Property managers and vendors could find themselves legally responsible if they fail to disclose instances considered to be of “material fact” to prospective property buyers and tenants.
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Material fact is a fact that would be important to a reasonable person in deciding whether or not to proceed with a certain transaction.
In cases such as real estate, Vickie van Heuzen from PRDnationwide said, material fact can include cases such as violent crime or murder and could stop a tenant from leasing a property.
“With all the different categories and all the different things that could happen, you’ve really got to go back to basics,” she said.
“With material fact, you have to take into consideration things like health or safety risks that might not be apparent to a reasonable person.
“A good way to determine a material fact is to ask yourself, would it stop me from renting a home because of this?”
Risks that might not be apparent to a reasonable person, Ms van Heuzen said, include things like mould issues or loose-fill asbestos.
“If you were to disclose at commencement of a lease, for example, that you have a light mould problem in winter and the tenant chooses to continue with the lease, that’s OK,” she said.
“If it’s a continual problem or it develops into a bigger issue, then tenants can get out of that.”
But if the property has had a history of defects, director for Professionals Real Estate, Paul Irvine said, “common sense would say a good, ethical agent would disclose” them.
“We have a duty of care not just from a legislation point of view, but as people,” he said.
“It’s wise for any real estate agent in New South Wales to divulge all information they have on a property.
“If there is full transparency at the beginning, then there shouldn’t be any issues.”
Agents and vendors can face fines upwards of $20,000 and even de-registration if they fail to disclose any material facts.
“We do rely on the information from the landlord or owner,” Mr Irvine said.
“It is also in our best interest to do a bit of a background check on properties we feel may have had some stress in the past.
“The last thing you would want is your new tenant getting a knock on the door relating to previous activity in the house.”
Multiple things can affect material fact and Ms van Heuzen said all parties should be aware of what has happened as part of a property’s history.
“If you know something about a property and you’ve asked the owner, and they’ve disclosed that, it will affect the sale or lease of a house,” she said.
“As agents, we don’t want a lease to fall over and we don’t want a lease to fall over and we don’t want a sale to fall over.”