Guide to Form 2 - Seller Disclosure Statement

Guide to Form 2 - Seller Disclosure Statement

What are the new Seller Disclosure (Form 2) requirements?

For the most part, Queensland currently operates under a ‘buyer beware’ principle, which means the onus is on a buyer to satisfy themselves on matters relating to the property [with a few small exceptions].

The new disclosure obligations are two-fold:

1. provide a completed disclosure statement

Firstly, sellers must provide buyers with a completed disclosure statement, which is a prescribed form. While we’re all used to the existing disclosure statements, this new standard form requires sellers to provide more warranties and information concerning their property.

Some of the new information required to be disclosed in the disclosure statement includes:

• details of any unregistered agreements [written or verbal]
• zoning information of the property [including character overlay]
• whether the property is impacted by any transport proposals and resumptions.
• whether the property is on the Contaminated Land Register or Environmental Management Register
• whether the property is heritage listed
• whether the property is affected by flooding
• whether any unlicensed building work has been carried out on the property, and/or
• the total amounts payable for rates and water [both connection fees and water usage].

2. provide documents relating to the property

In addition to the disclosure statement, sellers will also need to provide a number of documents to buyers, including:

• a title search
• a copy of the survey plan
• a QBCC warning notice [if building work has been carried out on the property by unlicensed person within the last 6 years]
• any show cause or enforcement notices under the Building or Planning Act
• any notices from any competent authority requiring work to be done, and/or
• any notices under the Environmental Protection Act.

It’s important to note that some of this information and documents are already required to be disclosed via other pieces of legislation, so this is not a substantial departure from the existing position, but it does bring it all together, ultimately making the buyer more aware of the condition of the property before going under contract.

Implications for sellers

In short, the changes will provide buyers with the right to terminate contracts if the seller does not provide disclosure OR if the disclosure is inaccurate or incomplete in a material way.

How will these changes affect the sales process?

We won’t know the full effect of these changes until they have been implemented, but expect that the main change to the sales process will be that sellers will be engaging with a legal representative early on, likely at the same time they engage their sales agent to get assistance with preparing disclosure statements and meeting their statutory obligations [and minimising the risk of losing a sale at the eleventh hour].

Sellers who neglect this obligation will see delays in properties going under contract or if shortcuts are taken and disclosure is not properly made, an increase in the number of contracts that will be terminated.

Are there any exceptions?

The good news is there are some exceptions to the disclosure requirements. The bad news is that the transaction types are less common, so that the exceptions will rarely apply.

Some of the exceptions include:

• related party transactions [including sales between co-owners or transfers pursuant to a will]
• sales where the price is over $10,000,000 [incl GST];
• boundary realignments between neighbouring owners
• a contract that gives effect to a court order, enforcement warrant or a financial agreement under the Family Law Act; and/or
• off-the-plan sales [which will continue to be governed by the Land Sales Act and Body Corporate and Community Management Act].

However, it’s important to note that in some of the exceptions noted above, the exception may only apply where the buyer signs a waiver notice.

What now?

There’s a bit to take in so we suggest from here, you should:

• familiarise yourself with the Disclosure Statement [link here] and the information required.
• look into free searches and subscriptions that you can use to assist with the disclosure requirements – for example Before you Dig, QBCC Pool Register,  Develo; and
• lastly [and most importantly], partner with a property law firm that can help you  comply and minimise the risk of your property sale falling over.