this product is unavailable for purchase using a firm account, please log in with a personal account to make this purchase.

COVID-19 Hub.

The one-stop source of information for the legal profession.

Visit Hub

Property: Levy liabilities

Every Issue

Cite as: (2007) 81(12) LIJ, p. 94

Specific steps must be followed if vendors wish to pass on the responsibility for levy payments to the purchaser.

Property owners are sometimes liable for levies struck in respect of their property.

Common examples are levies by a body corporate for substantial projects or those by a municipal council for street construction or drainage works. They are a “one-off” imposition and different to recurring charges such as quarterly maintenance contributions and annual rates.

When a property is sold, consideration needs to be given to which party – the vendor or the purchaser – will be responsible for payment of these levies.

Virtually all contracts of sale adopt the conditions set out in Table A of the Seventh Schedule of the Transfer of Land Act. This is the case whether a formal contract of sale is prepared or if the less formal contract note is used.

Condition 15 of Table A provides that the purchaser is liable for notices issued after the day of sale, so it follows that the vendor is liable for notices issued before the day of sale.

Some vendors may wish to pass responsibility for compliance with the notice and levy payment to the purchaser. To do so, steps need to be taken to deal with this within the contract.

However, vendor disclosure obligations under s32 of the Sale of Land Act sometimes lead vendors’ solicitors into failing to satisfactorily deal with the vendor’s intentions in relation to these levies.

Section 32, among other obligations, requires a vendor to give details of “notices” served in respect of the land.[1]

It is therefore necessary for a vendor wishing to pass on the levy obligation to comply to include details of the “notice” in the vendor’s statement.

There is no doubt that inclusion of details of the notice fulfils the vendor’s disclosure obligations and that failure to include such details in the vendor’s statement would constitute a breach of s32 that might entitle the purchaser to avoid the contract. However, inclusion of the notice in the statement does not, without more, result in liability for that notice passing to the purchaser.

In its simplest form, the vendor’s statement merely satisfies the vendor’s disclosure obligations. It does not, of itself, alter the contractual relationship between the parties.

Therefore, a vendor’s statement disclosing the existence of a notice creating a pre-contract levy that is attached to a contract of sale or contract note will mean that the vendor will remain liable to pay that levy. A purchaser would be justified in deducting the levy from the amount due at settlement and paying it to the body corporate or municipal council.

A vendor who wishes to pass liability to the purchaser must amend the standard form contract or contract note to overcome the effect of Condition 15. This is perfectly permissible (Table A is not mandatory and may be amended) but requires the vendor to go further than merely disclosing the existence of the notice.

The best way for a vendor to achieve the desired outcome is the inclusion of a special condition in the contract that amends Condition 15 of Table A and passes liability for compliance with the notice and payment of the levy to the purchaser.

However, contracts that are prepared and forwarded to estate agents are often not used if a sale is negotiated before or after an auction and in such circumstances agents tend to adopt the less formal contract note.

Typically, a copy of the vendor’s statement is attached to the contract note, thus satisfying the vendor’s disclosure obligations, but the carefully constructed special condition passing liability is left languishing in the contract in the agent’s top drawer.

To avoid this problem, consideration should be given to including the special condition in the vendor’s statement, logically close to that part of the statement that discloses the existence of the notice.

This suggestion opens the debate about the efficacy of including contractual terms in the vendor’s statement.

Ideally, the conveyancing process should begin with one document that constitutes a contract and disclosure document, and it is merely a consequence of history that we have two documents that combine to achieve this purpose. Some argue that the purpose of the vendor’s statement is to act only as a disclosure document and that it is therefore inappropriate to include contractual terms in that document.

On the other hand the standard form contract itself acknowledges that the contract “includes” the vendor’s statement and in such circumstances there appears to be no policy reason why contractual terms cannot exist in that part of the contract.

Indeed, the only case to consider the question[2] appears to accept that the vendor’s statement is a contractual document.

Whatever the virtue of including general contractual conditions in the vendor’s statement, there is much to be said for including a condition passing responsibility for pre-contract notices to the purchaser.

Without such a condition the vendor remains responsible for compliance with such notices.

RUSSELL COCKS is the author of 1001 Conveyancing Answers.

[1] Section 32(2)(e).

[2] Jenkins v Visualeyes Pty Ltd [2005] VSC 218.


Leave message

 Security code
LIV Social