Unit Title properties are becoming more common in New Zealand and the ownership structures of these properties are becoming increasingly complex. It is therefore more important than ever that buyers understand the rights, obligations and benefits associated with owning a Unit Title property prior to becoming committed as a buyer under an Agreement for Sale and Purchase.
The Unit Titles Act 2010 (‘the Act’) came into effect on 20 June 2011 and addresses some of the concerns traditionally associated with Unit Title property ownership. The Act provides for more information to be available to buyers so they can make better and more informed decisions regarding their purchase of Unit Title Properties.
When a Unit Title is sold the seller must now provide the buyer with pre-contract and pre-settlement disclosure regarding the Unit Title property. The purchaser will also be entitled to request additional disclosure at their own expense.
Under the Act a pre-contract disclosure statement must be prepared and provided by the seller to any prospective buyer of a Unit Title property before the parties enter into any Agreement.
Pre-contract disclosure must advise the buyer on:
• body corporate charges,
• proposed future maintenance, including how the costs will be met,
• the balance of any fund or bank accounts of the body corporate as at the date of the last financial statements,
• whether or not the unit or common property is or has been subject to a claim under the Weathertight Homes Resolution Services Act 2006 or any other similar civil proceeding,
• and explain matters such as unit title property ownership, body corporate operation rules, unit plans, ownership and utility interests together with other matters to ensure the information provided is meaningful to the buyer.
The requirement to provide pre-contract disclosure cannot be contracted out of by the parties. All sellers must comply.
After the buyer and seller have entered into an agreement for sale and purchase the seller must provide the buyer with a second disclosure statement with further information, including a certificate from the body corporate, no later than the fifth working day prior to the settlement date.
The buyer of a Unit Title may request additional disclosure from the seller. Any request for an additional disclosure statement must be made by the earlier of either:
• five working days after the date of the agreement, or
• the tenth working day before execution of settlement.
If a request for additional disclosure is made, the seller must provide the additional disclosure to the buyer no later than five working days after the request was made. The seller is entitled to recover any reasonable costs they incur in providing the additional disclosure.
The additional disclosure may be of great assistance to a buyer, and serious consideration should be given to requesting information even though it may incur additional costs.
There are consequences if the correct disclosures are not made within the appropriate timeframes. These can include the buyer being able to postpone settlement or cancel the agreement altogether.
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