WHAT DO VENDORS HAVE TO DISCLOSE TO PURCHASERS?

What Do Vendors Have to Disclose to Purchasers?

There is a widely held belief that when buying property, the vendors have a duty to purchasers to disclose defects or damage to the property.  However, this belief, despite being common, is not entirely accurate.  Real estate agents have an obligation to disclose defects, but this relies on them being informed by the vendor.  If it is a private sale, the vendor does not have the same disclosure obligations.

The general terms in the REINZ Sale and Purchase Agreement that is used by most agents and lawyers across New Zealand, does not include any warranties that the property is free from defects. The vendor provides warranties that any work they have done to the property has the required consents and that any chattels included in the sale are in reasonable working order (this often includes chattels such as ovens, extractor fans etc). However, there are no warranties in relation to the condition of the property or that it is free from defects.

Vendors have no obligation to provide purchasers with information which may or may not be relevant to the purchaser in deciding whether to buy the property, this includes defects.  However, a vendor cannot mislead the purchaser or misrepresent the condition of the building. If the purchaser asks a specific question about the condition of the building or certain issues (for example, if there has been a history of leaking), the vendor cannot lie about this.  But if the purchaser does not inquire about this, the vendor does not have to volunteer this information. Silence is generally not considered a misrepresentation except in certain circumstances

It is generally the responsibility of the purchaser to ask questions about the property and any potential issues.  If issues are discovered after settlement, it can be extremely difficult to get the vendor to foot the bill for remedying these.

We recommend buyers complete a thorough due diligence investigation on properties they want to purchase.  This generally includes obtaining building and LIM reports, together with the Council files.  Sometimes this can also include plumbing, electrical, geotechnical or other specialist reports.

It is always a difficult balance between making an offer as attractive as possible and ensuring there is sufficient time and opportunities to complete a due diligence investigation.  While it can seem undesirable to spend the money on these reports, a couple of thousand now can save a lot of money in the long run. 

There is also a widely held misconception that the vendors have a duty to leave the property clean and tidy.  The REINZ Agreement does not include this duty.  There is nothing in this Agreement which puts an obligation on the vendors to provide a clean property.  Generally, the pre-purchase inspection is the best opportunity to make sure that the premises are clean and tidy.  However, if it gets to settlement and the property is still untidy, unless it is so untidy that it can be deemed untenable, there is generally still an obligation to settle in full. 

A clause can be inserted into the Further Terms of Sale which states that the vendor must leave the premises clean and tidy.  But in some circumstances, this may make an offer less attractive.

If you need any advice on what conditions to include in an offer to purchase, or your obligations as a vendor, contact one of our property lawyers or legal executives.

Written by Kayla McLellan