Those of you operating in the inner-city market will be well versed in unit title ownership as it’s the most widely used form of multi-unit property ownership. However, as we also see unit title ownership in the suburbs as well we thought it would be useful to give you a bit of a recap of unit titles.
What is a unit title development?
Unit owners within the development have exclusive ownership to their unit as well as any accessory units, which might include security lockers and/or carparks. Whereas, areas accessible to all unit holders (such as lobbies and driveways) are ‘common areas’ and owned and managed by the body corporate.
What is the body corporate?
The body corporate is created when the unit title development plan is deposited with LINZ and is made up of all unit owners. All unit title properties have a body corporate – there’s no such thing as ‘no body corporate’, instead it’s a ‘non-functioning body corporate’.
How is selling a unit title property different?
The main thing to be aware of when selling unit title properties is that there are three stages where information must be required or requested by potential purchasers.
1) Pre-Contract Disclosure
When bringing a property to market, make sure a pre-contract disclosure statement is ready to be provided to potential purchasers. This is a requirement whether or not the body corporate is functioning. Where there’s body corporate manager they will help the vendor put this together. Where there isn’t, the vendor will need to do this. The statement must be in the prescribed form – there’s a template on the Tenancy Services website. We recommend attaching the disclosure statement to the back of the agreement so there’s no argument that the purchaser didn’t receive it.
2) Pre-Settlement Disclosure
The primary purpose of the pre-settlement disclosure statement is to assure purchasers that nothing has changed since the pre-contract disclosure was given to them. Pre-settlement disclosure must be given at least 5 working days before settlement. The vendor’s lawyer will manage this process but it’s good to be aware of it as failure to provide on time could result in settlement being delayed, or worse still, an agreement being cancelled! Additionally, the deposit cannot be released until the pre-settlement disclosure statement is received by the purchaser’s lawyer.
3) Additional Disclosure
A purchaser can request an additional disclosure statement before the earliest of 5 working days after signing the agreement or 10 working days before settlement. This information doesn’t need to be in a prescribed form but the statement is required to contain certain information. Unlike the pre-contract and pre-settlement disclosure, this information is prepared at the purchaser’s cost. If requested, it’s important it’s provided on time otherwise the purchaser is entitled to delay settlement or cancel the agreement.
Other things to be aware of
Vendors can only apportion contributions to the operating account at settlement. They can’t apportion their contributions to the long-term maintenance, contingency or capital improvements funds. This is particularly relevant in Wellington where a few vendors and purchasers have been caught out when special levies have been raised for earthquake strengthening.
Where you suspect a vendor has made alterations to their unit, make sure they have approval from the body corporate in accordance with the body corporate rules. If they haven’t, make sure they get it ASAP!
The Unit Titles Act requires a body corporate to have a long-term maintenance plan but there’s no obligation for them to have a long-term maintenance fund. As yet, the existence of a healthy long-term maintenance fund doesn’t seem to have had a significant impact on the value of the units, but there’s potential for this to change as apartment living becomes more popular.
If you have any questions along the way or you’re unsure when guiding vendors and purchasers through the sale and purchase of a unit tile property then please feel free to call us – obligation free!