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18 December 2015

Water under the bridge...now

Sale, Purchase, Mortgage, Lease
Victoria

Asked

I act for a purchaser who bought a property subject to lease and settlement is on 28/1/15. The agent managing the sale and the agent managing the lease are two different agents. After signing the contract, my client found out from the leasing agent that there has been a complaint from the tenant regarding a water leak problem in one of the bedroom wardrobes. The leasing agent told my client that they reported the water leak issue to the vendor and the vendor promised the agent that the problem would be fixed by last Christmas. Whilst my client was doing the final inspection, they were told by the tenant that the problem is still there as the vendor has not done anything to fix it.

I immediately wrote an email to the vendor's lawyer requesting for the problem to be fixed prior to settlement. I also wrote numerous emails to the vendor's lawyer prior to request for the issue to be fixed but did not receive any reply. With 2 days left before settlement, the vendor's lawyer replied that as the problem already existed prior to contract signing day, the vendor is not obligated to rectify the issue.

If the issue already existed before contract signing day, was the vendor legally required to disclose this issue in the section 32 under the Notices section? Can you please also advise if I can now pursue any of the following options for my client:

1) delay settlement, without any interest penalty to my client, until the issue is fixed;

2) hold $5,000 of the deposit money in the agent's trust account until the problem is fixed; or

3) threaten to terminate the contract as the section 32 was defective (for not mentioning the issue under notices)

If none of the above can be applied, then I have to advise my client to proceed with settlement.

Answered

Regrettably, the problem is a quality defect which existed at the time of contract. Therefore, you cannot withhold $5000.

There has been no notice from a government authority, therefore there has not been a breach of section 32.

The basic law is caveat emptor - let the buyer beware.

Your client could pursue an action in VCAT for misleading conduct (non-disclosure of the defect) after settlement but is required to settle on time and without deduction.

See the Defects chapter in our Reference Manual - 1001 Conveyancing Answers for Victoria.

Regards

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