An investor owned an apartment in a complex of 8 unit titled apartments.

When they contacted a real estate agent about selling, the agent asked them for contact details and information about the Body Corporate, including levies and insurance. 

The investor thought that because their complex was a small complex, and had a ‘non-functioning Body Corporate’, any disclosure rules did not apply to them when it came to selling their unit.

The 8 owners had not appointed a committee, or a chairperson, and many of them lived overseas. 

The legal position here is clear.  There is no such thing legally as ‘non-functioning Body Corporate’, and all the same disclosure rules apply to smaller Bodies Corporate and larger ones.

Key things Bodies Corporate must do

All unit titled properties, no matter how small or large the development is, are governed by the Unit Titles Act 2010.  All unit owners in a unit titled development make up the Body Corporate.

The key things, as an absolute minimum, that a Body Corporate should do are:

1. Maintain a register of all unit owners;
2. Have an operating account into which levies are paid (which at the very least, should cover insurance costs);
3. Ensure the development is insured under one insurance policy (noting there is an exception if units are not attached to each other, where the Body Corporate and individual owners can insure separately if a special resolution has been passed confirming this);
4. Manage and maintain common property;
5. Have a Long Term Maintenance Plan in place for period of 30 years; and
6. Provide disclosure statements when a unit owner is selling their property.

The only thing that a Body Corporate with 9 or fewer units is exempt from under the Act is the requirement to have a Body Corporate committee.  A committee is a smaller group of owners which the Body Corporate has delegated certain responsibilities to.

Importantly, if there is no committee or no nominated chairperson of the Body Corporate, then all owners need to sign all documents on behalf of a Body Corporate. 

Disclosure when selling a unit titled property

When selling a unit titled property there are requirements under the Unit Titles Act for the vendor to provide the purchaser with:

• A Pre-Contract Disclosure Statement before signing the agreement (noting there is some scope for the purchaser to receive this after signing the Agreement, but this can lead to a risk of cancellation or delay in settlement); and
• A Pre-Settlement Disclosure Statement (no later than 5 working days before settlement.

The Pre-Contract Disclosure Statement is signed by the vendor, being the investor in this example.  These statements are very detailed and must attach various information including copies of financial statements, minutes, and remediation reports.

The Pre-Settlement Disclosure Statement is to be signed by the vendor and confirmed correct by the Body Corporate.  This means in the example above all owners would need to sign it, which is very impractical, and could seriously delay settlement.

It is important to be aware that this disclosure regime is separate from any more general disclosures that real estate agents will require when listing a property.

Vendors still need to disclose to their real estate agents any known defects, and the agent is required to point out any defects or likely defects that they should know in their experience as an agent.

How can this Body Corporate make the sale process easier for owners?

In the above example the owners should vote on a chairperson in order for one person to sign the Pre-Settlement Disclosure Statement.  That person can also be delegated certain powers of the Body Corporate, including organising meetings, payment of insurance, and collection of levies.

Another option is to appoint a committee and delegate key tasks to them.

It pays to be aware of your obligations as an owner of a unit titled property to ensure the way your Body Corporate is being run won’t hinder the sale of your property.

Equally it is important for Real Estate agents to be aware of the requirements so they can help owners of such properties navigate the sale process.