Section 32 statements should disclose leases

It has long been a vexed question whether a vendor of land needs to include details of a lease affecting the land in the vendor statement provided to a purchaser pursuant to s.32 of the Sale of Land Act 1962.

Section 32 requires the disclosure of, among other things, mortgages and charges affecting the land but does not expressly require disclosure of a lease. The vendor is required to include in the statement a “a description of any easement, covenant or other similar restriction affecting the land (whether registered or unregistered) and particulars of any existing failure to comply with the terms of that easement, covenant or restriction”. See: s.32(2)(b).

It is established that s.32 should not be given a “narrow, restrictive construction having regard to the evident reformatory object of the leglislation”. See: for example, Vouzas v Bleake House Pty Ltd [2013] VSC 534 at [49]. In Krakowski v Eurolynx Properties Ltd (1992) V ConvR 54-436 ( BC9200732) O’Bryan J did not consider that s.32(2)(b) required a vendor to disclose the existence of a lease affecting the land.

However, in IGA Distribution Pty Ltd v King [2002] VSC 440 at [252] Nettle J (as he then was) doubted that O’Bryan J was correct but did not specifically decide the issue. In Vouzas the vendor had disclosed the existence of the lease but had not disclosed that the tenant had entered into a conditional agreement to assign the lease.

In Vouzas Macaulay J had to decide whether s.32(2)(b) required the vendor to disclose that the tenant of the land being sold had entered into the conditional agreement to assign the lease. to a third party . The vendor knew about the conditional agreement to assign the lease. Macaulay J expressed the view that “the doubts expressed by Nettle J in the IGA case" concerning whether a lease need be disclosed were "well founded".

However, Honour held that the vendor had not breached s.32(2)(b) because that section did not oblige a vendor to disclose a conditional agreement to assign a lease. His Honour also said that “he was not convinced that an assignment of lease would need to be disclosed under s.32(2)(b").