Buyer Beware… are you doing your research?

Posted on Apr 3, 2017 in Buyers Agent

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As a buyers agent in Sydney, we do sometimes hear horror stories about people purchasing property.  Recently, friends of mine rang me with the news that they had purchased a beautiful house near the beach with sweeping coastal views. They were clearly relieved to have found something suitable after missing out on a couple of auctions.  As buyers across Sydney all know, the market is challenging, with demand up and stock levels in the local area down by approximately 42% since 2015.  Competition was and still is fierce.

The fear of missing out is very real for buyers and this can often result in overlooking important due diligence and negative consequences of a property purchase. We’ve all done it haven’t we – we sit down and write a list of all the pros and cons of something we want but somehow that ‘pro’ list is much longer than the ‘con’ list.  That’s because if we really want something we become ‘blinded’ to the negatives. Not such a big deal when you’re talking about a piece of furniture or a weekend getaway, but it’s a very big deal when you’re talking about property.

Having had their Conveyancer look over the contract our friends decided to bid at auction and were delighted at being the winners on the day.  However, about a week or so after they had purchased they inadvertently found out that the owners of the property next door had lodged a DA some 6 months earlier which was still not approved due to several neighbour objections. Although the vendor had received formal notification of the DA in September 2016 the details were not disclosed. This is a significant DA which will impact on the privacy of my friends’ new property and of course, will cause significant disruption for at least six months during the build. Imagine if this had happened in the extreme and well-documented case of the semi in Lewisham where a 5 story apartment popped up next door.

So why didn’t they know about this DA before they purchased the property?  It’s a good question and a lesson for all of us thinking of purchasing property.

  • There is currently no legal obligation in NSW to disclose neighbouring DA’s despite such a development potentially having a significant impact on the property being purchased, such as through loss of privacy, amenity and views.
  • The selling agent’s job is to get the best price possible for his/her vendor. Under the Property, Stock and Business Agents Act 2002, Section 52 (1) there is an obligation for selling agents to disclose information about the property that could be considered a ‘material fact’ if that information is known to them.  It’s a grey area, so a sensible starting point for any property buyer would be to specifically ask the selling agent whether he/she is aware of any neighbouring DA’s that have been lodged or approved as the selling agent has an obligation to answer truthfully and honestly if they are aware of any such DA’s).  As always however, regardless of the response, its best to adopt a buyer beware approach and conduct the due diligence yourself or get someone to do it on your behalf.
  • In NSW, the “Requisitions on Title” is a document with questions pertaining to the property title which the seller is required to complete truthfully. For example, if there is any dispute with a neighbour regarding a boundary fence then that would need to be disclosed by the vendor.  Or if there was any recent building work carried out by the vendor then that would also need to be disclosed along with the relevant paperwork. Why is there a legal requirement to disclose a boundary fence dispute but no requirement to disclose a large-scale DA next door that will quite possibly negatively impact the property both in privacy and in potential loss of view and therefore value?  Also, the problem with the requisitions on title is that even if it WAS disclosed in the requisition replies, they are always POST exchange and there would be no remedy either.
  • The solicitor for the purchaser should conduct the appropriate checks. Any good solicitor would run an appropriate check on the property prior to exchange to ascertain any pending or approved DA’s on the property being purchased AND on neighbouring properties. Unfortunately in the case of my friends, their conveyancer didn’t carry out the rights checks nor did they engage the services of a buyers agent and so they entered into a contract without being fully informed.

If this lack of disclosure seems inadequate, it’s because it is (in our humble opinion). One solution would be a more accessible Register of DA’s – where you could check the address of any property and find anything that has been lodged in the last 10 years.  Whilst most DA’s last 5 years before they expire, they can run for a long time providing they have been “practically commenced”.

Conducting the proper due diligence on any property purchase prior to exchange is time consuming but given the size of the investment, it’s crucial. Most of the Councils in NSW have online application tracking tools so searching for DA’s, whilst time consuming, is possible.

Back to my friends.  So, how did they find out about the DA if it wasn’t disclosed?  Well coincidentally, as buyers agents in Sydney, we were doing due diligence on another property in the same street and came across it. I immediately notified my friend who had no idea.  We only wish we had been able to check it earlier for them so they could have avoided this unwelcome surprise.  Whilst it might not have changed their decision to purchase, it would have at least ensured they were making an informed decision regarding both the positives AND negatives associated with the property. As a Buyers agency and property research company in Sydney, it’s something we take very seriously and we are uncompromising with respect to our due diligence processes in order to help our clients make informed decisions BEFORE they purchase.

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