It has been more than one year since the law came into effect requiring a Form 2: Seller Disclosure Statement to be provided to a purchaser before signing a contract for sale.

Part 3 of the form deals with ‘Land use, planning and environment’ – areas that were previously not at the centre of conveyancing.

For property lawyers, Part 3 of the Seller Disclosure Statement is a useful prompt to identify land use and environmental issues early. However, what is not included in the Form 2 disclosure is just as important as what is.

Below we provide some practical tips for reviewing or preparing the Seller Disclosure Statement.

1. Do not treat zoning as a box-ticking exercise

The zoning of land is a useful starting point for asking relevant questions about land use.

For many properties, the more important questions also include whether:

• the current use is lawful;
• the proposed use is lawful, or if an approval is required for the use how difficult it would be to obtain the approval (does it constitute accepted development, assessable development or prohibited development);
• there are overlay constraints that constrain the developable area of the land;
• there are existing development approvals, unfulfilled conditions of those approvals, or an infrastructure agreement in place;
• a temporary local planning instrument is in effect, or draft planning scheme document that is well advanced towards adoption; and/or
• there are existing lawful use rights operating on site, and the intensity and scale of that use, and what evidence there is that supports the lawfulness of that existing use.

However, as the Guideline to the Seller Disclosure Statement notes, the seller is not required to disclose information about:

• current or historical use of the property;
• current or past building or development approvals for the property; or
• limits imposed by planning laws on the use of the land.

The Seller Disclosure Statement itself warns buyers that they may not have rights if the current or proposed use of the property is not lawful under the local planning scheme. It also directs buyers to obtain further information about planning and development restrictions, including short-term letting, from the relevant local government.

Tip 1: If the transaction depends on a particular use being allowed, redevelopment outcome, short-term accommodation model, subdivision potential or a change of use, get a specialist planning lawyer or town planner to provide advice before the contract is signed.

2. Transport infrastructure and resumptions need careful treatment

Part 3 asks whether the lot is affected by a notice from a Commonwealth, State or local government entity about a transport infrastructure proposal to locate transport infrastructure on the property or alter the dimensions of the property. It also asks whether the lot is affected by a notice of intention to resume the property or part of the property. If the answer is yes, the seller must give a copy of the relevant notice, order, proposal or correspondence.

These issues can have a material impact on value, development potential, finance, insurance and settlement risk. The sale itself may also act as evidence of the market sale rate for the land and be influential in any compensation payment should a resumption take place.

However, a transport proposal may not involve a notice or an immediate resumption (usually in the form of a Notice of Intention to Resume), but planning designations for transport may still affect the property’s future use, by sterilising land from development, from things such as frontage or road widening setbacks, or the imposition of conditions that requires things such as acoustic treatment or limited hour of operation. These may impact development yield or commercial attractiveness.

Tip 2: Ensure that your client is aware of the compensation rights under the Acquisition of Land Act 1967, and that it is clear who is entitled to compensation should a resumption take place and also produce evidence at the time of purchase to make it clear as to whether or not the purchase price was paid on the assumption of a resumption or otherwise.

3. Contamination is not limited to land on the registers

Part 3 asks whether the property is recorded on the Environmental Management Register or Contaminated Land Register under the Environmental Protection Act 1994. It also asks whether particular environmental notices have been given, including notices relating to contaminated land, show cause notices, requirements for site investigation, clean up notices, site management plans, environmental enforcement orders and prescribed transitional environmental programs.

These notices are important warnings, but they do not provide complete environmental due diligence. You should seek specialist advice if a notice is disclosed or if you suspect the land may be contaminated.

A property may present contamination risk because of current or historical industrial uses such as:

• service stations or fuel storage;
• dry cleaners;
• mechanical workshops;
• agricultural chemical use;
• fill or imported material;
• adjoining land uses;
• underground storage tanks;
• historical dumping; or
• acid sulfate soils.

Tip 3: Know the history of the site and seek specialist advice and/or consider possible soil testing if the history reveals a noxious use that may have caused contamination, and do so before the contract becomes unconditional. Having a report in place at the time of sale sets a baseline for both the seller and the buyer in terms of the contaminated condition of the land.

4. Contamination of Common Property

Sellers within community title schemes encounter the added complexity of disclosing not only information relating to their individual lot, but also details relevant to the scheme’s common property. Under Section 35 of the Body Corporate and Community Management Act 1997, common property in a Community Titles Scheme is collectively owned by all lot owners and forms an inseparable part of each owner’s interest in their respective lot.

As a result, if the common property of a Community Titles Scheme is listed on the Environmental Management Register or Contaminated Land Register under the Environmental Protection Act 1994, sellers of individual lots are required to disclose particulars of the common property recorded in the relevant land register and details of any site management plan recorded in the register. They must also provide the buyer with any notices/orders issued under the following sections of the EPA in relation to their lot or the common property:

Tip 4: Always confirm whether the common property is listed on the Environmental Management Register or Contaminated Land Register.

5. Trees are easy to overlook

Part 3 asks whether there is a tree order or application under the Neighbourhood Disputes (Dividing Fences and Trees) Act 2011 affecting the property. If yes, the seller must give a copy of the order or application.

For residential transactions, this may appear minor. In practice, tree disputes can affect boundary works, renovations, pools, extensions, retaining walls and neighbour relations.

Separate from tree orders, vegetation controls may arise under local laws, planning scheme overlays or State or Commonwealth vegetation legislation. Part 3 separately notes that information about vegetation clearing, koala habitats and other development restrictions can be obtained from the relevant State government agency.

Tip 5: Conduct additional searches for significant vegetation, mapped koala and other habitat, developable land or proposed clearing, and get advice before assuming vegetation can be removed.

6. Heritage constraints can be deal-critical

While less common, properties can be affected by the Queensland Heritage Act 1992 or included in the World Heritage List under the Environment Protection and Biodiversity Conservation Act 1999.

Heritage issues can affect demolition, extensions, adaptive reuse, signage, excavation, vegetation removal and maintenance obligations. Local heritage overlays may also be relevant, even if the property is not State heritage listed. Local heritage issues can result from planning scheme designations, and may not be easily identifiable to a purchaser or recorded on any public database.

Heritage of neighbouring properties may also constrain use and development of the land being sold.

Tip 6: If heritage is disclosed, or if the property and its buildings are older, prominent or located in a character area, check local planning schemes as well as State heritage constraints as part of due diligence.

7. Remember what the form does not cover

The Seller Disclosure Statement is not a complete planning and environment report.

The form warns that it does not include information about:

• flooding or other natural hazard history;
• current or historical use of the property;
• current or past building or development approvals;
• limits imposed by planning laws on the use of land;
• services connected or potentially connected to the property;
• structural issues of improvements and buildings; and
• the presence of asbestos within buildings or improvements.

For property lawyers, this is an important risk management point. A compliant Form 2 may still leave major planning and environment questions unanswered.

Tip 7: Always consider whether further enquiries about the above matters should be made.

Final thought

The Seller Disclosure Statement is a useful front-end disclosure document, but it is not a substitute for planning and environment due diligence.

For straightforward residential sales, Part 3 may be simple. For development sites, commercial property, mixed-use assets, industrial land, rural land, short-term accommodation, contaminated land or constrained sites, it can be the start of a much deeper conversation.

That is where planning and environment advice can help you to limit your risks and to protect your clients, manage risk and keep transactions on track.

This article was written by Peter Bittner, Partner, and Flynn Rush, Senior Associate.