500-year-old legal principle still reigns

Dice

Caveat emptor or ‘let the buyer beware’ is a rule of law which has underpinned transactions for all manner of goods, including property, since the 1500s but it may not always apply.
 
The principle is based on the fact that buyers often have less information about the goods or service they are purchasing, while the seller has more information. In a nutshell, it means that the onus is on the buyer to be satisfied with any item before purchasing.

When it comes to buying property, caveat emptor reflects the old English common law rule (and is a legitimate legal defence) that the burden of discovering defects in a property rests with the purchaser, and the vendor is relieved from any duty to disclose facts simply because those facts might affect the purchaser’s decision.

However, the International Bar Association notes that there are three circumstances where a buyer could turn the tables – caveat venditor ('let the seller beware'):

 
  1. The vendor or agent made express or implied statements which conveyed a false impression about a property’s characteristics.
  2. The vendor knowingly disguised or concealed a physical defect in the property in order to mislead potential purchasers.
  3. A latent defect, flaw, fault, imperfection or irregularity in the property was not readily observable, such that the purchaser could not discover the defect through the exercise of ordinary care.
A key protection for buyers in Australia is that the vendor, or their agent, must not have acted in a misleading or false manner. Buyers could seek recourse through fair trading acts in their state/territory in relation to the conduct of the real estate agent, or through Section 18 of the Australian Consumer Law that states: ‘A person must not, in trade or commerce, engage in conduct that is misleading or is likely to mislead or deceive’.

Although there are some protections for buyers, the best way to avoid the headache (and expense) is to do your due diligence:

  • Check the Vendor Statement of the contract
  • Ask the real estate agent questions (they are obligated to disclose any information they have if you ask) and
  • Have building and pest inspections carried out by qualified professionals. 
 
If you go in fully informed, you can carpe diem (‘seize the day’) and achieve that investment property with peace of mind.
 
 
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