Body Corporate and Community Management and Other Legislation Amendment Act 2010 was passed on the 6 April 2011 with commencement beginning from the 14 April 2011. Changes to the disclosure regime under the Body Corporate and Community Management Act 1997 (Queensland) (BCCM Act) apply to contracts both issued after 14 April 2011 and to contracts already issued to proposed buyers, but not yet signed by both parties by 14 April 2011. The changes relating to lot entitlements also takes effect from the 14 April 2011, whilst changes relating to two-lot schemes will commence on a later date to be fixed by proclamation.
Additional Disclosure Obligations for Sellers
The amendment means sellers will need to provide additional disclosure when entering into a contract for the sale of both existing and proposed community titled properties to which the BCCM Act applies. If they fail to provide this additional disclosure before the buyer signs the contract, it potentially may give the buyer a right to terminate the contract at any time prior to settlement.
The seller must now provide a copy of the Community Management Statement (CMS) to accompany the disclosure statement for an existing lot before the buyer signs the contract.
The disclosure statement for both existing and proposed lots must now include four new statements:
– The amount of annual contributions fixed by the body corporate as payable by the owner of the lot (this was previously required, but further detail is now required – see statements 2 to 4);
– The extent to which the amount in statement 1 is based on the contribution schedule lot entitlements for lots in the scheme;
– The extent to which the amount in statement 1 is based on the interest schedule lot entitlements for lots in the scheme; and
– That the contribution schedule lot entitlements and the interest schedule lot entitlements are set out in the CMS.
Contracts already provided to the buyer but not yet signed by both parties
If a contract has been given but not signed by both parties (prior to 14 April 2011), then the seller must provide the buyer with:
– A new disclosure statement incorporating the four new statements as above and a copy of the CMS; or
– If the disclosure statement has already been provided to the buyer, a written notice that includes the four new statements and a copy of the CMS.
For an existing lot, if a new CMS is recorded after the disclosure statement is given but before the contract settles, the seller must give the buyer a copy of the new CMS within 14 days. A buyer can cancel a contract prior to settlement if the buyer would be materially prejudiced, given the extent of any changes.
For a proposed lot, if changes are made to the proposed CMS, the seller is obliged to give a further statement in the manner prescribed by section 214 within 14 days.
Contribution and Interest Schedule Principles
From 14 April 2011:
1. contribution schedule lot entitlements must be consistent with either:
(a) the equality principle; or
(b) the relativity principle; and
2. interest contribution schedule lot entitlements must be consistent with the market value principle.
For schemes created or adjusted after 14 April 2011, the CMS needs to:
1. state the contribution schedule principle on which the contribution schedule lot entitlements have been decided;
2. if the contribution schedule lot entitlements have been decided in accordance with the equality principle and are
not equal, explain why they are not equal;
3. if the contribution schedule lot entitlements have been decided in accordance with the relativity principle,
sufficient details are required to show how the individual contribution schedule lot entitlements were decided
4. if the interest schedule lot entitlements reflect the respective market values of the lots a statement is required
stating that the interest schedule lot entitlements reflect the respective market values of the lots; and
5. if the interest schedule lot entitlements do not reflect the respective market values of the lots explain why interest
schedule lot entitlements do not reflect the respective market values of the lots.
Additional Termination Rights
There are also new rights of termination where items 1, 2, 3 and 5 listed above are not complied with and the Buyer is materially prejudiced by the omission.
Sellers should note that Buyers will also have additional rights to terminate a contract where the Seller is the original owner of the scheme and the Buyer reasonably believes that the contribution schedule lot entitlements are inconsistent with the principle on which they were decided and that the Buyer would be materially prejudiced if compelled to complete the contract.
Please seek professional advice in regards to these changes introduced by the Property Agents and Motor Dealers and Other Legislation Amendment Bill 2010 and not rely on the commentary I have made.
For more information download:
[Additional guide] Queensland Law Society’s guide to BCCM Act changes