Material Facts

Information Sheet: Series 2012

Learning Area:
Relates to the following sections of the PSBA Act 2002 and PSBA Regulations 2003:
 PSBA 2002 s.47 Duty of disclosure to client and prospective buyer of land
 PSBA 2002 s.219 Disclosure of information
 PSBA 2003 Rule 3 Fair and reasonable to all parties
 PSBA 2003 s.1.7 Confidentiality
Learning Areas:
 Risk Management;
 Legislation and Compliance; and
 Ethics and Professional Responsibility.
**Real Mastery believes that the content of these notes and checklists are accurate and current at the time of printing. Real Mastery does not make any warranty of any kind,
whatsoever expressed or implied, with respect to the contents. It is the responsibility of the real estate professional using the notes and checklist to verify any information before
relying on it.

Definition
A material fact is a fact that would be important to a reasonable person in deciding whether or not to
proceed with a particular transaction.

OFT Misrepresentation Guidelines

Material facts relate to the property where personal information relates to the parties involved in the
property transaction.

KEY POINT : PROTECTING CONSUMERS BY PROVIDING OPENNESS AND TRANSPARENCY WITHIN

TRANSACTIONS FORMS THE THRUST OF DISCLOSURE.

To disclose or not to disclose, that is the question

Since the result appeared in the infamous Gonzales case (2005), debate has raged about what is the
duty of disclosure that applies to agents and their representatives and when disclosure is required,
whether in property sales, management or leasing; and spans residential through rural to the
commercial, industrial and business sectors.

Complications:
– the agent is engaged to act for one party in the transaction;
– must act in the best interest of that party to comply with their fiduciary obligations; and
– What if the disclosure is not in the best interest of that party, i.e. the client?
Does the duty of disclosure override the duty to act in the client’s best interest?

1. Schedule 1 of the Property, Stock and Business Agents Regulation 2003 mention in rule 3 that you
must be fair and reasonable to all parties and must not mislead or deceive any parties in negotiations
or a transaction. Consumer protection legislation also prohibits false and misleading conduct or
conduct that is likely to mislead or deceive.

2. Only one course of action here is considered the legal one.

When to disclose
Attempts to definitively answer these questions have been made by legal practitioners, industry
practitioners, training organisations and the Office of Fair Trading has issued misrepresentation
guidelines to stem the debate. The Administrative Decisions Tribunal also covered these areas in the
Appeal Panel hearing dismissing the appeal in Hinton & Ors v Commissioner for Fair Trading, Office of
Fair Trading (GD) [2007] NSWADTAP 17 dated 3 April 2007.

Consider:
– most of us consider ourselves to be ‘reasonable’;
– agents tend to err with caution on the side of our client to lessen any negative elements in the
transaction; and
– ‘we were only acting in the best interest of our client to get the best result for them’.

The Administrative Decisions Tribunal Appeal Panel further ruled that indications, which would
be relevant to determining whether something is a material fact include:

– the agent’s treatment of the fact

– whether the fact is able to be independently ascertained
– whether the fact is likely to impact on price
– the reaction of other purchasers to the fact
– whether the fact results in the property being in a rare or unusual category or position

Gonzales Case Judgement Outcome

In the judgement, fact may become ‘material’:

1. because in the particular circumstances it is known by the agent to be material to the particular
consumer, even though agents and consumers may not typically regard the matter as material; and

2. is by the application of an objective standard, which has regard to what a reasonably informed
consumer with a fair minded understanding of the real estate market, including the role of the real
estate agent would regard as material.

 Stepping into the place of the other party in the transaction and looking from their view
– agent’s appointment to act is viewed and considered at law to be a one-sided role
– consumer protection legislation places the agent in the middle ground
– the negative or less advantageous elements in transactions need to be disclosed along with selling
the positives.

 Silence is not golden

Not knowing something may not absolve the agent of blame on its own if it comes up later.

 The Stronger Party

The agent is by their very profession considered to be a strong party in a transaction:

– through their knowledge and expertise; and
– due to your position as agent should have found out information, facts or details for yourself and
disclosed them if you claim you did not know.

Does the fact have to be disclosed at indication of point of interest? At point of offer? At
exchange of contract? At the signing of lease?
OFT guidelines state that:
1. timing would depend on the nature of the material fact and that sensitive information may be more
appropriately revealed when there is an indication of serious interest; and
2. facts of a non-sensitive nature, such as the area of land on which the property stands should be
provided as part of the standard marketing plan.

Material fact would require disclosure prior to the point of no return. Remember that in relation to
misrepresentation whether you intended to mislead someone is not relevant and therefore cannot be
used to defend your actions.

Protecting consumers by providing openness and transparency within transactions forms the
thrust of disclosure.

The Tribunal Appeal Panel decision also addressed the question of the impact of the decision on the
agents’ duty to the vendor (client in this case). At the appeal the agent argued that the statute should
not extend so far to impose a higher burden on the agent.

The Panel’s Decision:

– this obligation merely means that the agent’s obligation to the vendor (their client) is not able to be
ascertained simply by reference to common law;
– agents must advise the vendor of the statutory requirements and how they frame the way in which
the agent will conduct business for the vendor; and
– consumer protection standards recognises that agents stand between the vendor and purchaser and
are responsible for informing the purchaser as to the property being examined.
Material Facts for Property Management

Material Facts are different in Property Management to Sales. Don’t get confused!

They are:

 Property going to be sold

 Property already on sales market
 Likelihood of mortgagee repossession
 Serious flooding
 Serious bushfire
 Unusual Access arrangements
 Unusual Utilities arrangement
 Any OH& S issues
 Pest and Vermin
 Mould
 Communication capabilities
 Violent Crime

Period that disclosure must take place – five (5) years after the event.

However, please remember that it has not changed for the sales material facts and sales people still
need to disclose everything that could affect the purchaser’s decision to buy.
Material Facts – Template
(This Form to be reviewed at time of signing all Managing, Sales and Auction Agency
Agreements)

DEFINITION
A material fact is a fact that would be important to a reasonable person in deciding whether or not to
proceed with a particular transaction.

ADMINISTRATIVE DECISIONS TRIBUNAL (ADT) appeal panel indicates that the following would
be relevant in determining material fact:

 The agent’s treatment of the fact

 Whether the fact is able to be independently ascertained
 Whether the fact is likely to impact on price
 The reaction of other purchasers to the fact
 Whether the fact results in the property being in a rare or unusual category or position

The agent is by law required to determine material fact and ensure that the information is passed
onto any interested parties prior to them making any decisions regarding the property.

The owner of the property (known as the vendor) warrants that they believe the following to be material
facts:
1.
2.
3.

Or that, as far as we are aware there are no material facts.

(strike out which is not applicable and initial)

Vendor / Landlord Signature: Date:

Print Name:

Agent Signature: Date:

Print Name: