You can protect yourself from a complaint by knowing what you’re selling, understanding the relevant information, clearly communicating that information and knowing when you need to refer vendors and buyers to independent legal or technical advice.
What is a leaky building?
A leaky building is one where moisture gets between the exterior cladding of the house and the inside walls. The walls can potentially rot, and dangerous fungus can grow and cause structural problems for the building and health problems for those who live there.
Buildings that have a high risk of leaking were mostly built between the late 1980s and the mid-2000s, using plaster-style monolithic cladding systems. The exterior walls typically have an unbroken or smooth appearance. Other indicators can include a building with no flashings around windows and a flat roof.
Monolithic cladding refers to exterior cladding that is coated to give the seamless appearance of concrete, masonry or plaster.
Signs that there may be weathertightness issues include:
- cracks and splits in the cladding or joints
- moisture staining or other visible water damage
- musty smells
- efflorescence (white chalky substance) at junctions or cracks
- mould, moss or colour degradation
- blistering or fading paintwork or bubbling or peeling wallpaper.
If you suspect it is a leaky building
If you suspect a property may be subject to weathertightness issues, you should bring this to the attention of the vendor.
You should ask the vendor to supply evidence or expert advice that demonstrates there are no weathertightness issues or concerns with the property. Evidence to support this can include building reports, specialist weather-tightness reports, council files and a LIM report. If the client can’t provide that evidence, you should ensure that you inform any customers of the potential risk, so they can seek expert advice.
If the vendor explains they have had weathertightness issues in the past but have made repairs, ask to see the evidence of work carried out and a building inspection report. Discuss with your client why this should be disclosed to potential purchasers as a matter of fairness.
If the vendor asks you not to disclose a defect with the property, you must not continue to act for them.
Disclosing the information
You must talk with the vendor before making any disclosure decisions about a property. Disclosure can’t be made without the consent of the vendor.
Any information you disclose must be current, authoritative, relevant and able to be substantiated. Verbal disclosure should be confirmed in writing. We recommend that you suggest buyers get expert advice about risk, finance and insurance so they can make an informed decision before making an offer.
It’s also important to remember that, while it’s not your job to discover hidden or underlying defects with the property, you should be able to identify whether it is potentially subject to a defect and take the appropriate steps.
Guidance from a decision
This case involves a licensee providing the complainants with a building report, a copy of the LIM, and assured them the property was a ‘good property’. He failed to disclose about a previous building report on the property that identified weather-tightness problems, monolithic cladding, and the fact that the property was constructed between 1994 and 1998. The report had led to a previous sale falling through.
The property had previously been listed with the agency. An offer was withdrawn due to the ‘leaky home problems’ the report identified, and the property was subsequently removed from the market. A year later, the vendors stated they had fixed the issues with the property, but they were unwilling to disclose the earlier report. They only wanted the licensee to disclose the updated report obtained following the remedial work. This report confirmed there were no issues with the property.
The Tribunal made a finding of unsatisfactory conduct against the licensee in circumstances where he failed to disclose to the purchasers that the property was built of material which might leak and that a previous sale had collapsed due to an unfavourable builder’s report. This report identified potential weather-tightness problems with the property.
Read the full decision here(external link).
Below are some of the key points from the decision and what it means for you.
Failure to identify and disclose leaky building
The licensee failed to advise the purchasers that:
- due to its age and construction materials, the property might be at risk of weathertightness problems
- a previous conditional agreement for sale and purchase of the property had failed to settle due to an unfavourable building report
- the previous building report had identified potential weathertightness problems with the property.
The licensee told the Tribunal that:
- He did not consider that he needed to tell [the complainants], or any other buyer, about the earlier building report or the fact that the sale had previously fallen through because of the building report.
- He now acknowledges that he should have told [the complainants] about the existence of an earlier Agreement for Sale and Purchase and the reason why it had collapsed.
You must disclose all material information
The Tribunal held that the licensee was not entitled to rely on the fact that a subsequent positive report provided by the vendor cleared the property. The licensee should have disclosed the fact that an initial building report had detected problems with the property.
We consider that he was careless and that he was not properly trained in understanding his obligations as an agent to disclose all material information, not just the information that he thought was material to the issues.
The licensee breached rules 6.4 and 6.5 of the Code of Conduct because he did not disclose all material information to prospective purchasers relating to the weathertightness of a property.
...we do consider that the Charge has been proved at the level of unsatisfactory conduct under section 72. We consider that there was a clear breach of Rule 6.4 and 6.5 and that on the basis of previous decisions and comments by the Tribunal,... the obligation is on the agent to be proactive in ensuring that potential purchasers have all necessary information.
What this means for you
The obligation is on you, the licensee, to be proactive in ensuring that potential purchasers have all necessary information. You can’t solely rely on a positive report provided by the vendor to clear the property of your disclosure obligations.
If a building you suspect, due to its age and construction materials, might be at risk of weather-tightness problems, you need to inform buyers and advise them to seek expert or legal advice before submitting an offer.
Purchasers should be able to be sure that the information that they are given about the house by the agent represents a complete picture of the property and not selective information.
We recommend you seek advice about the effect of the Tribunal’s decision if this is a significant matter for you.