The question of what a vendor or a real estate agent should tell a purchaser about potential methamphetamine contamination when selling a property has been brought sharply into focus by the release of Sir Peter Gluckman’s report into methamphetamine contamination in residential properties.
Residential property vendors have commonly relied on the old adage “buyer beware” when selling properties. But is that a valid approach today when selling a house that might be contaminated by methamphetamine? For some time now, it has been common (though not universal) practice for residential property purchasers to undertake methamphetamine testing as part of their pre-contract due diligence on a property. The practice has developed in part as residential vendors are not generally under a duty to speak and buyers must make proper enquiry as to any defects in the property. But if a purchaser asks a vendor, “has methamphetamine been smoked at this property“, and the vendor falsely answers “no“, the vendor may be liable for misrepresentation or even the criminal law of deceit.
For real estate agents the answer is different. Real estate agents have professional obligations to disclose known methamphetamine contamination to purchasers under the Real Estate Agents Act Professional Conduct and Client Care Rules 2012. Under the Rules an agent must:
- not mislead a customer or client;
- not provide false information;
- not withhold information that should by law or in fairness be provided to a customer or client;
- disclose known defects to a customer.
If the vendor client refuses to allow disclosure of defects the agent must cease acting.
The Real Estate Agents Authority (REA) regulates the conduct of licensed real estate agents. The REA has adopted the new standard proposed in the Gluckman Report. New guidance was issued on 7 June:
You do not have to disclose test results below 15 micrograms per 100cm2 unless specifically asked by a prospective buyer or where a prospective buyer has clearly shown an interest in methamphetamine contamination. (Rule 6.4 of the Professional Conduct and Client Care Rules (2012)).
Disclosure is not required if the property has been successfully remediated back to below 15 micrograms per 100cm2 in a property where methamphetamine has only been used, or to below 1.5 micrograms per 100cm2 where methamphetamine production using highly toxic chemicals was identified.
The REA’s guidance does have legal effect, as part of the functions of the REA is to set professional standards for real estate agents, including guidance on disclosure. If real estate agents do not comply with the obligations set out in the Rules, they may face disciplinary charges (including a charge of unsatisfactory conduct).
The Real Estate Institute of New Zealand (REINZ) is the membership organisation representing real estate agents. It previously issued guidance to its members on their disclosure obligations around methamphetamine contamination. That guidance referred to disclosure in line with the New Zealand Standard for Testing and Decontamination for Methamphetamine Contaminated Properties (the Standard). REINZ has referred to the new guidance from the REA and stated that REINZ will be updating its own guidelines shortly.
By contrast, there are indications that those in the methamphetamine decontamination industry are still adhering to the Standard, and until that is revoked, it is “business as usual” for remediation down to 1.5 micrograms per 100cm2. The REA’s guidance is clearly at odds with that.
So, what should one make of these apparently divergent approaches to methamphetamine testing?
- We suggest that vendors and agents should note the REA guidance now in effect and that care should be taken when commenting on methamphetamine test results. The exacting standards of disclosure on agents have not changed as a result of the Gluckman report. Legal advice should be sought where a vendor or their agent is in any doubt about as to their disclosure obligations.
- We suggest that purchasers make particular enquiries as to whether a property has a known, or suspected, history of being used as a methamphetamine lab or otherwise used for heavy methamphetamine consumption. If so, the safest course may be to arrange for pre-purchase methamphetamine testing to be undertaken. The Gluckman report recognises that such properties should still continue to be remediated in accordance with the existing NZS 8510:2017 Standard.
If you have questions, please contact a member of our litigation and dispute resolution team.
Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.