In this article, we will discuss the three principal disclosure statements. These are:

• Pre-contractual disclosure statement (“PCDS”);
• Additional disclosure statement (“ADS”); and
• Pre-settlement disclosure statement (“PSDS”).

Pre-contractual Disclosure Statement

The seller must provide a PCDS to any prospective buyer of a Unit Title property before they sign an Agreement. The new version of the ADLS Agreement for Sale and Purchase provides for an acknowledgement by the buyer that they have received such disclosure. Buyers can reply on the statements as conclusive evidence of the accuracy of the information in the statement.

PCDS requirements are contained in Form 18 of the Unit Titles Regulations 2011 and must contain the following:

• General information on:

• unit title property ownership
• unit plan
• ownership and utility interests
• body corporate operational rules
• pre-settlement disclosure
• additional disclosure
• computer register
• land information memorandum
• easements and covenants

• Name and address of person who can provide further information;

• Body Corporate information such as Body Corporate number, the annual amount of the Body Corporate levy, the period covered by the levy, the proposed levy for the next 12 months, details of any proposed maintenance, details of all bank accounts held;
• Estimated cost of providing the ADS;
• Whether or not the unit or the common property is or has been the subject of a claim under the Weathertight Homes Resolution Services Act 2006; and
• Must be signed and dated by the seller or by a person authorised in writing by the seller to sign the statement.

For those unit owners who have a professional Body Corporate secretary or manager, this PCDS will not pose a problem. A professional Body Corporate secretary/manager will provide the information for an agreed fee – usually around $100. This fee is the responsibility of the seller. However, units in a Body Corporate with no functioning committee, Body Corporate secretary or manager will have real difficulty fulfilling this requirement.

If you are required to assist with this information on behalf of the seller, it is imperative that you do not purport to certify the correctness of the information on the statement on behalf of the seller, as the buyer can reply on the accuracy of the information and if it turns out that the information is incorrect, then the buyer will look to the person who has signed the statement for compensation for wrongful disclosure.

Checklist for sellers of Unit Title properties:

• Before putting the property on the market, sellers should talk to their lawyer first about pre-contract disclosure requirements;
• Allow plenty of time for collecting the information before marketing the property;
• Have Form 18 completed and ready to hand out to prospective buyers by the agent;
• Do not complete the agency agreement unless Form 18 is completed and ready to go;
• Understand the importance of the accuracy of the information because wrong information   could lead to action by the buyer l ater for wrongful disclosure.

There are no statutory consequences for failing to provide a PCDS but there may be possible contractual consequences.

Additional Disclosure Statement

Under section 148 of the Act, a buyer may request an ADS before the settlement of an agreement for sale and purchase of a Unit Title. The buyer must pay to the seller, all reasonable
costs incurred by the seller in providing the ADS. The estimated cost of providing an ADS must be set out in the PCDS.

It would be in a buyer’s interest to obtain an ADS, as the information in it will be very helpful
in understanding the Body Corporate and the way it is being run.

The Act contains a prohibition that if the buyer does not pay the cost for the ADS, the seller
cannot withhold providing the ADS. This provides a classic situation where a buyer may request an ADS, withhold payment but the seller still has to comply because of the significant consequences of not complying. A solution to this problem for those contracts that settle is to include the amount of the ADS fee in the seller’s settlement statement.

ADS requirements are set out in Regulation 35 of the Unit Titles Regulations 2011.

An ADS must be requested within 5 working days of the date of the contract, or 10 working days before settlement, whichever is the first.

The ADS must be provided within 5 working days of the statement request. This is a very tight timeframe.

Pre-settlement Disclosure Statement and s 147(3)(b) Certificate

The PSDS is similar to the section 36 certificate under the Unit Titles Act 1972. The  requirements are set out in Regulation 34 of the Unit Titles Regulations 2011 and must contain the following:

• The unit number;
• The body corporate number;
• Amount of contribution levied in respect of unit;
• Period covered by such contribution;
• Manner of payment of the levy;
• The date on or before the levy is due to be paid;
• Whether a levy or part of a levy is unpaid and, if so, the amount of the unpaid levy;
• Whether legal proceedings have been instituted in relation to any unpaid levy; Whether any metered charges due are unpaid and, if so, the amount;
• Whether any costs relating to repairs to building elements or infrastructure contained in the unit are unpaid and, if so, the amount;
• The rate at which interest is accruing on any money owing to the body corporate;
• Whether there are any proceedings pending against the body corporate in any court or tribunal; and
• Whether there have been any changes to the • body corporate operational rules since the ADS or the PCDS.

A professional Body Corporate secretary/manager will complete this form for a fee.
This fee is the responsibility of the seller.

In addition, there is a Body Corporate Certificate required under the Act. This Certificate states that the information contained in the PSDS is correct. We recommend you ensure the seller’s Body Corporate levies are up to date as the Body Corporate may withhold this Certificate if the seller owes them money. If the seller cannot pay the arrears prior to settlement, then the seller’s solicitor will need to undertake that they will be paid on settlement. The Certificate will then be issued with a “caveat” that it is subject to payment of the arrears.

A PSDS must be provided no later than the 5th working day before the settlement date.

There are significant consequences for failing to provide the ADS or PSDS and Certificate within the timeframe. These consequences are:

• A postponement of the settlement date if either the ADS or PSDS are not given within the 5th working day before the settlement date. The postponement will be to the 5th working day after the date which the disclosure statement is given; or
• A right of cancellation for the buyer if either the ADS or PSDS are not provided within the prescribed period as set out in the Act.

Please note that the disclosure regime does not make the contract conditional. The information just has to be provided and purchasers should be made aware that information that they do not like does not give them a right of cancellation of the contract.

Written by Debbie Masters, Registered Legal Executive (NZILE Fellow)  www.denniskinglaw.com

Disclaimer: This newsletter discusses its topic in general terms and should not be relied upon as legal advice.