Queensland’s new seller disclosure regime under the Property Law Act 2023 (Qld) has now been in effect for almost six months. Initial concerns that the disclosure obligations would be overly burdensome have generally not materialised. Likewise, buyer termination rights have not increased as much as expected, mainly because many of the matters now required to be disclosed were already covered by contractual warranties in the REIQ standard form contracts.
However, for local governments, land dealings rarely fit neatly into the standard residential sale model for which the seller disclosure forms were designed. While many council transactions are straightforward, the disclosure regime is primarily framed around private sales. It does not always sit comfortably with local government sellers or the types of land they commonly manage and sell.
Consider, for example, the sale of a property that has been used as council employee housing. The seller must now disclose whether the property has been subject to a residential tenancy agreement in the last 12 months and the date that rent was last increased. This requirement aligns with the Residential Tenancies and Rooming Accommodation Act 2008 (Qld) (RTRA Act) and is intended to give buyers a clear understanding of the rental position they are stepping into. For councils, it is important to determine whether the property is occupied under a residential tenancy agreement captured by the RTRA Act. Most employee housing falls within the RTRA Act, which triggers the obligation to disclose rent increases. However, the rent is often tied to the employee’s contract of employment and may be set below market rates. Under the RTRA Act, rent increases attach to the property and may only occur once every 12 months. As a result, the buyer inherits the rent history and may be unable to increase the rent again if an increase has occurred within the previous 12 months, even where the rent is below market value.
Interestingly, the seller disclosure form does not require sellers to disclose the amount of rent charged, nor does it require sellers to indicate whether the rent is below market. This could create a gap in the information available to buyers. Further, if council is selling a property that is no longer subject to a current lease because the employee has vacated, there is no obligation under the disclosure statement to note the amount of rent previously paid, only the date of the most recent increase. In those circumstances, a buyer will have no visibility of the rent history at all, despite the fact that it may still have financial implications, particularly where the property is being purchased as an investment.
Other items that sellers are not required to include in the disclosure statement include:
- the structural condition of the building;
- flooding history; and
- previous building or development approvals.
Although these matters are not mandatory disclosures, they are probably very important to a buyer.
Beyond compliance issues, councils should also be mindful of reputational risk. For instance, flooding history is not required to be disclosed under the seller disclosure regime. Even so, where council sells land in a flood-prone area and flooding later becomes an issue, community backlash may arise despite council having met its legal disclosure obligations.
Another issues that local governments need to be mindful about is whether the instructing officer has full visibility of any notices affecting the land, such as notices issued under the Environmental Protection Act 1994 where land has been identified as contaminated. Managing this risk relies on effective communication and timely information sharing between different council departments.