Body Corporate disclosures when purchasing an apartment…

A young couple looking at buying their first property decided they wanted to buy close to central Wellington and found an apartment they loved near the waterfront.

After completing their due diligence on the apartment, they wanted to make an offer.  Before the couple could sign an Agreement for Sale and Purchase however, the Vendor was required to provide a signed Pre-Contract Disclosure Statement (PCDS).  If the couple did not receive the PCDS prior to signing the agreement, the contract would not be enforceable and they would not be able to purchase the apartment.

This disclosure statement includes information on the unit, such as levies, weathertightness claims, the balance of the accounts of the Body Corporate and maintenance intended to be carried out by the Body Corporate.  In short, the PCDS allows the buyer to obtain initial information about the unit and about the way a Body Corporate operates in order to make a decision about whether to purchase that unit titled property or not.  

The couple had their lawyer check the PCDS prior to them signing the agreement, and she recommended obtaining further information, as the statement recorded that the unit had been subject to weathertightness claims. 

The lawyer recommended a clause be added to the agreement allowing them to receive and be satisfied with an Additional Disclosure Statement (ADS), prior to signing the Agreement, to allow them to find out more information about how the Body Corporate had dealt with the weathertightness issues.  This is a type of statement that provides more information than what the PCDS is required to include, for example copies of minutes of meetings of the Body Corporate and any contracts the Body Corporate has entered into.  If they were not satisfied with the information in the ADS, they could pull out of the Agreement.

The couple signed the Agreement for Sale and Purchase with a condition regarding the ADS above and were successful with their offer.  They were then satisfied with the further information provided in the ADS so their agreement was confirmed as unconditional.  

Prior to settlement, a Pre-Settlement Disclosure Statement (PSDS) must also be provided to the couple.  The PSDS is required to include current information about the levies for that particular unit, among other prescribed information.  This information is provided prior to settlement so that the operating levies can be apportioned between the seller and buyer on settlement.  The Body Corporate is required to sign the PSDS to certify that the information is correct. 

The Unit Titles Act and the regulations that apply alongside it are specific about what needs to be included in each statement.  There is, however, only a prescribed form for the PCDS.  There is no prescribed form for the PSDS or the ADS, but there are example PSDS forms available for use on the Ministry for Business, Innovation and Employment’s website.   

The Act provides for serious consequences in cases where the statements are not provided within the required timeframes, including the ability for the buyer to delay settlement and at worst, cancel the Agreement, so it pays to get this right. 

There are also requirements to update information in certain cases where information that has been provided changes prior to settlement.

Whether you are a seller or a buyer, disclosure is an important and complex area in relation to unit titled properties, and it pays to take legal advice.