Unfortunately it’s a fact of life that many houses in bushy areas, such as the Sutherland Shire, are subject to termite invasions. It is actually more common than not for homes in the Shire to already have pre-existing termite damage.
But what if the pre-existing damage is so substantial, that it threatens the structural integrity of the home? And what if the vendors selling the home already know about the damage?
The District Court of New South Wales (and subsequently the Court of Appeal) dealt with this type of situation in the case of Wood & Anor v Balfour & Anor  NSWDC 139. This case centred on the purchase of a property located in Kareela. The property had been owned by the Balfours from the time it was constructed in 1980 until it was purchased by the Woods in 2004.
During their ownership of the property, the Balfours discovered termite activity in the timbers of the home, and had the home treated by a pest control company. They later discovered three further areas of termite damage, and then took steps to repair and cover the damage in each of these areas. The repairs included cosmetic building work to cover the damaged areas. The last of these repairs were completed in 2000.
Four years later, the Balfours placed their property on the market and sold the property to the Woods. After purchasing the property, the Woods discovered the extent of the termite damage was greater than expected.
The Woods sued the Balfours in the tort of deceit, alleging that the concealment and non-disclosure of the termite damage constituted a fraudulent misrepresentation that there was no serious termite damage to the property. The Woods also alleged the Balfours knew this representation was false and intended to deceive the Woods.
At the trial in the District Court of NSW, the judge rejected the Woods’ claim, holding the alleged representation was not made, and, even if it had been made, it had not been false, and the Woods had not relied on it. The decision upheld the principle of ‘caveat emptor’ meaning let the buyer beware. Further, the Contract included a Special Condition which specifically acknowledged that the purchaser was not relying on any representations made to them by the vendor.
The trial Judge found that the work carried out to conceal the past termite activity was done for aesthetic purposes and not with the intent of deceiving prospective purchasers.
The Woods appealed the District Court decision and the matter was heard in the NSW Court of Appeal.
The Court of Appeal found that by making the property available for inspection and being silent as to the existence of any latent defects, the Balfours created the implication that the vendor had not knowingly concealed any defects that would otherwise be visible to the eye or otherwise discoverable by the exercise of reasonable care when inspecting the property.
The Court found that the conduct of the Balfours was not fraudulent. It was not enough for the Woods to prove that the Balfours were aware of the damage. In order to be successful in bringing a claim in the tort of deceit, the Woods needed to prove that the Balfours were aware that the property had substantial termite damage which compromised the structural integrity of the property. The Court of Appeal therefore dismissed the appeal and the trial judge’s decision that the Balfours were not liable to the Woods was upheld.
Whilst the appeal was unsuccessful, it is clear that if you as a vendor are aware of the existence of substantial termite damage which compromises the structural integrity of the property and you takes steps to conceal such damage from prospective purchasers, you can be held liable for losses suffered by the purchasers.
Contact the team at Shire Legal if you have any questions about selling or purchasing property.