Are you selling or purchasing a unit title? Do you know about the disclosure requirements?

The Unit Titles Act 2010 (“the Act”) sets out three different statements a seller must provide to a buyer at different stages in the sale and purchase transaction.  The first disclosure statement is called a "pre-contract disclosure statement".

Pre-contract disclosure statement

As the name suggests, this disclosure statement must be provided to a prospective buyer before they sign an agreement for sale and purchase.  If you are selling your property through an auction process, you should ensure that the pre-contract disclosure statement is attached to the auction terms and conditions that are provided to prospective buyers. 

The agreement for sale and purchase includes an acknowledgment that the buyer has received the pre-contract disclosure statement from the seller.  It is very important, as a seller, that you provide this statement to the buyer as soon as possible.  If it is not provided to the buyer before the agreement is signed, the buyer could seek to cancel the agreement. 

If you are a buyer, it is important that you obtain the disclosure statement; when acting for buyers, we recommend that we review the pre-contract disclosure statement to see if the statement raises any alarm bells.  If there is any particular cause for concern, further questions may need to be asked of the seller and the body corporate. 

The onus in providing the disclosure statement falls on the seller even though most sellers will rely on the body corporate manager or chairperson to provide the required information.  The statement must be signed by the seller or an authorised representative.

The Unit Titles Regulations 2011 (“the Regulations”) set out the prescribed information that the statement must contain.  The disclosure statements can be somewhat unclear in terms of what the seller should be disclosing to the buyer.  Some owners have the view that they will give the prospective buyer everything they have about the unit and body corporate; in contrast, other owners will provide as little information as possible, without actually under-disclosing. 

Regulation 33 sets out the information that must be disclosed.  This includes:

• A description of unit title property ownership, unit plans, ownership and utility interests, body corporate operational rules, computer registers, easements and covenants, Land Information Memorandums and information about what is required in a pre-settlement disclosure statement and an additional disclosure statement;
• The amount of the contribution levied by the body corporate for the particular unit being sold;
• The details of maintenance that the body corporate proposes to carry out on the unit within the next year and how the maintenance costs will be met;
• The balance of every fund or bank account looked after by the body corporate; and
• Whether the unit or the common property is or has been the subject of a weathertightness home claim.

The pre-contract disclosure statement allows the buyer to obtain initial information about the unit and describes certain terminology associated with unit title properties.  It can be useful for the seller to have a solicitor look over the statement to ensure the correct information is being provided to the buyer (and the sellers are not over- or under-disclosing). 

Additional disclosure statement

Once the agreement has been signed, a buyer may, within five working days of signing the agreement but no later than 10 working days before the settlement date, request an additional disclosure statement from the seller.

We always recommend obtaining this statement however, it may depend on the information already provided to you as a buyer as to whether you request this.  We see a number of sellers providing most of the information in the pre-contract disclosure stage, removing the need for an additional disclosure statement. 

Also there is no requirement under the Act for a buyer to approve or agree to the content of a disclosure statement.  When acting for a buyer we therefore recommend that a condition is included in the agreement that allows you to approve the contents of the additional disclosure statement and various other body corporate matters.  Please note that this would not be applicable if you were purchasing the property at an auction.

The statement provides important information such as:

• Summaries of the long term maintenance plan;
• Text of motions voted on at the last general meeting and whether each motion was passed or not;
• Details of regular expenses that are incurred at least once a year;
• Amounts owed to the body corporate at the date the additional disclosure statement is requested; and
• Details of every current contract entered into by the body corporate.

The pre-contract disclosure statement sets out how much an additional disclosure statement will cost.  Although it is the seller’s responsibility to provide an additional disclosure statement, the cost of this must be met by the buyer.  

Again, for the seller, most of the information will need to come from the body corporate chairperson or manager.  However, the onus falls on the seller to provide the statement to the buyer and, crucially, the seller is responsible for the content of the statement.

Pre-settlement disclosure statement

This is the final statement that makes up the trio of disclosure statements to be provided to the buyer.  The seller must provide this statement no later than the fifth working day before the settlement date.

The information required to be disclosed in this statement is very important for a buyer.  Yet, there is no ability for the buyer to "approve" the information contained within statement.  If there was information that the buyer was unaware of or did not agree with, the buyer may be unable to cancel the agreement.  

The statement is mainly concerned with what levies have been raised by the body corporate, and whether there are any unpaid levies by the unit owner and unpaid costs relating to repairs of building elements or infrastructure.  This information is important to ensure the buyer is not taking on any outstanding debt by the seller and also to highlight the amounts payable by the buyer from the settlement date onwards.

Again, the statement must be provided by the seller and the onus falls on him or her to provide it.   Unlike the previous statements, a  pre-settlement disclosure statement requires a certificate to be signed by the body corporate stating that the information contained in the statement is correct.  Therefore it is vital that the information in the statements is up to date and accurate.

There are also serious consequences if the buyer does not receive the statements within the specified timeframes set out in the Act, or if the seller does not provide the statements at all.  In those cases, the buyer could delay the settlement date or cancel the agreement altogether.

The disclosure requirements under the Act have caused some headaches due to the unclear wording of the Act and Regulations, the double-up of information required to be disclosed, the overtly complicated structure that could easily be simplified and the serious implications of not getting the disclosure requirements right.

If you are in doubt about the disclosure requirements, either as a seller or buyer, ensure you obtain legal advice to avoid any costly mistakes. 

If you would like further information please contact Dale Thomas on 07 958 7428.