Understanding a Section 32 vendor statement in Victoria

In Victoria, before a vendor and a purchaser sign a contract of sale, the vendor must give the purchaser a statement of prescribed information about the property. That statement is required by section 32 of the Sale of Land Act 1962 (Vic) — hence its common name, the "section 32". A defective section 32 statement can allow a purchaser to rescind in some circumstances, so both vendors and purchasers have a strong incentive to get it right.

What must be disclosed

The Act sets out the categories of information that must appear in the statement. The main headings are:

• Financial matters. Rates, taxes, charges and outgoings, and any similar amounts approved but not yet levied.
• Land use. The planning scheme name, the zone, any planning overlays affecting the land, the responsible authority and known planning permits.
• Notices. Notices, orders, declarations, reports or recommendations of a public authority affecting the land.
• Building permits. Building permits issued in the previous seven years for work requiring one, and any current builder's warranty insurance.
• Owners corporation. For strata titled property, full owners corporation disclosure — fees, insurance, meetings, special levies and any current legal proceedings.
• Growth areas contribution. Where the land is in a growth area, disclosure of any liability for the growth areas infrastructure contribution.
• Services. Whether the property is connected to the main services (electricity, gas, water, sewerage, telephone).
• Title. A copy of the title, plan and any registered dealings — mortgages, easements, covenants, caveats.
• Restrictive matters. Restrictions or agreements affecting use of the property that are not registered on title — for example, section 173 agreements under the Planning and Environment Act 1987 (Vic).
• Bushfire and specified overlay information. Disclosure where the property is in a designated bushfire prone area or affected by other specified overlays.

What a section 32 does not do

The section 32 is a document of disclosure, not a warranty or insurance. It is not:

• A building inspection or building condition report.
• A pest inspection.
• A valuation.
• A statement about the physical state of the property.

A purchaser who wants confidence in the physical condition of the property arranges those inspections separately. A section 32 tells you what the vendor and public authorities know, not what a builder or valuer would tell you.

Consequences of a defective statement

Section 32K of the Act sets out the remedies. In broad terms:

• A purchaser may rescind if the section 32 statement fails to comply, subject to the vendor's opportunity to rely on the "acted honestly and reasonably" defence and the purchaser being no worse off.
• Rescission must be exercised before the purchaser accepts title.
• The right can be lost by delay, waiver or the acceptance of a corrected statement.

In practice, a serious deficiency creates a bargaining chip more often than an actual rescission — the parties negotiate a correction, a price adjustment or additional time, rather than unwinding the deal.

Common deficiencies

• Outdated title search that does not show a recent registered dealing.
• Failure to attach owners corporation certificate (or attaching an out-of-date one).
• Building permits omitted, or works described as "no permit required" when in fact one was needed.
• Section 173 agreements omitted.
• Adverse council notices not disclosed.

Practical steps for vendors

1. Ask your lawyer to prepare the section 32 as soon as you decide to sell.
2. Order current title, planning, rates, water and land tax certificates.
3. Locate every building permit issued in the last seven years.
4. Order an owners corporation certificate (if applicable) from the manager.
5. Disclose known adverse notices — non-disclosure creates far more risk than disclosure.

Practical steps for purchasers

1. Have your lawyer review the section 32 before signing.
2. Check that certificates are recent (within about three months).
3. Read the title and the plan carefully. Ask what any easement or covenant means for how you will use the property.
4. For units, read the owners corporation certificate and any recent minutes carefully.
5. If in doubt, ask your lawyer to request a clarification or amendment before you sign.

The section 32 does its work when both sides treat it as a genuine disclosure exercise. A well-prepared statement gives a purchaser confidence and reduces the vendor's risk. A poorly prepared statement is one of the most common sources of dispute in Victorian conveyancing.

For legal review of a section 32 statement, see our contract review service or contact us to discuss.

What the section 32 is trying to achieve

The section 32 vendor statement is the vendor's statutory disclosure to the purchaser about the property. It is the tool that allows a purchaser to make an informed decision about the property before entering the contract. Where the disclosure is materially incomplete or misleading, the purchaser may in defined circumstances rescind the contract. That is why vendors and their representatives take the preparation of the statement seriously and purchasers should read it carefully.

Common areas of concern

• Title and encumbrances. Mortgages, caveats, covenants, easements and section 173 planning agreements are disclosed by reference to a search of the title. Restrictive covenants that limit permissible building on the land are particularly important for purchasers who intend to alter or extend.
• Planning. The planning zone, overlays and any current planning permits or amendments materially affect what can be done with the property.
• Owners corporation. Where the property is part of an owners corporation, the statement should include the owners corporation certificate showing fees, insurances, and any current issues.
• Notices, orders and outgoings. Building orders, rates, water and land tax are disclosed so that purchasers can factor them into their decision.
• Building information. Any building permit issued in the past seven years and any current building or owner-builder insurance are relevant for purchasers considering renovations.

Vendor obligations and consequences of error

Vendors are required to take reasonable steps to ensure their section 32 statement is complete and accurate. Where a material omission or error is identified after the contract is signed, the purchaser may have rights to rescind or seek damages. A vendor who is uncertain whether a matter needs to be disclosed should err on the side of disclosure and take legal advice before the property is listed.

How purchasers should read the section 32

The section 32 should be read alongside the contract of sale and any inspection reports the purchaser has obtained. Reading in isolation is a common cause of purchasers missing the interaction between the disclosure and the special conditions in the contract. A pre-signing review by a lawyer is the most reliable way of ensuring the disclosure is understood in context.

Practical points for both sides

Vendors benefit from preparing the section 32 before the property is listed, so that the disclosure is complete when the first prospective purchaser asks for it. Purchasers benefit from asking for the contract and section 32 as soon as they have a serious interest, so that a review can be conducted before the purchaser is under pressure to bid or make a written offer.