An investor owned an apartment in a complex of 4 unit titled apartments, which 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 was adamant 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 agent wasn’t sure what exactly was required in terms of disclosure when there is no ‘functioning’ Body Corporate, so sought legal advice.

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 as 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 is:

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 can insure separately if it passes a special resolution confirming this);
4. Manage and maintain common property;
5. Have a Long Term Maintenance Plan in place; and
6. Provide disclosure statements when a unit owner is selling their property.

The only thing that a smaller Body Corporate 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.

Any Body Corporate with 9 or fewer units does not need to have a Body Corporate committee.

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 regime

When selling a unit titled property there are requirements under the Act for the Vendor to provide the Purchaser with:

• A Pre-Contract Disclosure Statement,
• A Pre-Settlement Disclosure Statement,
• Insurance details, and
• An additional disclosure statement, if requested by the Purchaser.

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.

Pre-Contract Disclosure Statement

When selling the property the Vendor needs to provide (and sign) a Pre-Contract Disclosure Statement to purchasers.  There is a template statement on the Tenancy Services website, which may assist if the Body Corporate does not know how to prepare the statement.

There is a specific list of items that need to be included in the statement, as detailed in the Unit Titles Regulations.

Pre-Settlement Disclosure Statement

The Vendor is required to provide the Purchaser with a certificate of insurance and a Pre-Settlement Disclosure Statement no later than five working days before settlement.

A Pre-Settlement Disclosure Statement is also signed by the Vendor, but is required to be accompanied by a certificate from the Body Corporate confirming the contents of it are correct. If there is no chairperson or committee, this statement will need to be signed by all owners. 

It could be difficult to get all owners to sign, so enquiries may need to be made very early in the piece to avoid settlement potentially being delayed as mentioned below.

This Pre-Settlement Disclosure Statement includes information regarding the levies that will be apportioned on settlement, and other details relevant to the purchase. 

It is worth noting that, under the Agreement for Sale and Purchase, only ordinary levies are apportioned on settlement, not Long Term Maintenance, Contingency or Capital Improvement fund levies.  Vendors will not get back a share of what they have contributed to any such funds over time.

It is also important to be aware that the Agreement can be delayed or cancelled if this statement is not provided within 5 working days of settlement.

Deposit

It is important to remember that when selling a unit titled property, the agent is required to hold the deposit until the Pre-Settlement Disclosure Statement and Additional Disclosure Statement (if requested) have been provided, as there is a right for the Purchaser to cancel prior to those statement being provided.

An update... Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Bill

This Bill, currently passing through Parliament, seeks to update the Unit Titles Act and rectify some known problem areas.  The Bill has passed its Third Reading and is expected to be considered again in May.

Key things that the Bill will change are:

•          Adding additional items to be provided under a Pre-Contract Disclosure Statement and some other                   changes to the disclosure regime;
•          Greater accountability for Body Corporate managers, who will be defined in the Act and will be subject               to a code of conduct;
•          A reduction in the fees for applying to the Tenancy Tribunal in the event of a dispute;
•          Permanent ability to hold meetings via audio-visual link and vote electronically.

Summary

Sales of Unit Titled properties are more complex for all involved than fee simple sales, so it pays to know what to look out for and what is required, to avoid settlements being delayed or cancelled.