Principles of disclosure
When you are listing a property, it’s important to share all the necessary information with potential buyers. Here we outline the related rules and the steps you can take when disclosing and provide guidance on other disclosure topics.
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 Code of Professional Conduct and Client Care rules 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.
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.