) any evidence of insurance.

(b) A successor in title to an owner-builder was not required to

provide evidence of insurance (or to make any disclosure in the

contract) when selling prior to 15 January 2015. As from that date

section 95(4) contemplates that a successor in title is caught by

the disclosure obligations set out in the section (although that

obligation may itself be removed by a savings and transitional

provision).

11 As from 15 January 2015, section 96B creates a new class of

vendors with disclosure obligations.

12 The disclosure requirements outlined above are subject to

exemptions. Some of the more important exemptions include (and

these do not necessarily apply to every category or at every point

in the history of the HWI scheme): insurable value below

$20,000; the “hardship” exemption which can be applied for from

NSW Fair Trading; work done more than a specified number of

years (usually six years but note the relevant period in the

amended section 95 is seven years and six months) prior to the

contract for sale (and note sections 3B and 3C of the Act which

defines when work is taken to be complete). Also note that the

right of rescission by a purchaser given by ss 95 (as it formerly

stood), 96, or 96A is lost in some (but not all) circumstances if the

vendor serves an insurance certificate on the purchaser even

though the certificate was not attached to the contract.

12 Page 2 of the standard contract for sale of land lists a number of

documents which are commonly attached to contracts, including

evidence of insurance under the Home Building Act (and in the

2005 and 2014 editions, a brochure or note / warning). Wherever


– 40 –

such documentation exists, it is helpful to the parties for the

document to be attached; however there is no legal requirement to

do so in every case.

It is now clear that, at general law (that is, unless there was a statutory right

provided by the Home Building Act 1989), a failure to comply with the

insurance provisions of the Act goes to quality rather than to title. In

Adderton v Festa Holdings Pty Ltd & Ors [2003] NSWSC 1065, Gzell J

held there was no obligation on an on-seller to arrange insurance cover

where the predecessor in title had not done so. His Honour then continued

(at [21] to [25]):

21 It was argued on behalf of the plaintiff that even if there was an

obligation upon him to obtain alternative insurance, that was not a

proper subject of a requisition on title strictly so called that could

prevent him from requiring the first defendant to complete until a

reasonable time after he had complied with the requisition

(Adolfson v Jengedor Pty Ltd (1995) 6 BPR 14,147).

22 The contract for sale of the dwelling extended the definition of the

term “requisition”. It did not, however, extend to a claim. In my

view, the first defendant was entitled to resist completion of the

contract for sale of the dwelling only if the absence of insurance

of the residential building work was a defect in title to the

property.

23 I doubt that the absence of such insurance goes to the title to the

property. The first defendant contracted to acquire clear title to

land and dwelling. There was no impediment to it acquiring that

title.

24 In Sullivan v Dan (1996) 7 BPR 14,974, Bryson J held that the

lack of compliance with the conditions of a development consent

by a local council was not a defect in title. I regard a lack of

insurance, if required, in like vein.

25 However, this is an issue that it is unnecessary for me to decide in

view of my finding that the plaintiff was not obliged to remedy a

lack of insurance by WDD Constructions Pty Ltd. It is an

important question that ought not to be the subject of mere obiter

dicta.

The decision of Gzell J was confirmed on appeal (Festa Holdings Pty Ltd

& anor v Adderton & ors [2004] NSWCA 228, 13 July 2004). Indeed, the

Court of Appeal expressly addressed the issue about whether a lack of

home warranty insurance constituted a defect in title in the following terms

(per Mason P at [54]–[55], [58]–[60]):

54 The subject matter of the Contract was land described as a

freehold estate under Torrens title. Legal and practical enjoyment

of that land was in no way undermined by the non-existence of a


– 41 –

contract of insurance underpinning whatever rights the Purchaser

might wish to assert against the original builder under the

statutory warranties. Nothing in the evidence suggests that there

was any basis for a claim against the builder at the time when the

Contract was entered into (cf Carpenter v McGrath (1996) 40

NSWLR 39).

55 Not even the quality of the subject property is affected by the

absence of insurance. All that has happened is that the Vendor

(not having the benefit of insurance) did not promise to include

that benefit as part of the Contract subject-matter. For all that one

knows, the value of the absent insurance was taken into account in

the negotiated contract price.

…

58 Nothing in the Contract addressed the question of insurance under

the Act. The Vendor had not bargained for nor obtained any such

insurance from his vendor, Windy Dropdown. He had not been

obliged to do so before he completed the purchase of the land

from Windy Dropdown. Nor was he obliged by statute, contract

or fiduciary obligation to procure such insurance for the benefit of

his purchaser, a procurement that the appellant conceded was

virtually impossible.

59 Gzell J held that s94 prescribed the effect of the original builder’s

failure to insure. Nothing required the Vendor to obtain

alternative insurance cover for his purchaser. Indeed, s94(1C)(a)

was a counter-indicator. In the absence of a contractual

requirement obliging the Vendor to obtain alternative insurance

cover, his answers to requisitions 18B and 29 were appropriate.

The absence of insurance imposed no impediment to the

Purchaser obtaining clear title to the land and dwelling that were

the subject of the Contract. His Honour refrained from deciding

that there was a defect in title, although he favoured the view that

there was not a defect.

60 It will be seen that I agree substantially with the reasoning of the

learned primary judge. Unlike him, I think it necessary to grasp

the defect of title issue. I have concluded that there was no such

defect when the Act and the Contract are analysed. The second

appellant’s argument is essentially circular and flawed in its

statutory analysis. Insurance cover would have been an advantage

to the Purchaser to the extent that any of the statutory warranties

were breached within the seven year timeframe, but this was

insufficient to give it a right to insist that the Vendor obtain such

cover.

