Principles of disclosure
When you are listing a property, it’s important to share all the necessary information with potential buyers. On this page, we outline the related rules and the steps you can take when disclosing information so you can best protect yourself.
Open and frank discussion
You should have an open and frank discussion with the vendor around the importance of disclosing all relevant information to buyers and the potential repercussions if they don’t. Ideally, this conversation would take place before they sign an agency agreement with you so you can decide if you want to continue with the listing.
It is important to encourage the vendor to be open and honest throughout the process. This helps reduce the chances of a sale falling through and minimises the risk of legal action after settlement due to non-disclosure.
If it helps the conversation, you could ask the vendor what information they would want to be disclosed to them when they purchase their next home. For example, would they want to be told about previous flooding on the property, or evidence of borer?
The Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 (Code of Conduct) set out your obligations to parties involved in a transaction. There are two specific rules that address what information you must share - rule 10.7 and rule 6.4.
Rule 10.7 – disclosing defects
Rule 10.7 states:
A licensee is not required to discover hidden or underlying defects in land but must disclose known defects to a customer. Where it would appear likely to a reasonably competent licensee that land may be subject to hidden or underlying defects, a licensee must either—
a) obtain confirmation from the client, supported by evidence or expert advice, that the land in question is not subject to defect; or
b) ensure that a customer is informed of any significant potential risk so that the customer can seek expert advice if the customer so chooses.
This rule involves you telling potential buyers about known problems with the property or business you are selling. It tends to relate to physical defects, for example, a leaky roof or subsidence in the land, but may also include issues like defects in the title.
You are expected to be able to identify potential issues with a property, for example, properties that fit the ‘leaky building’ stereotype or properties with suspected asbestos ceilings.
Rule 6.4 - sharing information
Rule 6.4 states:
A licensee must not mislead a customer or client, nor provide false information, nor withhold information that should by law or in fairness be provided to a customer or client.
This rule addresses the other information you may need to share about a property that is broader than physical defects, for example, a development happening in the neighbourhood, or whether there has been a violent crime in the property.
Read more about the Code of Conduct here.
What do I do if I find a potential problem with the property?
Here is some guidance on what to do if you find a potential problem with the property you are listing.
Speak to the vendor
You should talk to the vendor about any information you receive and explain you may be obliged to disclose the problem. Talk to the vendor about their options including:
- the vendor providing you with information to address or clarify why there is not a problem or that the problem has been resolved
- investigating the nature of the problem so the vendor can make an informed decision about what to do next
- agreeing there is a problem and consenting to share information about this with interested buyers.
If the vendor agrees there is a problem and the problem can be disclosed
You should discuss what information will be shared and how. It’s important to document the decision and ideally give the vendor a copy of the decision you have reached together.
If the vendor can provide information that addresses the problem
If the vendor provides information that proves there is no problem, they may decide that the matter does not need to be disclosed. If the vendor provides information that shows there was a problem but it has been addressed, you both may agree to share this information with potential buyers.
You should document the decision and give the vendor a copy of this. Consider rule 6.4 in relation to this decision.
If the vendor disputes there is a problem or believes the problem does not need to be disclosed
You should review the information you have and seek more clarity if you are not sure what to do.
- Weigh up the evidence and the risk of not sharing this information and discuss this with your manager and the vendor. You may wish to seek legal advice.
- If you think the problem needs to be disclosed, explain this to the vendor and ask if they agree. Document this decision and give the vendor a copy.
- If the vendor does not agree with the problem being disclosed, you may need to walk away from the transaction.
Check your agency’s policy on disclosure of problems with a property.
How to share information
It’s important to consult with your vendor about how a problem with a property is shared with interested buyers. You aren’t required to include information about a problem with the property in the marketing or at open homes. Buyers should receive information that could affect their decision to make an offer before an offer is drawn up and submitted to the vendor.
Best practice suggests following up any conversations in writing where possible where you have disclosed information to a buyer.
It’s important to advise buyers that they may wish to seek expert advice.
Disclosure facilitated meeting guidance
As part of addressing the issue of disclosure, we designed a facilitated meeting guidance booklet, intended for leaders in real estate agencies to use to run a session(s) on disclosure. We also included a flyer on disclosure resources for all licensees to keep for reference.