What Is A Section 32 + Why Do I Need One?
Written by: Nancy Robertson | Legal Team
One of the biggest steps in an individual’s life is either purchasing or selling a property, or both!
Many people assume that engaging a real estate agent (or in relation to a purchase, negotiating with the real estate agent) is all that needs to be done. They do not realise that all sales and purchases of real estate also require a solicitor or conveyancer and that obtaining the right legal advice is imperative to any acquisition or disposal of property.
Want to get a better understanding of the conveyancing process? Check out this previous blog we put together: Buying -VS- Selling A House: The Conveyancing Process
What Is a Section 32?
A section 32, commonly known as a Vendor Statement, is a document that must be provided to any purchaser before a sale can become legally binding.
The document discloses all information in relation to the property that a buyer is legally entitled to have disclosed.
The first step in any sale (after settling on a real estate agent) is contacting a solicitor or conveyancer to prepare the Section 32 Statement.
The Section 32 sets out all the relevant facts about the property. Once all the questions are answered, documentation is also required to be attached, including:
- A copy of the Certificate of Title and Planning certificate. This will show any mortgages, caveats or covenants affecting the land;
- Copies of rates notice, such as council, water, State Revenue Office and owner’s corporation. This gives any potential purchaser an idea of what the outgoings are in relation to the property;
- A copy of any building permits if the work was done within the last seven to ten years. This ensures that any potential purchaser is aware of any works completed on the property and that the works were completed within the council guidelines;
- A copy of any lease agreements if the property is tenanted. This discloses to any potential purchaser whether they will receive vacant possession of the property;
- A copy of any VicRoads proposals and any other certificates/notices that should be disclosed to a prospective purchaser; and
- Connections for gas, electricity, sewerage, telephone and any other services that may or may not be connected to the property.
How Does a Section 32 Affect The Conveyancing Process?
The significance of Section 32 is that once a document is provided to a purchaser, and assuming that all the details within it are correct, a purchaser cannot end a contract based on any information contained within it.
However, if the Section 32 is not provided, or has incorrect or missing information, a purchaser is legally entitled to end a contract at any stage of the conveyancing process. This is the case even if the purchaser is aware that certain information is missing and had agreed to sign the Contract of Sale in any event. In these circumstances, is a purchaser simply ‘changes their mind’, the vendor would need to return all deposit monies and agree to end the contract.
Most commonly, a purchaser would not attempt to terminate the contract unless there is a major disclosure, such as not disclosing that buildings on the land have been built without a permit, or there may be hazardous waste on the block that has not been disclosed. Having said this, as mentioned above, a purchaser would have right to rescind based on a much smaller issue.
The rationale for this somewhat harsh approach, which may seem to favour a purchaser, is that a purchaser generally relies on the information provided, as do their solicitor or conveyancer. When a purchaser engages a solicitor or conveyancer to peruse and advise on the contract before signing, the solicitor bases the advice on what is contained in the Contract and Section 32. Therefore, if the information is incorrect, whether deliberate or not, there needs to be protection afforded to the potential purchaser and their legal representative.
Why Do I Need a Section 32?
From a vendor’s perspective, the law requires a Section 32 to be produced to all purchaser, as outlines above, there are significant risks to a vendor should the Section 32 be deficient.
In relation to a purchaser, being provided with a Section 32 means that important details about the property (or even a vacant block of land) are disclosed.
The flow on affect of this is that a purchaser can make an informed choice as to whether they should make an offer on a property or not. There may be some type of disclosure in the document that makes you question whether you want to proceed with an offer. It also allows a solicitor or conveyancer to raise issues that a purchaser may not have been made aware of during the inspection.
Importance Of a Section 32 Vendor Statement
A Section 32 is also extremely important from a finance perspective.
Any lender will rely on what is contained in both the Contract and Section 32 and make the decision on whether to lend and/or how much to lend. If it is discovered that the Section 32 is deficient in a way that affects the value of the property, a lender could refuse to continue to finance the purchase.
Canny Legal + How We Can Help
At Canny Legal, we act for both vendors and purchasers in the conveyancing process.
For a vendor, we can prepare the Contract and Section 32 and carry out the conveyancing process from the beginning to settlement. We ask all clients to answer a questionnaire before beginning the preparation process and assist in obtaining any information that may be required, but not easily obtainable.
For a purchaser, we would always recommend that you contact Canny Legal to review any Contract and Section provided to you by a real estate agent before signing to determine not only that the Section 32 is not deficient in any way, but also to ensure that appropriate conditions are contained in the Contract of Sale. Both documents are equally important and must be read in conjunction with each other.
Whether you are a vendor or a purchaser, the process can be daunting, and that is where Canny Legal can make the process smooth and stress free.
Get in touch with our team to ensure that you receive expert advice on your property purchasing and selling ventures!
