What is a Property Interest Report?
Landgate’s Property Interest Report (PI Report) provides prospective buyers with information about a range of unregistered interests that may affect the enjoyment of a property.
In their current form PI Reports includes “information such as local and regional planning schemes (including zoning), acid sulphate soil risk, garden bore suitability and land use planning in the vicinity of Perth and Jandakot airports.”
PI Reports should always be read in conjunction with a certificate of title.
It should be noted that Landgate’s interest in providing the report – itself an aggregation from several government departments – is primarily commercial. As a result they have a clearly vested interest in creating a business environment where their products are the primary means by which real estate and settlement agents can comply with consumer-based legislation.
Departmental obfuscation and threatening tactics
In a December 2013 real estate industry ebulletin, the Department of Commerce state [PDF, opens immediately]:
Section 10 of the Code requires that prior to the execution of a contract; an agent must make all reasonable efforts to ascertain or verify facts material to a transaction, that a prudent agent would have ascertained, and to promptly communicate that fact to any person affected by it.
Their view is that a prudent agent should provide prospective property buyers with a PI report as “as a central tool in informing prospective buyers about matters affecting a property.” In doing so, they contend, the agent will satisfy the requirements of sections 9 and 10 of the Code of Conduct and in so doing, lessen the chance of misrepresentation.
DoC believe that providing a PI Report provides the agent with an “easy and comprehensive way for agents to comply with obligations of disclosure…”
They claim that it’s best practice to have a buyer “sign and date an acknowledgement when they have received a copy of the PI report.”
The Department of Commerce are ambivalent when it comes to the use of PI Reports by settlement agents.
After vaguely indicating that a PI Report may be helpful in discharging a settlement agent’s duties under the Act and Code, they state [PDF, opens immediately] meekly:
[The] Department of Commerce believes that when and how a settlement agent uses a PI report will be a judgment call for individual agents at this stage of the PI report’s evolution. Use of the PI report, and other sources of information, will need to have regard to the instructions of the principal and the particular characteristics of the property. The Department will continue to expect that the requirements of the SA Code and Settlement Agents Act (1981) are met in this context.
It’s apparent from this lack of direction that the Department of Commerce is attempting to make up policy on the run.
To be crystal clear: disclosure is a central element in creating consumer confidence in real estate transactions. Better disclosure gives consumers reason to have greater faith in the property transaction process; and that equates to a healthier, more vibrant marketplace.
What I refuse to tolerate is the Department’s threatening undertones by a cynical obfuscation and conflation of terms and meaning.
For example, they fail to define the term “prudent” agent. By leaving the term undefined they implicitly threaten real estate agents who choose to conduct business in ways and means that don’t conform to their suggested best practice with prosecution.
Further, they fail to define what information is deemed “material to a transaction.” In doing so they ignore the complexities of a real estate transaction and attempt to project on buyers their own aversion to risk and they force on the buyer more information than is necessary to make a smart decision.
Their “best practice” suggestions add significant overheads to the operating costs of real estate agents and yet they provide no mechanism by which these additional imposts can be recovered from either the seller or the buyer.
Furthermore they encourage buyers to rely on data that’s clearly deficient in scope. According to their own ebulletin there are up to 100 interests that might affect an owner’s use and enjoyment of land and yet there is only 44 of these interests listed on the PI report.
This lack of information and the department’s own posturing on the issue run the real risk of misleading home buyers into thinking that this is the only information they need source in the home buying process.
How the department can claim that providing such a limited report is “comprehensive” defies explanation.
The Department of Commerce hold a legitimate place within the real estate industry to ensure that all property sellers – not just real estate agents – comply with the disclosure requirements contained within a range of consumer-based legislation. While their charter includes the provision of advice to businesses as a means to creating a “fair and competitive marketplace” their advice is just that – advice.
Now is the time for them to step back and stop lecturing small business – real estate agents particularly – on how to run their business. And now is the time for them to start respecting the home buying public for their ability to make wise property decisions.
Rather than force feed buyers with disclosure they, along with Landgate, should get off their backsides and start marketing their information products like any other business.
If their business model is sound PI Reports will find their way into the hands of the home buying public. If it’s not, PI Reports will be consigned for use by those who need extra information to help them make decisions.