Our below article was published in a recent REINZ magazine and was very well received, so we would like to share it with all of those who receive our Agent Care newsletter as well.
A couple owned an apartment in a complex of 4 unit titled apartments.  After owning the apartment for 10 years, they put it on the market through a real estate agent.  The agent asked them for contact details and information about the Body Corporate, including levies and insurance.  The couple believed that as theirs was a small apartment complex, they did not require a functioning Body Corporate and so none of the rules applied.  The agent wasn’t sure what exactly was required in terms of disclosure when there is no ‘functioning’ Body Corporate.

The legal position here is clear. Basically all of the same rules apply to a ‘non-functioning’ Body Corporate as to a ‘functioning Body Corporate’.  The agent is still required to prepare disclosure documents in the usual way.

The term ‘Body Corporate’

All unit titled properties, no matter how small or large the development is, are governed by the Unit Titles Act 2010 (“the Act”).  All unit owners in a unit titled development make up the Body Corporate, so there is no such thing as having ‘no Body Corporate’.

Under the Act, a Body Corporate is responsible for many tasks, including (among other things):

1. Maintaining a register of all unit owners;
2. Ensuring the development is insured under one insurance policy;
3. Managing and maintaining common property;
4. Having a Long Term Maintenance Plan in place; and
5. Providing disclosure statements.

The only thing that a smaller Body Corporate is exempt from under the Act is the requirement to have a Body Corporate committee.  This is different to having a Body Corporate.  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 statements

The same disclosure statements need to be given when selling a unit in a small unit titled development.

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; and, if requested by the purchaser,
• An additional disclosure statement.

Pre-contract disclosure statement

When selling the property the agent would be required to produce a pre-contract disclosure statement to prospective purchasers, signed by the Vendor in the same manner as usual before a purchaser signs an Agreement for Sale and Purchase.

In a non-functioning Body Corporate there will often be many parts of the pre-contract disclosure statement that are not relevant.  In that case, “not applicable” should be included after each of those statements (e.g. if there are no levies).

Purchasers can make their own decisions about whether to proceed with the purchase based on the information in the pre-contract disclosure statement (i.e., knowing that the Body Corporate is not doing many of the things that it should by law be doing).

A small Body Corporate should at the very least have a joint insurance policy covering all units, with ‘levies’ being those insurance premiums split between owners in proportion to their ownership interests.

Small Bodies Corporate are also required to have a Long Term Maintenance Plan in place in the same manner as larger Bodies Corporate.

There are no sanctions set out in the Act for not complying with it, however any owner can take the Body Corporate to the Tenancy Tribunal to force them to comply with the Act if they were so inclined (although they as an owner are part of that Body Corporate, so are equally responsible for the Body Corporate not complying with the Act).

Pre-settlement disclosure

Prior to settlement, the vendor is required to provide the purchaser with a certificate of insurance and a pre-settlement disclosure statement.

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 Body Corporate it will need to be signed by all owners.  More time therefore often needs to be allowed for this to occur. This pre-settlement disclosure includes information regarding the levies that will be apportioned on settlement, and other details relevant to the purchase.

Additional disclosure is optional information which a purchase can request.  In the case of a Body Corporate with no ‘functioning’ Body Corporate, it is the responsibility of all owners to put this together.

Deposit

It also pays to remember that when selling a unit titled property, you as the agent are required to hold the deposit until the pre-settlement disclosure statement and additional disclosure statement have been provided, as there is a right for the purchaser to cancel prior to those statement being provided.

It pays to be aware of what is required when selling unit titled properties, as there may be many vendors like the couple above who are unaware of the requirements, so will need significant guidance.