Description of this module
Buying a Unit Title Property?
What should you be aware of?
When purchasing a unit title property consideration needs to be given to the following important documentation:
1. Disclosure statements
There are three of these: pre-contract disclosure statement; additional disclosure statement; pre-settlement disclosure statement.
• Pre-contract disclosure statement (“PCDS”):
These are required to be provided to all prospective purchasers prior to an agreement for sale and purchase being entered into with any of them. PCDS can be useful tools to understand what purchasing a unit title property is about and highlight anything to the purchaser that is important (including, for example, if the unit title development has been or is currently the subject of a weathertight claim).
• Additional disclosure statement (“ADS”):
A purchaser may request an ADS from the vendor within five working days after the date of the agreement or no later than 10 working days before the settlement date (whichever occurs first). The vendor must provide the ADS to the purchaser within five working days of receiving the request. The information to be contained within an ADS is prescribed, and when requesting an ADS a purchaser may request as much of that information as they desire.
• Pre-settlement disclosure statements (“PSDS”):
No later than the fifth working day before the settlement date the vendor must provide a PSDS to the purchaser. This disclosure statement must contain the prescribed information and must contain a certificate given by the body corporate certify that the information in the statement is correct.
• What happens if an ADS or PSDS are provided late?
A purchaser may postpone the settlement date (at its discretion) if either an ADS or a PSDS is not provided within the prescribed time frames. Or, the purchaser may, if they have elected not to postpone the settlement date, cancel the agreement for sale and purchase (by giving 10 days’ notice in writing to the vendor). Note that this does not apply to pre-contract disclosure statements.
2. Title and supplementary record sheet
The title goes hand in hand with the supplementary record sheet. Be aware that the title relates specifically to the unit whereas the supplementary record sheet affects the body corporate as a whole (i.e. all unit owners that form part of the body corporate).
3. Body corporate rules
Body corporate rules form an important part of the management and governance of a body corporate. It is critical every purchaser of a unit title property has received a copy of, and understood, the body corporate rules. These will be binding on the purchaser in the same way as the Act and the Regulations.
4. Minutes and financials
Body corporate minutes, committee minutes, and body corporate financials can provide invaluable insight into the operation of a body corporate and the committee. They tend to provide a strong inkling as to the culture of the body corporate, the culture of a committee, an understanding as to the body corporate financials, an indication of any challenges the body corporate / committee may have faced or may be facing, as well as some insight in terms of upcoming challenges and financial commitments.
We suggest that purchasers obtain (and review) copies of the AGM minutes, the EGM minutes, the committee minutes, and the financial documents (all for at least the past three years), as well as a copy of the long-term maintenance plan.
5. Building report
Building reports are very much a standard recommendation by legal advisers to purchasers of any type of property. In terms of unit title developments, we think building reports arguably play an even more significant role. Given the obligations of unit owners and the body corporate to undertake repairs, maintenance, and replacement, it is critical that a qualified building inspector not only inspects the particular unit you are purchasing, but also inspects the entire development (in so far as possible) to ascertain the general state of the building/s and to advise of any apparent issues (both immediate issues but also issues that may arise within the next 5-10 years).
6. LIM reports
Like building reports, LIM reports are very much a standard recommendation by legal advisers to purchasers of any type property. While this applies to unit title properties, we often find a reluctance from purchasing clients to obtain a LIM report primarily for the fact that it generally relates to the development as a whole as opposed to their particular unit. Notwithstanding this, a LIM report will contain information relating to the consents associated with the development, and the buildings and units in the development. It will typically contain other helpful information such as floodplain maps, which may give an indication as to possible current and/or future issues that may arise with the development. And a LIM report addressed to the purchaser (rather than simply taking one off the real estate agent) creates a contract is between them and Council to enable the purchaser any chance (regardless of how difficult it might be to make a successful claim against Council) to have a claim against Council.
7. Allocation of levies on settlement
The ADLS Agreement for Sale and Purchase (the agreement used in the vast majority of property sales and purchases) provides that periodic contributions to the operating account are to be apportioned on settlement, but there is to be no apportionment of contributions to the long-term maintenance fund, any contingency funds, or any capital improvement fund. In addition, and special levies that have been struck are to be paid by the party who owns the unit at the time the levy payment is due.
8. Deposit release
Generally speaking, a deposit paid by a purchaser is entitled to be released to the vendor following satisfaction of any conditions, and satisfaction of the title requisitions procedure. However, in the case of a unit title sale, the deposit is required to be held by the stakeholder until the requirements of the Act have been satisfied (this includes providing the pre-settlement disclosure statement) which may surprise vendors who may think they are entitled to the deposit considerably earlier than the sale and purchase agreement provides for.
This article is published for general information purposes only. Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice. If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.
If you need any assistance with buying or selling a unit title property or have any queries about your apartment or apartment complex please contact Josh Muir om 09 365 1056.