Will 'Caveat Emptor' Affect your Property Purchase?

Caveat emptor essentially underpins the notion of purchaser due diligence and buyers knowing the risk and possible issues with a property when entering a contract. Whilst caveat emptor is seen as a primacy legal doctrine, the Australian Consumer Law states that vendors and agents are required by law to disclose known information or material facts of a property.

The case of Elanor Funds Management Ltd v Alcean Group Pty Ltd [2023] FCA 1291 (Elanor v Alceon) saw Elanor enter a contract for the purchase of a Shopping Centre worth $55.25 million. After purchasing the property, Elanor claimed there was a failure to disclose certain information about tenants which led to a misrepresentation by silence. Subsequently, Elanor commenced proceedings for ‘misleading or deceptive conduct’ pursuant to s 18 of the Australian Consumer Law. Throughout the contract, Alceon had created a ‘data room’ where all relevant documents to the major transaction and tenant related reports were accessible to Elanor throughout the period of due diligence.

Noting Elanor’s previous investments and consequently viewing them as experienced buyers, the Federal Court found no misleading or deceptive conduct. It was also found that Elanor had failed to prove damage suffered from alleged misleading or deceptive conduct.