Anyone who has purchased a property will have learnt that the old English doctrine of caveat emptor still applies.
While consumer laws across the country protect buyers from defective products in most instances, the onus is on the purchaser to be satisfied with a property before they sign a contract of sale.
The Law Institute of Victoria warns that a vendor of real estate may not be liable to a purchaser for defects in a building or land that renders it dangerous or unfit for occupation.
It’s one thing to be happy that the structures are in sound condition, but what about the dangers that might lurk below?
Andrew Kaspen, principal at Best Hooper, says that it’s only when a developer starts to dig to make provision for an underground carpark or a basement that they might find that soil or groundwater contamination is an issue.
And it can get tricky if the developer believes misleading or deceptive conduct may be involved, such as false claims about the state of the land or the extent of disclosed contamination.
So, it pays to be careful. Twenty years ago the state government estimated there were about 10,000 contaminated sites in Victoria but experts believe that figure to be a gross underestimation.
The underground tanks and heavily leaded leaked fuel on former petrol stations and the leached carcinogenic chemicals from dry cleaners are especially problematic. These are two examples of the many types of businesses that often just came and went in the suburbs and inner city without signposting their history.
However, more often than not both the vendor and the purchaser are aware of an issue with pollution and the question then becomes one of allocating responsibility for the remediation within the contract of sale.
The vendor might seek to completely walk away from any remediation obligation so the purchaser buys the land as is and therefore undertakes remediation for themselves, or there might be a remediation process by the vendor either before or after settlement. Sometimes, the contract may require the vendor to undertake only limited remediation. So at the time of signing, the purchaser needs to be aware of the limits of the vendor’s obligations and whether the property will be remediated to the extent the purchaser requires.
The best advice for anyone considering purchasing a property for development is to seek advice before entering into a contract. Property lawyers can then prepare the documentation so that appropriate clauses can be added to protect the purchaser from some of the risk. At auction, the contract is drafted ahead of the hammer falling.
Unfortunately, these property lawyers are often not called in until there is a problem. The dispute resolution team steps in when there is an issue as to the cost of remediation; or who should be responsible for a clean up; whether or not a clean up has occurred to the extent required by the contract; or the period of time over which any remediation has occurred.
Obviously you bring the dispute to the attention of the other side and see if it can be resolved by agreement or through formal mediation but if there’s little or no prospect of it being resolved satisfactorily the matter can turn litigious and the client may need to look to the courts for a resolution.
It’s fair to say, however, that 98 per cent of cases settle.