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I’ve just bought a property, what are my rights?

Buying a house or apartment can be both exciting and stressful for many people. Whether you’re a first home buyer, thinking about purchasing an investment property or you need to upsize to a family home, there are a few important things everyone needs to be aware of before making their final decision.

The ABC recently reported about a Brisbane woman who is facing bankruptcy because a serious defect in her new apartment has forced her and her family to move out of it, (and consequently pay rent for another property). Despite many complaints, the defects are yet to be fully rectified, even after two years.

 

What rights do you have if you buy a property that turns out to be faulty?

In WA, there are three main avenues you can pursue if you purchase a property and later find out it has some sort of fault or defect. The first of which is a contractual term requiring work to be performed to an appropriate standard. The second is a concept called ‘an implied terms of workmanlike quality’ and the third is ‘misleading and deceptive conduct’.

 

Implied terms of workmanlike quality

If you have contracted a tradesperson to build your property, the contract will often include a term to the effect that the works must be carried out in a ‘workmanlike manner’. That is, the construction must be done properly and without defects. However, even if your contract does not have such a term, workmanlike quality is still likely to be implied in your contract.

Although courts can be hesitant to find implied terms in a contract, if certain criteria are met a term will be implied. An implied term is one that is not expressly included in the contract, but it taken as being included anyway. For a term to be implied, it must:

  1. be reasonable and equitable;
  2. be necessary to give business efficacy to the contract;
  3. be so obvious that it ‘goes without saying’;
  4. be capable of clear expression; and
  5. not contradict any express term of the contract.

These criteria come from the High Court case of BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977).

  1. Reasonable and equitable
    The term ‘reasonable and equitable’ means the term must be fair for it to be implied.
  2. Necessary to give business efficacy to the contract
    For a term to be ‘necessary to give business efficacy to the contract’ it must be necessary for the completion of the parties’ contractual obligations. In other words, if the contract can operate without it, it will not be implied.
  3. So obvious that it ‘goes without saying’
    This means that for a term to be implied, it must be something that the parties would likely have included had they thought about it, (but because it was so obvious, they did not). Courts have tended to adopt the perspective of a bystander when considering this element. If you were to suggest the contractual term to a bystander, and they would be likely to say ‘of course that should be included’, then it will probably be so obvious that it ‘goes without saying’.


Misleading or deceptive conduct

What if you specifically ask the vendor about a possible defect in the house and they tell you an outright lie? In this case, you may be able to rescind (get out of) the contract and get your deposit back, or receive compensation. To be successful in such a claim, you will need to prove that the vendor engaged in misleading or deceptive conduct or that the contract included unfair terms. These provisions come from the Australian Consumer Law (ACL) sections 18 and 23.

Section 18 ACL

The Australian Consumer Law says that ‘a person must not…engage in conduct that is misleading or deceptive or is likely to mislead or deceive.’ Although the vendor is not required to disclose everything to the buyer, they cannot mislead them either. This means they cannot intentionally give you false information, (including false information about the price of the property) or leave out important information. Deceptive conduct can also include things like using paint or artwork to cover up defects.

Another thing that can constitute misleading conduct is ‘dummy bidding’. This occurs when a vendor, (or someone on their behalf) pretends to be a genuine bidder to force other buyers to increase their bids. This only becomes a problem if the ‘dummy bidder’ continues to bid after the reserve price has been met.

Section 23 ACL

Vendors also cannot include unfair terms in your contract. According to section 25 of the ACL, the following are some examples of what could constitute an unfair contract term:

  • a term that permits only one party to avoid or limit their contractual obligations
  • a term that permits only one party to terminate the contract
  • a term that permits only one party to vary the terms of the contract
  • a term that permits one party to unilaterally decide whether a term has been breached
  • a term that limits one party’s right to sue the other under the contract

If there is an unfair term in your contract, that term will become void.

When can I get out of the contract?

If you can prove there has been misleading or deceptive conduct you may be able to rescind the contract and get your deposit back. There is an important principle of contract law that comes into play here, though. That is – the matter must have been so important to you that you would not have entered into the contract had you known the truth about it.

For example, if you asked the vendor whether the roof is prone to leaks and they lied and told you it was not, even though it was, you will only be able to rescind the contract if the leaking roof was a deal breaker for you. So, if you would have bought the house anyway, then you cannot rescind the contract.

By way of another example, if you ask the vendor if the house is infested by pests and they tell you it’s not, when it is, and you would not have purchased the property if you had known, then you may be able to rescind.

Essentially, the issue that the vendor misled you about to must have been a deal breaker had you known about it. This is often referred to as a matter that goes to the ‘heart of the contract’.

If the matter doesn’t go to the heart of the contract, you may still be entitled to compensation, but you won’t be able to rescind the contract or get your deposit back.

A quick word about strata title

A Strata title lot is a portion of a building (or group of buildings) for which a separate Certificate of Title is issued. For example, a single apartment in an apartment block. Some examples of Strata titles include:

  • apartments
  • retirement villages
  • commercial offices
  • townhouses

A person’s ownership of a Strata title includes their individual property (ie. their apartment), as well as rights relating to common areas. Common areas can include parking grounds, entrances, hallways, swimming pools, gardens, etc.

Strata properties all have some sort of legal entity – called a Council in WA, which performs duties in accordance with their by-laws and has responsibility for common areas. Therefore, it is their job to handle any defects in a common area.

The strata title lot boundary is deemed by the Strata Titles Act 1985 (WA) (“The Act”) to be the inside walls of the strata title unit. Therefore, the outside walls and roof of all strata developments is common property, except if section 3AB of the Act applies.

In the case of the Brisbane woman mentioned earlier in this article, the Queensland Building and Construction Commission says, because the roof constitutes common property, they need to receive a complaint from the body corporate (Council) before they can inspect and investigate the leaking roof.

 

Our advice for home buyers

Before buying a house, we recommend you complete some important checks to ensure that everything is up to scratch. For example:

  • Make sure the agent selling it to you has a licence
  • Research the selling prices of other houses in the area
  • Find out why the property is on the market
  • Get a building report, Strata report and pest control report
  • Research any possible environmental hazards
  • Check whether there are any encumbrances on the property, such as a mortgage or easement (the vendor is only required to tell you about encumbrances that cannot be discovered through reasonable inspection by you)
  • Read the contract carefully and ensure you understand what the terms mean

 

Legal advice

If you are looking at buying a commercial property, a house or apartment and you’re unsure about the terms of your contract, or you just want to make sure that you aren’t getting yourself into anything you might regret later, do not hesitate to contact Lynn & Brown Lawyers. We have a team of experienced lawyers who will be happy to go over your contract, other documents and any other concerns with you.

 

About the authors:

This article has been co-authored by Chelsea McNeill and Steven Brown at Lynn & Brown Lawyers.  Chelsea is in her fourth year of studying Law at Murdoch University.  Steven is a Perth lawyer and director, and has over 20 years’ experience in legal practice and practices in commercial law, dispute resolution and estate planning.

Want to know more about commercial law? Visit our commercial law articles and fact sheets

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