Importance of Section 32 When Buying a Property in Victoria
15 min read
What is Section 32?
A Section 32 is a legal document, also known as the vendor’s statement. Before a property can be sold in Victoria the buyer must be given a copy of the section 32 statement. The term section 32 is a reference to the Sale of Land Act 1962 (VIC) as this is the section of the act which states a vendor must provide a statement to the purchase
Prepared by a conveyancer or solicitor, the section 32 statement sets out all appropriate information a purchaser needs to know about a property before they make a decision to buy. It includes relevant documentation such as the ownership and title details, along with a host of other information.
It allows the purchaser to do their due diligence and make an informed decision before they commit to purchasing the property. The purchaser needs to review all of the information set out in the section 32 before signing a contract of sale to purchase the property.
Importance of Section 32 in Victoria
It is mandatory that a section 32 to be prepared and given to prospective buyers in Victoria before a property can be sold. The document discloses important information to the buyer which may affect the value of the land and property for sale.
The term section 32 is a reference to the Sale of Land Act 1962 (VIC) as this is the section of the act which states a vendor must provide a statement to the purchaser. This section of the Sale of Land Act also outlines what must be contained in the statement.
Who prepares the section 32?
The legal practitioner (commonly a conveyancer or solicitor) for the vendor prepares the section 32. The vendors conveyancer works with them to compile all of the relevant information outlined below to be provided in the statement.
It is then important for the buyer to have their own conveyancer or solicitor to review the document. We don’t recommend you try and review this yourself without getting legal advice.
What’s in the section 32?
The statement provides a range of different information to the buyer which may not be available or obvious simply by inspecting the property. This includes:
- A copy of the registered search confirming the Title details, whether there are any encumbrances, caveats or notices.
- Details of the boundaries and restrictions affecting the land.
- Confirmation of services including water, power, sewerage, gas and telephones.
- Any covenants. A covenant describes what the owner of the property may or may not do on the land. For example, a single dwelling only can be built there.
- This is the right by another party to access and use the land. Common easements include access to sewerage and drainage.
- This outlines whether the property is residential or whether business can be conducted there too.
- Such as rates, water, levies, notices, permits or proposed plans.
- Common overlays are things like heritage areas, bushfire or flood prone zones
- Building permits for works occurring the seven years prior to sale. This could include an occupancy permit, final inspection, defect reports or insurance.
- Due diligence checklist.
When should the section 32 be supplied?
The section 32 needs to be provided to the purchaser before they sign a contract of sale and before an offer is made to purchase. If someone has requested a copy of the section 32 it means they are interested in the property and they are likely to make an offer subject to a satisfactory inspection and review of the vendors statement.
In most cases, a legal professional will prepare the section 32 at the same time as the property is listed on the market by the real estate agent. This ensures anyone who views the property right away will be able to access this document upfront.
Even if the property is not going to be listed on the real estate listing websites and is going to be transacted “off-market” a section 32 still needs to be prepared and made available to buyers.
What happens if a section 32 is not supplied prior to contract signing?
If the vendor’s statement or section 32 is not supplied (or is not compliant with the Sale of Land Act) then the purchaser is entitled to withdraw from the contract. They are also able to seek compensation from the vendor.
It is for these reasons it’s crucial the vendor has the section 32 statement prepared by a legal professional to ensure they are providing the correct information.
If the vendor or their agent refuses to provide a section 32 then the sale does not have to proceed. Due to the fact that the section 32 is a document that must be supplied by law, a vendor cannot actually market their property without one.
In all instances a buyer must exercise caution and protect themselves, no matter how wonderful the property may be. Reviewing the section 32 is a crucial part of doing due diligence on the property and a purchase without the section 32 is not recommended.
What should a buyer be looking out for in a section 32?
Given the sheer volume of information provided in a section 32, there are lots of different areas a prospective buyer needs to be checking for. A conveyancer or solicitor will be able to break down the different areas that the buyer needs to be wary of, this is part of the due diligence process.
The solicitor or conveyancer may identify areas to be wary of, this may include:
- An outline and notes on whether easements, covenants or other aspects of the statement are of concern.
