Unit Titles Act requires more disclosure

Each week, national law firm Simpson Grierson answers commercial property questions which can be emailed and headed "property problems". This week's question is answered by senior associate Daniel Kelleher and associate Nick Wilson who can be contacted at daniel.kelleher@simpsongrierson.com and nick.wilson@ simpsongrierson.comrequirements

Q. I run a company that manages unit-title properties. A unit owner is looking to sell her unit and has requested a lot of information which I have not provided in the past. Apparently she has to give this additional information to any potential purchasers because a new Unit Titles Act has been put in place. What information must she actually provide, and are there timeframes?

A. The new Unit Titles Act 2010 does impose new disclosure requirements on a seller of a unit. The act will come into effect once the regulations required under it have been finalised, probably in late 2010 or early 2011. The unit owner can probably relax for now.

The new regime is designed to provide greater clarity to purchasers to avoid being hit by surprise costs or claims after buying a unit.

Its four requirements are:

1. A pre-contract disclosure by the seller of a unit to a prospective buyer before an agreement to sell.

2. A pre-settlement disclosure statement by the seller to a buyer at least five working days before settlement.

3. An additional disclosure statement by the seller (if required by a buyer) which, we would expect, would usually be requested at the outset of negotiations.

4. A turnover disclosure statement from the original owner of a unit-titled development to the Body Corporate once it sells more than 25 per cent of the principal units or ownership interest in the development.

The regulations will prescribe the form and content for each of the four disclosure statements. The Department of Housing and Building has produced a discussion paper on the regulations and is currently seeking submissions.

The pre-contract disclosure statement will likely need to include:

A copy of the computer register (the title) to the unit.

A description of the ownership and utility interests of the unit (previously referred to as the "unit entitlement").

Details of any easements or restrictions.

A council LIM report and a description of all "leaky homes" claims affecting the development.

It must also identify what documents will be provided with the pre-settlement disclosure, provide general information on how unit titles and common property work and the duties of the Body Corporate.

The requirements of the pre-settlement disclosure statement look similar to those of the current "section 36 certificates" plus details of the Body Corporate operational rules and the long term maintenance plan (a new requirement under the Unit 2010 Act). An additional disclosure statement is likely to include details of:

The finances and bank accounts of the Body Corporate.

Minutes of Body Corporate meetings; insurance policies.

Contracts between a Body Corporate and a committee. ; AND

Any ground leases and the contact details for the Body Corporate and Committee.

It is proposed that the turnover disclosure statement by an original owner of a unit-title development (usually the developer) to the Body Corporate would include information such as building and compliance records, maintenance and service obligations, warranties and other contractual obligations to allow the Body Corporate to assume management of the property.

While the onus to comply with the disclosure requirements under the new act is on the seller, in reality, a seller will be looking to the Body Corporate to provide it with much of this information. We recommend that once the new act comes into force, you seek legal advice to ensure the information you provide meets the standard required.

The information contained in Commercial Property is intended to provide general information in summary form current at the time of printing. The contents do not constitute legal advice and should not be relied on as such. Specialist advice should be sought in particular matters.