non-compliance to rescind a Contract for Sale
Looking for a reason to walk away from a Contract for Sale
without losing her deposit, Victoria King chose to rely upon
a breach of the building compliance warranty which is
implied into every Contract for Sale by s 52A(2)(b) of the
Conveyancing Act 1919 (NSW). Breach of the warranty
entitles a purchaser to rescind the Contract for Sale.
[The Vendor warrants that:] there is no matter in
relation to any building or structure on the land
(…included in the sale of the land) that would justify
the making of any upgrading or demolition order or, if
there is such a matter, a building certificate has been
issued in relation to the building or structure since
the matter arose,
(cl 8 and Schedule 3 Part 1 - 1(d) Conveyancing (Sale
of Land) Regulation 2010)
This warranty was examined in the decision of Cooper v
King  NSWSC 86 Supreme Court of New South Wales by
Emmett AJA (18 February 2019).
On 4 May 2017, Victoria King entered into a Contract for
Sale to purchase a house at Glencoe Street, Sutherland for a
price of $1,080,000. She paid $54,000 of the deposit on
entry to the Contract for Sale and agreed to pay the balance
of the 10% deposit of $54,000 on completion, or if she was
in default under an essential term of the Contract.
The property was advertised as having four bedrooms and
two bathrooms with a “floor plan” that had lower-level
self-contained accommodation. This was the plan on the real
estate agent’s website:
Two days before the completion date of the Contract set
under a Notice to Complete, the purchaser served a “Notice
of Rescission” asserting that the vendors were in breach of
the building compliance warranty because there were “several
non-DA approved buildings/structures” on the land “that
would justify the making of an upgrading or demolition
order”. They were the bedroom, living area, kitchenette and
bathroom accommodation on the lower level which were
described as “separate self-contained accommodation” on the
real estate agent’s website.
The vendors’ solicitors replied, enclosing a building
certificate issued by Sutherland Shire Council dated 19
January 1989. In the building certificate, the Council
certified that it would not make an order or take
proceedings “requiring the demolition, alteration,
additional rebuilding of, to the building”. The certificate
contained a note that the lower ground floor area had been
assessed as “non-habitable rooms”.
Completion did not take place. The vendors terminated the
Contract, forfeited the deposit paid and demanded payment of
the balance of the deposit.
The purchaser commenced proceedings for return of the
deposit paid relying on a breach of the building compliance
warranty and representations made as to use. The vendors
counter claimed the deposit paid and the balance deposit
The Court found that the purchaser’s assertion of breach
of the building compliance warranty failed through lack of
the Buyer simply asserts a breach of the implied
warranty without identifying the illegal structure or
illegal building work that would justify the making of a
demolition order or an upgrading order. (judgment,
I am not persuaded there has been any breach of the
implied warranty under the Conveyancing Act.
The Court gave these reasons:
- The purchaser could have made an application for a
Building Certificate under clause 12 of the Contract,
which would have resulted either in the issue of a
certificate or a refusal with reasons. The purchaser had
not made an application.
- No demolition order was recorded on the Planning
Certificate attached to the Contract.
- No building work had been carried out upon the
property after the Building Certificate was issued in
1989. As to the note on that certificate that the rooms
on the lower level were “non-habitable”, the Court said:
Even if there is a restriction as to how the lower level
rooms can be used, such as dual occupancy, it does not
follow that the building or the building work is illegal
and therefore a matter affecting the Property that would
justify the making of a demolition or upgrading order.
- There was no evidence that the purchaser would not
have entered into the Contract had she been aware of the
matter to satisfy the pre-requisite for rescission under
cl 16(4) of the Conveyancing (Sale of Land)
- The warranty applies to structures, not to their
use. Unlawful use or lack of a DA approval for use from
the local Council is not a breach of the warranty.
- If a purchaser desires to rely upon the building
compliance warranty to rescind a Contract, then they
should apply to the Council for a Building Information
Certificate. If the application is refused, the reasons
for refusal will provide the necessary evidence.
- Conversely, a vendor should disclose in the Contract
any non-compliances of which they are aware to gain the
protection of cl 16(3) of the Conveyancing (Sale of
Land) Regulation 2010, which prevent a purchaser from
rescinding the Contract if they are aware of the
non-compliances. Disclosures for garages and under house
areas modified as accommodation without Council approval
are common examples of disclosures.
- In this case, the vendors’ conveyancer did not
disclose the non-compliance in the Contract, which
opened the door to the purchaser’s action.
- The warranty cannot be excluded: under s 52A(4)
Conveyancing Act 1919, a provision in a Contract which
purports to exclude or modify the building compliance
warranty is void.
Representations as to use
The purchaser asserted that several “dual occupancy
representations” were made by the real estate agent. They
were that the property could be used as a dual occupancy,
and that the upper and lower levels could be separately
The Court found that no representations were made by the
real estate agent, and that if any were made, they were not
The Court noted that the purchaser was an experienced
purchaser of real property who would have either confirmed
what she had been told or made her own enquires before
entering into the Contract. She did neither.
The evidence was that the purchaser planned to demolish
and build a duplex on the land.
The Court upheld the effectiveness of the additional
provision in the Contract in which “the Buyer acknowledged
that she did not rely upon any warranty or representation
made by the Sellers or any person on behalf of the Sellers
except as expressly provided in the Contract” to extend to
any representations made by the agent.
The disclaimer on the floor plan that it was for
“illustrative purposes only” and “does not constitute part
of any legal documents” was also relevant.
The Court noted that the Australian Consumer Law
did not apply to the representations made in the advertising
material because the vendor’s conduct was not ‘in trade or
Ordinarily, where a person sells his home, whether by
private treaty or by auction and whether the person
conducts the negotiations personally or through a real
estate agent, the person would not be said to be
undertaking those activities in the course of a trade or
business or in a business context. … There is nothing
about the character of the Sellers, such as being
engaged in commercial activities, or the transaction
being motivated by business reasons, as distinct from
personal reasons, to suggest that the Contract was a
transaction that occurred in trade or commerce.
Comment: Only when a representation is compelling,
will a purchaser be able to clear the many hurdles they face
in asserting a misleading representation.
As to the Court’s discretion under s 55(2A) of the
Conveyancing Act 1919 to relieve against forfeiture of
the deposit, the Court stated that the facts did not support
any assertion that it would be unjust or inequitable for the
vendors to forfeit the deposit and for the balance of the
deposit to be ordered to be paid.
The court ordered the deposit be paid to the vendors,
that the purchaser pay the balance of the 10% deposit and
the legal costs of the vendors and the real estate agent.