- What different agreements, zoning and planning means and how it may affect the purchaser.
- Whether there are no building permits for the past 7 years and whether the purchaser should check to ensure this is consistent with the current state of the property.
- Implications of certain types of overlays.
- Notations as to what the outgoings look like and which council the property is governed by.
- Any taxes, leases or owners corporations.
Your legal professional may also suggest the buyer get in touch with the local Council to check whether there are any proposed developments in the area which may impact the property and land.
All of these steps form the crucial due diligence which should be conducted for every property purchase.
What if there is something missing?
If the vendor’s legal professional has failed to provide an essential document in the section 32 the purchasers conveyancer can request a copy of whatever has been left out or overlooked. If the information is not forthcoming then the purchaser may choose to walk away from the transaction.
Is there a cost associated with getting a section 32?
Yes. The vendor is required to pay their conveyancer for their services. The cost varies across professionals. Some legal professionals charge a flat rate for the preparation of a section 32, whereas others may charge an hourly rate.
It is well worth the cost to have the section 32 prepared by a legal professional. As outlined above, if there is information that is left out or the document is not completed appropriately then there are some big ramifications for the vendor and their agent. This could include the purchaser withdrawing from the contract through to financial penalty.
There is no cost to the buyer to obtain a copy of the section 32. They will however need to pay for their own legal professional to review it. As mentioned above some conveyancers and solicitors charge a flat fee for a contract review whereas others may charge an hourly rate.
Some conveyancers will offer free contract reviews on the proviso you use them for the conveyancing when you do eventually purchase. This varies from business to business so it’s worth discussing upfront what fees will be charged for what services.
If the purchaser wants to add wording or a clause (such as a finance clause) to the contract it’s up to the purchaser to contact the vendor’s agent and make this request in writing. It’s then at the discretion of the vendor and their team whether they choose to make these changes or not.
Do all properties require a section 32 statement be provided?
Yes. In the state of Victoria, any property located anywhere including metropolitan, regional and rural all must be have an accompanying section 32. This doesn’t replace a contract of sale. All purchasers must receive a copy of the section 32 no matter whether they are buying land, house, apartment, townhouse and whether it’s residential or not.
Even if the property does not go on the market and is sold privately or off-market, a section 32 is still required to be provided in all instances.
Can the vendor prepare the section 32 without a legal professional?
Theoretically yes. However, because it’s such a crucial document and the financial implications and risks associated with a defective statement being provided it is not recommended. A conveyancer or solicitor is the best person to prepare the section 32 for the vendor to ensure all the appropriate documents have been supplied.
As mentioned above, the risk to the vendor for supplying a deficient or defective statement can be very expensive as it gives the purchaser the opportunity to withdraw from the sale and seek compensation for any losses.
For these reasons it’s recommended to employ a legal professional to prepare the statement from the beginning. These professionals prepare vendor statements constantly and will have the correct checklists and procedures in place to ensure nothing is missed. Paying the money upfront for a professional could save thousands of dollars down the track.
What happens after the section 32 has been reviewed?
Once the purchaser’s legal representative has reviewed the section 32 the purchaser can decide whether request any amendments to the contract of sale, or whether they want to make an offer at all. They may request to add in certain clauses relating to things like finance approval or building and pest inspections. The legal professional may also make recommendations/suggestions as to the goods, chattels, building and land which the purchaser may request be removed or included in the contract.
Where do Entourage come in?
An important element of making an offer is to ensure your finances are in order. Entourage can provide guidance and support when it comes to making this happen. From organising borrowing power, discussing loan options and features through to understanding repayments and getting your pre-approval in place – working with an Entourage will provide you with peace of mind so you know where you stand. Our mortgage brokers save your time and money by doing the heavy lifting with the banks and guiding you to the right finance solution to suit your needs.
Once you’ve got your finance clause in place, the Entourage team go to work to ensure you are ready to meet this deadline and support you all the way through to settlement day (and beyond in many cases!).
Ready to make an offer?
Get in touch and we can help walk you through the process.