Disclosure dilemma: $310k property refund triggers stark reminder for agents

Earlier this year, Filda Keci and Steven Wallace had put a $310,000 deposit for the Darling Street home in Bronte, which was described as having sweeping ocean views.

Prior to signing the contract, the pair was told by PPD agents, Alex Phillips and Tom Fuller, that only a nine-unit development was planned for an adjoining Hewlett Street site, and that it would not drastically affect the views.

However, the sellers were aware that the site was declared a State Significant Development (SSD), and there was another proposal on the spot for a nine-storey, 100–120 apartment building, which would impact the views, which they communicated to the agents.

In April, after Keci and Wallace had bought the property, they were made aware that there was a different proposed development for the site, and they immediately contacted their solicitor.

After the matter was taken to court, Justice Kate Williams found that while the agents’ statements about the nine-unit project were true, it was misleading by implication because they failed to disclose the larger proposal.

As a result, Justice Williams ordered that the contract of sale be rescinded and the buyers refunded for the deposit.

According to the Real Estate Institute of NSW (REINSW) CEO, Tim McKibbin, agents have a responsibility to inform potential buyers of matters that are regarded as “material facts” that could influence a buyer’s decision to enter a contract.

Section 52 of the Property and Stock Agents Act 2002 (NSW) states that agents must not induce a person into a contract by concealing or failing to disclose a material fact.

“It’s a mess because the vendor and the solicitor or conveyancer don’t have the same obligations to make those disclosures as the agent does,” he said.

“So you can see in circumstances like this that the agent, in fulfilling their obligations, is acting contrary to the interests of the vendor, who they serve.”

In this particular situation, McKibbin said it was interesting that the vendors seemed to bear ultimate responsibility for marking the disclosure, but noted that it may be a case-by-case scenario.

“Normally, what would happen in circumstances like this is firstly you’d have to look at the individual case and the circumstances of the individual case to work out if the buyer had a right to damages,” he said.

“Secondly, where those damages would come from, would it be the agent? This case is interesting because they have set the contract aside, which I don’t recall seeing one like that. I don’t think the agent was a party to the contract.”

Despite arguing it should be the responsibility of the agent to make important disclosures, McKibbin said that the vendor also had a role to play in communicating information about any possible setbacks.

“When you look at the solicitor, the agent and the vendor, the person who has the greatest knowledge of the property and its defects is going to be the vendor, but the vendor doesn’t have the obligation to make disclosures,” he said.

McKibbin said REINSW had advocated for reforms to ensure that the vendor, solicitor and agent disclosed important matters to prospective purchasers, and to ensure these matters were made known to them in the contract.

“We’ve been unsuccessful in achieving those. If the government’s purpose in this is to make consumers aware of matters that would be pertinent to their decision to purchase or not, then why is it so hit and miss?”

“Why would you not want the purchaser to be made aware of that by the parties? Why would you only require the agent to do it?”, he concluded.