Last updated 11 August 2016
While the conveyancing process involved in purchasing a lot in a community title scheme is similar to the process for conveying a house and land, special considerations apply when purchasing a townhouse or a unit. As the laws in this area are complex, a buyer should consult a solicitor before proceeding with an intended purchase.
In order to sell a lot in a community title scheme, a seller must provide a disclosure statement in the prescribed statutory form. Consistent with the consumer protection ethos of the Body Corporate and Community Management Act 1997 (Qld) (Body Corporate Act), there are also implied statutory warranties by the seller to the buyer to protect buyers from liabilities and potential problems. A breach of these warranties may enable the buyer to cancel the contract.
If the disclosure statement required by the Body Corporate Act is not given or if the disclosure statement is not substantially complete, then the buyer has the right to cancel the contract. If the disclosure statement contains inaccuracies, which are such as to materially prejudice a buyer, or if the buyer, having made reasonable efforts, is not able to verify the information, then again the buyer can cancel the contract.
The disclosure statement, among other things, will provide details of:
- the amount of annual contributions currently fixed by the body corporate as payable by the owner of the lot
- improvements on the common property for which the owner is responsible
- any other information prescribed under the regulation module applying to the scheme.
Given the importance of full and accurate disclosure, it is in the interests of both parties that the requirements of the Body Corporate Act receive careful attention. It is recommended that a buyer immediately seek expert assistance as to their contractual and statutory rights if they have any concerns about either the accuracy or fullness of the disclosure made by the seller.
After the contract is signed
The usual searches (as previously outlined) for the purchase of land should be made. In addition, a search of the records of the body corporate is necessary to ensure that the seller’s name is properly recorded in the roll, to check for any changes in by-laws and to confirm that the body corporate’s duties have been carried out with respect to such matters as insurance. This search, as well as obtaining a copy of the Community Management Statement, will also serve to identify any inaccuracies in the disclosure statement provided by the seller and may indicate if there is a breach of the implied statutory warranties. As well as having the records searched in person, buyers should obtain a body corporate information certificate from the body corporate pursuant to s 205(4) of the Body Corporate Act. The certificate incorporates a signed statement, which includes information about the members of the body corporate and levy contributions to the administrative and sinking funds.
A further search that should be undertaken is a search with the Commissioner for Body Corporate and Community Management in relation to any orders made under the Body Corporate Act that may impact on the community title scheme or the lot in question.
If the building is a class 2 or 3 building under the Building Code of Australia, a search of the local authority should be undertaken to ensure that a valid certificate of classification is current for the building.
Ideally, such searches should be carried out before the contract is signed to obtain the maximum protection, but in reality the pressure to sign the contract means this rarely occurs. If searches are carried out after the contract is signed, it is imperative that these searches are undertaken as soon as possible because certain rights to terminate may be lost if not exercised within strict time frames.
When preparing transfer documents, the buyer should also prepare a form of notice to the body corporate which provides information to the body corporate to maintain its records of addresses for the service of notices on owners, any mortgages given or discharged and any leases or sub-leases entered into or terminated.
Purchasing property from a developer
When a lot in a community title scheme is bought before the building or complex is completed, it is bought ‘off the plan’. In such cases, special considerations apply because the contracts involved may be lengthy and very complicated.
The developer (usually a company) is recorded as the original proprietor of all the lots. This allows the developer to pass special resolutions changing the by-laws and changing the rights between the owners of various lots. For example, a developer, as owner of all the lots, could enter into a management agreement with an associated company.
What a developer must disclose
The developer must provide the statutory disclosure statement which will include, among other things, a disclosure plan, details of proposed engagements of body corporate managers, letting agents and service contractors, details of proposed levies and a copy of the proposed community management statement. When a developer wants to vary the original statement, a further statement must at least 21 days before the date for completion be sent to the buyer. If the statement or further statement is later found to be deficient or if changes have been made and not provided for within the statement and they materially prejudice the buyer, then a right of cancellation may arise.