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Alert · 27 January 2012 |
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MacGillivrays |
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The Information Gap |
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Disclosure of Body Corporate Information to prospective Buyers of units in Community Title Schemes was expanded last year by the Queensland Government.
From 14 April 2011 Sellers of units have had to disclose to their Buyers the basis upon which the Body Corporate levies have been calculated (contribution or interest schedule entitlement) and also provide a copy of the current community management statement for the scheme.
The Government did not however require that sellers disclose the amount of any unpaid levies!
Seller Disclosure Obligations
When a Seller decides to sell their lot, they need to prepare a Section 206 Disclosure Statement, sign it and hand it over to their Buyer before the Contract of Sale is entered into. The Section 206 Statement discloses to the Buyer what the annual contributions and levies are for the lot, along with certain other basic information about the Body Corporate; for example contact details.
To help a Seller complete a Section 206 Statement the Queensland Body Corporate and Community Management Act 1997 (“Act”) contemplates that a Seller will give a BCCM Form 12 (requiring information from a body corporate) to their Body Corporate; ie the Body Corporate Manager in most cases. The Body Corporate (Manager) then prepares a BCCM Form 13 (body corporate information certificate) and hands that to the prospective Seller.
From the Information Certificate, the Seller can then extract the information necessary to complete the Section 206 Statement. There are prescribed fees for delivery of a BCCM Form 13 (up to $82 for an urgent faxed copy) and some enterprising Body Corporate Managers offer to their lot owner Sellers the additional service of preparing a Section 206 Statement (in draft) for an additional fee.
Differences Between a Form 13 and a Section 206 Statement
The BCCM Form 13 Information Certificate contains different information to the Section 206 Statement. Critically, the BCCM Form 13 contains a summary of amounts due but unpaid (including levies) while the Section 206 Statement does not have to include this information.
On this basis if you are a Buyer of a unit it is recommended that you obtain your own BCCM Form 13 Information Certificate from the Body Corporate, unless the Seller has given you a copy of theirs (which is unusual). This will ensure you receive the first of the missing bits of information in relation to unpaid levies for the lot.
Search the Records
While obtaining a BCCM Form 13 Information Certificate as a Buyer gives you more information than the Section 206 Statement alone, it does not give you the complete picture. As a Buyer you can lodge your own BCCM Form 12 with the Body Corporate seeking the right to inspect the Body Corporate’s records, in addition to receiving the BCCM Form 13 Information Certificate.
Attending at the office of the Body Corporate Manager to inspect the records enables the Buyer to examine the history of the building, including whether there have been any defects, if there are any major items of capital expenditure coming up, and whether there are issues not yet discoverable by other searches (e.g. a proposed future resumption).
Even if a Buyer inspects the Body Corporate records personally, unless they are a seasoned professional, they are likely to miss key information. It is recommended that a Buyer engage a search agent to search the Body Corporate records on their behalf. That agent will usually then prepare a written report attaching copies of relevant documents, for example extracts of meeting minutes and the like, and draw your attention to issues that are likely to impact the Buyer’s decision to proceed with the purchase.
Buyer Beware!
Beware however, all search agents are not the same! Some search agents do little more than obtain the information that would be available through obtaining a BCCM Form 13.
The best agents produce comprehensive reports and while you could pay more, their reports will put you in a more powerful position. For example if the contract of purchase is still conditional, then the Buyer may have rights to terminate the contract, negotiate changes (for example a change to the price) or to retain some money on settlement to pay for an expected Body Corporate liability which the Seller had not disclosed.
Filling the Gap
So whether you are a Seller, or Buyer, be aware of the means available to obtain information about the Body Corporate so that you can fill the information gap.
Article by Michael Kleinschmidt, Partner, Property & Strata Services.
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Buying or Selling a Business? Contact MacGillivrays Corporate & Business Services 1300 369 581 or johnm@macgillivrays.com.au.
PLEASE NOTE: This article is not legal advice and our comments are of a general nature only. This document is not to be relied on as substitution for proper detailed legal advice. Liability limited by a scheme approved under professional standards legislation. MacGillivrays are an Australian law firm
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