There are a lot of things that need to be considered when purchasing a home, but there is one crucial detail that is often overlooked – and it can cause major headaches later on.
House prices, increasing mortgage rates and the structural integrity of a property are often at the top of the list for those considering a property purchase.
But, a recent Supreme Court ruling in Western Australia has proven other factors – like your new neighbours – can completely derail a house sale, making it something both buyers and sellers need to be aware of.
The ruling, handed down at the end of May this year, saw the sale of a $390,000 apartment in Perth disintegrate after the sellers failed to disclose the presence of a particularly nasty and belligerent neighbour.
The buyer successfully sued the vendor for breach of contract and fraudulent misrepresentation of the property after the sellers signed a contract claiming: “The seller does not know of anything which will materially affect the buyer’s use or enjoyment of the strata lot or of the common property comprised in the strata scheme.”
The buyer contended that, in fact, the sellers were well aware of the continued aggressive behaviour of the upstairs neighbour, as
The court heard the neighbour had a long history of breaches of violence restraining orders, common assault and disorderly behaviour relating to other occupiers of the strata complex since at least 2001.
Complaints had been made against the man for repeated banging on the ceiling, “extremely” foul language and cursing, and playing music at an excessive noise level.
The court heard after the woman purchased the unit and moved in, the neighbour would be “set off” by the slightest noise, even just using the hair dryer or getting ready for work in the morning, resulting in the man banging above her and yelling abuse.
Assessors valued the flat, bought for $390,000, at just $200,000-$290,000 due to the behaviour of the neighbour.
The court agreed that the vendors had clearly known about the ongoing issue, ruling in favour of the buyer.
However, Justice Jeremy Curthoys noted in his ruling that any judgment against the vendors resulting in compensation would likely be a “Pyrrhic victory” as they would likely declare bankruptcy.
This would then leave the buyer having to cover her own hefty legal bills and no compensation.
“This case illustrates the folly of litigation,” he said in his summary.
Skeletons in the closet
Along with being aware of potentially nasty neighbours, buyers are also being urged to dig into the history of a property in order to avoid any morbid surprises after sealing the deal.
There have been cases in Australia where a person has purchased a home only to later find out their dream house was once the site of a violent murder – kind of takes the magic out of homeownership right?
These types of homes are known as ‘stigmatised properties’, this refers to a house or other dwelling that has a negative history that may influence a person’s decision to buy the property.
This could be a violent event that may have occurred there, a notorious former resident or other similar factors.
While the old adage “buyer beware” does hold some truth in these kinds of situations, the real estate agents and vendors still have some responsibility to inform potential buyers if a property is associated with a dark history.
Under Australian Consumer Law, vendors and real estate agents must not engage in misleading or deceptive conduct.
This type of conduct is defined as where a matter is not disclosed to a potential buyer when there is reasonable expectation that it would be.
Agents must also disclose “material facts” about the property, though the laws around this can become murky and vary between the states and territories.
This means there are cases in which it’s up to the buyer to conduct their own research into the history of a property.
Victoria has some of the most robust laws around material facts buyers need to know, with the legislation being updated two years ago.
The government updated the guidelines around what constitute material fact to include the property being the scene of a serious crime.
Specific examples include murder or use of the property for the manufacture of substances such as methylamphetamine.
Changes were also made to NSW laws in 2020, with agents required to disclose whether a property was the site of a murder or manslaughter crime.
However, this only covers crimes that occurred within the past five years.
This goes down to two years for properties that were used for the purposes of manufacturing, cultivating or supplying any prohibited drug or prohibited plant.
Selling a house where a murder took place
Former real estate agent turned auctioneer, Andy Reid, has had first-hand experience in dealing with a stigmatised property.
During his days as a real estate agent, Mr Reid sold a house in Cranbourne, Melbourne, where the occupier had been beaten to death under the property’s pergola.
The owner of the home had rented the property to her nephew, the victim of the attack.
“The nephew had got into an argument and ended up getting severely beaten up under his pergola. He died at the scene from his injuries,” Mr Reid, founder of auctioneering company Sold By Group, told news.com.au.
“My first reaction was a strong sadness towards the owner, who had tried to create a better environment for her nephew to get out of trouble.”
When Mr Reid was tasked with selling the three-bedroom, two-bathroom home, he said the owner was upfront from the beginning about what had occurred on the property.
He said she was aware of the challenges that could be presented when selling the home due to its history.
“The incident had been across the news, but with some articles not stating the address the question came from the owner: ‘Do we have to tell buyers?’” Mr Reid said.
He said in the end they decided that they needed to be fully transparent with potential buyers, even going as far as to explain where he died and the circumstances around his death.
“We also made the decision to be upfront about the information before committing to an inspection, so that buyers weren’t freaked out when they arrived,” he said.
When trying to consider buyers who wouldn’t be as concerned about the house’s history, Mr Reid said he thought investors were probably a good bet.
However, that would mean the same concerns would pop up when the owners tried to rent out the property.
Mr Reid had an interested couple who went as far as putting in an offer before deciding that the death in the home raised too many concerns for them.
“The first buyer I took through was a Chinese couple who were looking for an investment,” he said.
“I have to point out that they were Chinese, because they really liked the house, and were aware that the death occurred outside of the property, however they were advised that the bad feng-shui that would come with the home would be significant.
“They made a healthy offer but withdrew the offer the next day.”
Despite the history of the home, Mr Reid said there was still a fair amount of interest in the property, though he did come to an agreement with the vendor to decrease the asking price by a small amount.
This was so they could tell interested parties that the seller had already acknowledged the potential stigma attached to the home.
“In the end, it sold to an owner-occupier, who thankfully saw the value in the transaction outweigh any lingering concerns, and bought it towards the better end of the range we had on it at the time,” he said.
Fined for ‘misleading behaviour’
Agents who fail to disclose material facts to buyers can find themselves in a lot of hot water, as was demonstrated in a 2004 case when a Buddhist family sought to terminate the purchase of a home in Sydney after learning it had been the site of a triple-murder.
The agency failed to disclose the North Ryde home was where infamous 20-year-old Sef Gonzales murdered his parents and sister.
The new homeowners only realised the dark past of the home after reading about the sale of “Sef’s death house” in the newspaper and realising it was their home.
The real estate initially refused to release the family from the sale and refund their $80,000 deposit but eventually buckled to pressure and returned the money.
An investigation from the NSW Office of Fair Trading found the two real estate agents had engaged in “misleading behaviour in promoting the property for sale” and were fined more than $20,000.
Mr Reid advised any potential buyers who are concerned about the history of a property to just look up the address online, saying any questionable history should be available on the internet.
If that isn’t enough, he also said another option is knocking on the neighbours’ doors during a safe hour and chatting to them about the neighbourhood.
“Ultimately though, I always find that you can think as much as you want, but your gut instinct will never let you down or lead to regret,” he said.
“If it creeps you out, you’ll never settle so go find another property. Or offer at a level which eases those concerns, because chances are that on the other side of the transaction the seller will likely want to remove that bad history from their lives too.”