An investor signed an Agreement for Sale and Purchase to sell his townhouse.  He asked the agent to add a clause to the Agreement that recorded that the Pre-Contract Disclosure Statement would not be provided as the Body Corporate was not an ‘active’ Body Corporate. This was done, and the Agreement was signed.

Later, when he contacted his lawyer, he discovered that the Agreement was void and could not be enforced as it attempted to contract out of the disclosure requirements of the Unit Titles Act.  The buyer decided not to proceed with the purchase.

The disclosure regime for the sale of unit-titled properties was introduced by the Unit Titles Act 2010. It was put in place as a consumer protection mechanism. It seeks to ensure that those buying unit titles are aware of what unit-titled property ownership and living entails.

For many Vendors/Sellers selling unit-titled properties, particularly those without property management companies managing the complex, this is a poorly understood area and is often done incorrectly if vendors do not take proper legal advice.

It is not possible to contract out of the regime, and any provision in an Agreement for Sale and Purchase seeking to do so is of no effect (as the above investor learnt the hard way). 


Pre-Contract Disclosure

This disclosure needs to be given in the form of a Pre-Contract Disclosure Statement which is signed by the Vendor/Seller, and provided to a prospective Purchaser/Buyer before they sign an Agreement for Sale and Purchase.

An Agreement for Sale and Purchase does not come into effect for a unit-titled property until it is provided.

This is required for all unit-titled properties.  It does not matter what size the unit-titled complex is or whether it is well managed or not.

The Disclosure Statement needs to be signed by the Vendor.

It does not need to be signed as correct by the Body Corporate (unlike a Pre-Settlement Disclosure Statement). However, in practice most Vendors need the Body Corporate (eg: their management company or their committee or chairperson) to prepare the statement for them, as the Vendor may not know some of the details required to be included in the statement.

The Vendor needs to be satisfied that the information is correct as it is the Vendor who is confirming to the Purchaser that the information in the statement is correct.

Most Body Corporate management companies will charge a fee for providing this statement, which is payable by the Vendor.

The information to be included in the statement is provided in Unit Titles Regulation 33, and is as follows:

(a) the amount of the contribution levied by the Body Corporate under section 121 of the Act in respect of the unit being sold; and

(b) the period covered by such contribution; and

(c) details of maintenance that the Body Corporate proposes to carry out on the unit title development in the year following the date of the disclosure statement, and how the Body Corporate proposes to meet the cost of that maintenance; and

(d) the balance of every fund or bank account held or operated by the Body Corporate at the date of the last financial statement; and

(e) whether the unit or the common property is, or has been, the subject of a claim under the Weathertight Homes Resolution Services Act 2006, or any other civil proceedings relating to water penetration of the buildings in the unit title development; and

(f) an explanation of the following:

(i) unit title property ownership; and
(ii) unit plans; and
(iii) ownership and utility interests; and
(iv) Body Corporate operational rules; and
(v) the information required to be contained in a pre-settlement disclosure statement; and
(vi) the information required to be contained in an additional disclosure statement; and
(vii) records of title; and
(viii) the land information memorandum issued under section 44A of the Local Government Official Information and Meetings Act 1987; and
(ix) easements and covenants; and

(g) how to obtain further information about the matters referred to in paragraph (f); and

(h) an estimate of the cost of providing an additional disclosure statement.

Some smaller Bodies Corporate who do not employ Body Corporate management companies often struggle with putting together the information for these statements, in which case the Vendor’s lawyer will often need to assist with preparing the statement. 

If you are buying or selling a unit-titled property, you need to be aware of the requirements to avoid being caught out.  If you are unsure, you should take legal advice from a lawyer experienced in the unit titles area.


Claire Tyler
Property Lawyer
Wellington


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