Unit Titles – Pre-Settlement Disclosure and Additional Disclosure Statements

In addition to pre-contract disclosure statements, the Unit Titles Act 2010 (Act) contains further requirements as to disclosure regarding any given unit. This disclosure comes in the form of a pre-settlement disclosure statement and an additional disclosure statement.

Pre-settlement disclosure statement

In the sale and purchase of a unit, section 147 of the Act states that the vendor must provide the purchaser with a pre-settlement disclosure statement no later than the fifth working day before the settlement date. The pre-settlement disclosure statement must contain:

• the prescribed information set out in regulation 34 of the Unit Titles Regulations 2011 (Regulations); and
• a certification from the body corporate that the information in the statement is correct.

Regulation 34 of the Regulations sets out the pre-settlement disclosure statement’s prescribed information as follows:

1. The number of the unit, accessory unit (if any), and the body corporate.
2. The amount the body corporate levied for that particular unit and the period covered by such contribution.
3. The manner the levy is paid and the date on or before each payment of the levy is due.
4. Whether or not a levy, part of a levy, or any metered charges, due to the body corporate are unpaid and, if so, the amount of the unpaid levy or metered charges.
5. Any legal proceedings commenced against the existing owner in relation to any unpaid levy.
6. If any costs relating to repairs to building elements or infrastructure contained in the unit are unpaid and, if so, the amount of unpaid costs.
7. The rate at which interest is accruing on any money owing to the body corporate by the seller.
8. If there are any proceedings pending against the body corporate in any court or tribunal.
9. If there have been any changes to the body corporate operational rules since the issuing of:(a) the additional disclosure statement, if one has been provided; or

   (b) the pre-contract disclosure statement.

The prescribed information above is similar in content to the information contained in the pre-contract disclosure statement. However, the key difference is that the body corporate certifies that the information provided in the pre-settlement disclosure statement is correct. This is an assurance for purchasers to be fully alive to any potential risks associated with the unit they are purchasing.

This is a key stage of a unit title transaction. Vendors should be ensuring that their solicitors are providing a correct pre-settlement disclosure statement within the required timeframe. A pre-settlement disclosure statement typically costs between $250-350 plus GST to obtain from the body corporate. The vendor will be responsible for paying this cost.

Additional disclosure statement

If the purchaser wishes to obtain further information about the body corporate, they have the right to do so under section 148 of the Act. This additional disclosure can be obtained by request of the purchaser and at their cost. The additional disclosure statement can contain the following prescribed information set out in clause 35 of the Regulations:

1. The contact details for the body corporate and body corporate committee (if any).
2. The balance of every fund or bank account held or operated by the body corporate at the date of the last financial statement.
3. Amounts due under invoices to be paid by the body corporate at the date the additional disclosure statement is requested.
4. Details of regular expenses that are incurred at least once a year.
5. Amounts owed to the body corporate at the date the additional disclosure statement is requested.
6. Details and particulars of every current insurance policy held by the body corporate.
7. Details and particulars of every current contract entered into by the body corporate.
8. Information about every lease to which the base land is subject.
9. The text of motions voted on at the last general meeting and if each motion was passed or not.
10. Whether or not the body corporate’s operational rules are different from the prescribed body corporate operational rules, and if so, what the differences are.
11. A summary of the long-term maintenance plan and if the body corporate will be levying any further funds from the body corporate members.

The purchaser may only request an additional disclosure statement within five working days of signing the sale and purchase agreement or ten or more working days before the settlement date, whichever is the earlier date. The vendor must then provide the additional disclosure statement on or before the fifth working day from the date that request was made.

Additional disclosure statements can cost between $450 and $750 plus GST. It is not necessarily a document that you want to obtain with every potential unit title you are to purchase. You should consider obtaining an additional disclosure statement when you are serious about buying that particular unit title and are not satisfied with the due diligence you have completed up until that stage.

What happens if the seller fails to disclose?

It is paramount that if you are vendor, you disclose the prescribed information within the required timeframes. Failure by a seller to meet their pre-settlement disclosure requirements is a breach under the Act and can result in a delay of settlement or worse, cancellation.

If you are a purchaser, and you do not receive your pre-settlement disclosure statement or additional disclosure statement within the prescribed timeframes, or at all, the purchaser may postpone settlement to the fifth working day from when that disclosure statement is given to you (section 149, Act).

If the buyer chooses not to exercise their right to postpone settlement under section 149 of the Act, they may cancel the sale and purchase agreement. This can be done by giving notice, in writing, to the seller.

What if the disclosed information is inaccurate?

If the disclosed information in the pre-contract, pre-settlement, or additional disclosure statement is incorrect or inaccurate, the seller must rectify the inaccuracy or incorrect information within five working days by providing a corrected disclosure statement.

If the inaccuracy or incorrect information is discovered within five working days of the settlement date, the purchaser may, by giving notice in writing, delay settlement by five working days from the date the correct disclosure statement is provided to the purchaser.

Conclusion

It is important that both purchasers and sellers of unit titles are alive to the above disclosure requirements. For purchasers, ensuring that you receive the required disclosure of information will provide you with a greater insight into the unit you are purchasing. As a vendor, failure to meet disclosure requirements under the Act means that your transaction could be subject to unwanted delays or even cancellation.

There are no grounds in which any party can contract out of the disclosure requirements under the Act (section 145, Act). If a seller ever tries to avoid their disclosure obligations under the Act due to a contractual clause in the sale and purchase agreement or in a disclosure statement, the seller will be in breach of the Act.

Your lawyer should be alive to the pre-settlement disclosure requirements under the Act. However, if you consider that you are not receiving your statutory right to disclosure, are unsure as to what the contents of your pre-settlement disclosure statement mean, or wish to request an additional disclosure statement, contact one of our expert property lawyers today.