You are selling your house, its inspection time and you are thinking ‘time to spruik up the house, seal the cracks, fill the holes and give it a coat of fresh paint’. Well, think again. A recent case in New South Wales (Wood v Balfour [2011] NSWCA 382) indicates that the courts might not always look at property cases along the lines of ‘buyer beware’ and any attempts made by a Vendor to conceal defects in a property at inspection time could give rise to claims of misrepresentation, misleading or deceptive conduct and deceit.

The case of Wood v Balfour 

Wood had purchased property from the Balfour that had extensive termite damage, the cost of which to repair exceeded $200,000.00. Wood brought an action against Balfour alleging that Balfour had knowingly concealed the termite damage a couple of years prior to the sale and remained silent during the inspection process.

Dishonesty 

The matter revolved around the concept of dishonesty. If it was found that Balfour ‘was dishonest’ in patching up the damage caused by the termites and ‘dishonest’ in failing to notify Wood of the termite infestation then his conduct would be found to have been fraudulent and Wood would have been successful in his claim for damages.

To determine whether the conduct was ‘dishonest’, the Court looked at what Balfour’s intention was when he covered up the damage to the property. It found that as the relevant work was undertaken several times in 1983, 1999 and 2000 (before the selling of his house was even contemplated) the motive was for reasons of the enjoyment of the appearance of the property and not to deceive. In addition, it was found that Balfour had thought the termite problem had been effectively treated after he had arranged for expert pest controllers to address the problem in the past.

What the case means for those selling their houses

In the event you are selling your house and you know of defects that would be obvious to a potential purchaser during the inspection of the property (for example a crack that snakes up your living room wall or wood damaged by termite infestation) and you conceal that damage with the intention to deceive a purchaser and procure the sale, you may be liable for the wrongful act of deceit.

This article is intended to provide general information only and is not a substitute for legal advice. To obtain legal advice tailored to your situation please contact the author on {addressdetail telephone}.

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