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Selling a unit title property in New Zealand – disclosure requirements
11 December, 2013 | Smith and Partners
Unit titles used to be quite rare, particularly out here in West Auckland, but with increasing intensification came increasing numbers of unit titles. In 2011 the Unit Titles Act was updated including major provisions for information (disclosure) to be given to prospective buyers of unit title properties.
The main thing that agents need to know if they are marketing a unit title property is that there are three stages where information about the property (disclosure) must be given to prospective purchasers, or can be required by a purchaser or prospective purchasers.
- Before the purchaser enters into the agreement – a pre-contact disclosure statement (PCDS)
- Within 5 working days of being requested by the purchaser to provide an additional disclosure statement (ADS)
- At least 5 working days before settlement – pre-settlement disclosure statement (PSDS)
The disclosure must be in writing, dated and signed by the vendor or a person authorised by the vendor (if you are signing as authorised signatory you should make sure you have the written authority of the vendor).
If you are signing a pre-contract disclosure statement as authorised agent you should check your terms of engagement and whether you want to be doing this and perhaps exclude any obligation to ensure the disclosure statement is correct.
If you are marketing a unit title property, it is best to discuss the disclosure requirements with the vendor at your initial meeting so that they are aware of the costs involved and so you can set up a plan for how you will get the information in time for each stage.
It is also important to note that the ADLS/REINZ Agreement for Sale and Purchase incorporates these compulsory provisions of the Act in clauses 2.4, 3.16, 6.4(4), 8.1-8.6 and you cannot contract out of them. Deleting or amending these clauses will have no affect.
Pre-contract disclosure statement
A pre-contract disclosure statement must be provided before the agreement for sale and purchase is signed, and provided in the form set out in the Unit Title regulations.
A pre-contract disclosure statement contains
- What a unit title is
- What a unit plan is
- What ownership and utility interests are
- What the body corporate operational rules are
- That a pre-settlement disclosure statement must be provided at least 5 days before settlement;
- That an additional disclosure statement must be requested within 5 working days of entering into the agreement;
- That the vendor must provide an additional disclosure statement within 5 working days of the request being made by the purchaser;
- Explanation of a Land Information Memorandum (LIM) and how to get it;
- Explanation of easements and covenants;
- What the current body corporate levy is and what period it covers; and
- Whether the Unit is or has been the subject of a claim under the Weathertight Homes Resolution Services Act or any other proceedings relating to water penetration.
Vendors will need to contact their body corporate management company to let them know they are selling their property and that they require a pre-contract disclosure statement so that their real estate agent can provide it to prospective purchasers.
The costs of the pre-contract disclosure statement are to be met by the vendor. If requesting a pre-contract disclosure statement from a body corporate management company then the vendor can expect to pay between $250-$350 for it.
There are no consequences in the Act for not providing a pre-contract disclosure statement. However this could be tested in the courts if the purchaser can show that they would not have entered into the contract if they had received that information.
Additional disclosure statement
Unlike the pre-contract disclosure statement, there is no requirement to provide an additional disclosure statement unless a potential purchase requests it. The purchaser must request an additional disclosure statement within 5 working days of signing the sale and purchase agreement or 10 or more working days before settlement date – whichever date is earlier. The request does not have to be in writing. The vendor has five working days from the date of the request to supply the additional disclosure statement.
There is no prescribed form but the additional disclosure statement must include certain information which is set out in Reg 35 of the Act including:
- Any contracts the body corporate has entered into
- Any plan
- Current balance of bank accounts held
- Regular expenses
- Amounts owed to the body corporate
- Every insurance policy held by the body corporate
- Summary of the long term maintenance plan
Again the body corporate administration company will be able to provide the information. They will charge between $450 – $750 for it.
The purchaser is to pay for the additional disclosure statement if they request it, however if the purchaser does not pay the vendor still has to provide it. The vendor could then add this charge in the settlement statement. This is set out in clause 8.5 of the agreement for sale and purchase.
Pre-settlement disclosure statements
The pre-settlement disclosure statement and certificate of insurance are to be provided by the vendor (or the vendor’s agent) to the purchaser not less than 5 working days before the settlement date. The agreement can still be unconditional when this information is provided.
Again there is no prescribed form however the pre-settlement disclosure statement must include certain information which is set out in Regulation 34 and includes:
- Unit number the body corporate number;
- Amount of the contribution levied and the period the levy covers;
- Manner of payment and due date;
- Whether any levy is currently unpaid;
- Whether there are any legal proceedings in place in respect of an unpaid levy;
- Any costs relating to repairs of the building;
- Any proceedings pending against the body corporate; and
- A copy of the insurance certificate is also required to be provided.
You should be aware clause 2.4(3) of the agreement for sale and purchase provides that the deposit should be held until an additional disclosure statement and a pre-disclosure statement have been provided to the purchaser within the time frames or such extension of time as was agreed. This may cause delays to release of the deposit, and if they are not provided, the agreement can be cancelled.
The cost of a pre-settlement disclosure statement is generally between $250-$350.
So what are the consequences of not providing this information?
The purchaser can, by notice in writing to the vendor, delay the settlement date to the date that is five working days after the information is provided or, the purchaser could, by notice in writing to the vendor, cancel the agreement.
When there is no body corporate
What if there is no body corporate management company? The vendor should contact whoever has been looking after the insurance on the units to see if they will provide one, otherwise the vendor can check with their solicitor.
Some important things for you to take away
Make sure your vendor has the pre-contract disclosure statement from the body corporate management company and provides this to you at the time of the listing. If the property is going to auction then it should be provided with the auction pack.
As a purchaser only has 5 working days after the date of the agreement to request an additional disclosure statement you should ensure the agreement is provided to the vendor’s solicitor as soon as possible after signing.
Calculate the dates conditions are due to ensure that the agreement does not still have conditions due at the time the vendor is required to provide the pre settlement disclosure statement to the purchaser. Otherwise, this could put the vendor to unnecessary expense in having to provide it and then the purchaser does not satisfy the condition. This should also be taken into account when condition dates get extended (if the settlement date isn’t also being extended).