Mine Subsidence Compensation Act – a “special” warranty

Section 15(5) of the Mine Subsidence Compensation Act 1961

provides:

(5) Where any improvement has been erected or altered or

subdivision has been made in contravention of this section

(a contravening improvement or contravening subdivision):


– 42 –

(a) such contravention shall not invalidate any instrument

intended to affect or evidence the title to any land, but a

purchaser may cancel any contract for sale and recover

any deposit or instalment of purchase money paid

together with reasonable costs and expenses where such

contravention relates to the land purchased,

(b) no claim under section 12 or 12A or application under

section 13A is to be dealt with or any payment made

under this Act in respect of the following:

(i) any contravening improvement, any household or

other effects fixed or attached to a contravening

improvement or any household or other effects

damaged as a consequence of damage to a

contravening improvement,

Note.

For example, no claim may be made in respect of items placed in or around an unapproved house that are damaged by the collapse of that house.

(ii) any improvement on land within a contravening

subdivision that was erected or altered after the

land was subdivided,

(iii) any household or other effects on land within a

contravening subdivision for the purpose of

erecting or altering an improvement.

Note.

The Board may issue a certificate of compliance under section 15B (3A) in respect of an improvement or a subdivision of land that was erected or made without the approval of the Board. The certificate of compliance is for all purposes deemed to be conclusive evidence that the requirements of this Act relating to the improvement or the subdivision had been complied with up to the date of the certificate.

The right to “cancel” a contract for sale has been in existence, and

substantially unaltered, since the commencement of the Mine

Subsidence Act 1928.

The remedy would operate similarly to a breach of statutory warranty

under the Conveyancing (Sale of Land) Regulation 2010 but with some

significant differences:

• The Regulation allows the operation of a Schedule 3 warranty

to be excluded by a disclosure in the contract – there is no such

exclusion under the 1961 Act;

• The restrictions on the purchaser’s right of rescission found in

clause 16(3) of the Regulation are not replicated in the Act.


– 43 –

• In general, where a contract is rescinded under the Regulation,

neither party can recover damages, costs and expenses from the

other (clause 18(3), subject to the limited exceptions in clause

18(4)). A purchaser can recover “reasonable costs and

expenses” arising from a section 15(5) cancellation.

Whether a property is in a Mine Subsidence District is a prescribed matter

to be included in a section 149(2) certificate.

Typically, a purchaser buying a property in a mine subsidence district will

apply for a certificate under section 15B of the Act. That section provides:

15B Certificates of compliance

(1) Any person may apply to the Board for a certificate under

this section with respect to any improvement erected

within a mine subsidence district or land within a

subdivision within such a district.

(2) An application for a certificate under this section shall be

made in writing, be accompanied by the prescribed fee

and state the name and address of the applicant, and the

particulars of the improvement or land in respect of which

the certificate is required.

(3) Where the Board is satisfied that an improvement referred

to in an application under this section was erected in

accordance with the Board’s approval and that any

alterations to any such improvement were so made, or that

any subdivision containing any land referred to in such an

application was made in accordance with the Board’s

approval, or that any departure from any such approval is

such that it need not be rectified, the Board shall, if the

application was made in accordance with subsection (2),

issue to the applicant a certificate under this section in

respect of such improvement or land.

(3A) The Board may also issue a certificate under this section

in respect of an improvement that was altered or erected,

or a subdivision of land that was made, without the

approval of the Board if the Board is satisfied that it is

appropriate to do so having regard to the circumstances of

the case.

(3B) The Board must not issue a certificate under subsection

(3A) in relation to the following:

(a) an improvement that is a residential building that

was altered or erected more than 15 years before the


– 44 –

application for the certificate was made, unless the

Board is of the opinion that:

(i) the failure to obtain the approval was not the fault

of the applicant, or

(ii) exceptional circumstances exist,

(b) an improvement that is not a residential building,

unless the Board is of the opinion that exceptional

circumstances exist.

(4) The production of the certificate shall for all purposes be

deemed conclusive evidence in favour of a person having

an estate or interest in the land that the requirements of

this Act relating to the improvement or the subdivision

had been complied with up to the date of the certificate.

(5) If the Board refuses to issue a certificate under this

section, it shall notify the applicant for the certificate of

the refusal and the reasons therefor.

Procedures for applying for section 15B certificates were changed with

effect from 1 March 2017. The MSB (rebranded Subsidence Advisory

NSW) website set out the change:

“1. Certificates will be issued electronically to reduce turnaround

times.

2. An applicant requesting a 15B Certificate for residential

improvements will be required to provide a statutory declaration

from the existing landowner confirming the property has been built

in accordance with the relevant mine subsidence building

regulations. This statutory declaration will replace a physical

inspection carried out by Subsidence Advisory NSW, resulting in

faster and more efficient issuing of Certificates.

N.B. There will be no change to the current process for obtaining a

15B Certificate for commercial or infrastructure improvements.

Subsidence Advisory NSW will continue to undertake an inspection

for these requests.” (underlining added).

The practical difficulties for both vendors / landowners and purchasers will

be obvious to practitioners.

Fortunately, the FAQs located deeper in the website provide some comfort:

If you are not the current landowner you must organise for the

current landowner to complete a statutory declaration on your behalf

OR where this is not available, schedule for SA NSW representative


– 45 –

to undertake an inspection of the property in order to have a 15B

issued.

So if no statutory declaration is available:

“SA NSW can provide in these instances, a scheduled inspection of

the property by an accredited Project Manager.

Please note if you require an inspection it will delay the processing

time of your application by 10 business days depending on

availability of a Project Manager.”

It is understood that changes to the boundaries of mine subsidence districts,

and substantial amendments to the Act, will be implemented during the

course of 2017.

* * * * *

vendor disclosure & warranty - australian institute of ... · vendor disclosure and warranty...

Documents