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More disclosure when buying strata in Queensland, report suggests

Body corporate managers frequently assist in the sale of units by providing a body corporate certificate that includes certain information about the lot being purchased.

A few years ago, under the previous government, consideration was given to the volume of the certificate and subsequently its size was minimised, putting the onus of checking the background of a property back on buyers. In recent years however, we have seen a slow increase in the volume of the mandatory disclosure documentation and it is a concern to the strata sector that with the release of the Interim Report on Seller Disclosure in Queensland, there is a proposal to increase the depth of disclosure again.

In Queensland, there is currently no single, formal framework for the seller’s disclosure obligations. The obligations arise from a range of sources – statute, contract, local government laws and the common law and occur at different times in the conveyancing process. The legislation prescribes that the body corporate for a community titles scheme must keep rolls, registers and other documents, must give access to them, and may dispose of them, in the way, and to the extent, provided for in the regulation module applying to the scheme.

So when a sale occurs, the seller must give the person who proposes to buy the lot a disclosure statement, before the buyer enters into a contract to buy. The legislation prescribes that the disclosure statement states the full contact details for each person who is responsible for keeping body corporate records (e.g. the secretary or body corporate manager). The statement must include the amount of annual contributions currently fixed by the body corporate as payable by the owner of the lot; and identify improvements on common property for which the owner is responsible. It must be disclosed whether there is a committee for the body corporate or a body corporate manager is engaged to perform the functions of a committee; and include other information prescribed under the regulation module applying to the scheme.

The initial review on seller disclosure started in early 2014, setting out to provide meaningful disclosure and information which could affect the decision of a buyer to purchase; balance the cost of providing information between the buyer and the seller; and enable all information required to be provided in a readily accessible form which is easily obtainable at a reasonable cost.

The interim report that was released last month now proposes the introduction of a statutory disclosure regime or a regime that will result in better coordination of the conveyancing process.  As part of this, a comprehensive form is suggested within the Body Corporate and Community Management Act 1997 (Qld) for strata and community title lots.

It is envisaged to change the way in which the existing disclosures are made through the use of a seller statement and body corporate certificate.  Among other things, the body corporate certificate is envisaged to include by‐laws; exclusive use by‐laws where applicable; notice of resumption of common property; additional insurance information including the amount of cover, the period of cover and details of any current or outstanding claims made under the policy; and information specific to the body corporate such as whether it is involved in litigation (and adjudication), received a show cause or enforcement notice or a notice or order requiring work to be done or money spent in relation to the scheme.

While the intentions of the proposed reform are to protect buyers and make conveyancing easier, it is in the interest of a buyer to continue to obtain all the relevant information to know what they are buying into. One of the recommendations from SCA (Qld) is that an informed decision can only be made if the buyer initiates their own research to ensure themselves of the right decision being made. A certificate as proposed in the report can certainly be effective for a buyer but practical issues for our sector arise from timeframes, consequences of inaccurate or missing information and the cost involved for the seller in providing such mandatory disclosure.

With a 3.8 percent growth in lots registered in Queensland in the last 12 months, there needs to be more awareness from buyers what strata community living is and what it means long-term. Purchasers of strata properties must take the right steps to make an informed decision and best practice is to ask a conveyancer to do searches to ensure they are well aware of any matters concerning the scheme and lot they are interested in.

About Simon Barnard

Simon Barnard
SCA (Qld) represents more than 80% of all strata title under management in Queensland and its members manage more than $80bn in replacement value. Choosing a SCA (Qld) member – may it be a manager or an industry professional - ensures you get the best available service at competitive prices.

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