In this blog we explain S206 Body Corporate Disclosure in QLD - and what people are missing that are putting property deals at risk!
This video/blog is great for anyone who is involved with CTS (Community Title Scheme) property transactions in QLD. We discuss what can go wrong, what you need to have a valid S206, and even a few hot tips!
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Hi everybody - George Sourris, Empire Legal.
Today's topic: Non negotiables when it comes to selling a unit in Queensland.
Picture this - you’re a QLD Real Estate agent selling an apartment in Brisbane. Your buyer gets cold feet after the contract goes unconditional. Well its unconditional, so its going to settle, right? Not necessarily.
The first thing a good lawyer acting for a buyer that wants to get out of a unit contract will do is check the Section 206 Disclosure Statement. There are a couple of common errors that get made that allow the buyer the ability to get their deposit back and walk away from a deal without penalty, right up until settlement day.
In Queensland, when selling a residential or commercial property within a Community Title Scheme (CTS), sellers MUST provide a signed disclosure statement in accordance with Section 206 of the Body Corporate and Community Management Act 1997 (BCCMA), PRIOR to the buyer signing the contract.
The disclosure statement provides information about the body corporate, including the relevant fees that are associated with the property. There is no approved form for completing a Section 206 disclosure statement. Real estate agents and body corporate managers have created individual templates based on the requirements stated in the Body Corporate Act, S206.
The usual process is the real estate agent will source the information by ordering a Section 206 Disclosure Statement from the body corporate on behalf of their client. Ordering the Section 206 Disclosure Statement attracts a fee, usually somewhere around the $150 mark. It is critical for agents to understand how to complete and provide a disclosure statement.
Under Section 206, a buyer can terminate a contract if the disclosure statement if:
It is required that the following information is provided: The body corporate manager or secretary's contact information, any improvements on common property for which the lot owner is responsible, and the amount of annual contributions currently fixed by the body corporate as payable by the lot owner. Of course, the lot and plan description must be present in the S206 as well.
Diligent vendors should look over the Section 206 once it comes back from the body corporate to ensure its accuracy, i. e. ensuring any special levies are documented and that the levies noted are correct.
Other information may be included - such as financial statements, implied warranty information and insurance details.
For any interested readers, you can of course go to Section 206 of the BCCMA to understand the exact requirements. You do not need to though. Instead, I suggest ensuring you order the Section 206 from the Body Corporate early, i.e. not long after signing your Form 6. Then, get it signed by the seller.
However, it is important to be aware that if levy fees are updated, or the insurance expires - it should be updated, prior to settlement!
This way the disclosure information is ready and available for when a buyer comes along. Keep in mind here that the points I've just outlined are legislative law, so you cannot mutually agree to exclude or amend these legal obligations.
Fun fact: an agent may sign off on behalf of a seller If they've been previously authorised to do so. If you are an agent planning on signing a Section 206 statement on behalf of your vendor, I suggest getting their authorisation in writing in advance. This is governed by Section 205, Subsection D of the BCCMA.
Providing the disclosure statement.
Once a completed statement is ready, the agent MUST ensure the correct process is followed so that the buyer receives a signed copy of the statement BEFORE entering into the contract.
Remember, this administrative oversight cannot be rectified once a contract of sale is dispersed, allowing the buyer a continuing right to terminate the contract up until settlement.
It is baffling how many times we see a contract under Section 206 where the buyer has signed before the seller, or the seller has not signed at all.
PRO TIP: set your DocuSign signing order so that the Section 206 is signed by the seller first.
Keep in mind here that any inaccuracy with the Section 206 does NOT automatically give the buyer a right to terminate.
For agents using RealWorks - good news - there's a workflow that exists to take any confusion out of the signing process and ensure compliance with the BCCMA.
Thanks everyone for listening. If you're in the real estate world, this could save a deal for you. Having a buyer being able to terminate right up until the minute of settlement. Having a buyer that has a continuing right to terminate right up until settlement is obviously not ideal and not a great thing to explain to your vendor if an administrative oversight like this comes to play and the contract crashes.
Thanks very much. We'll see you next week.
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George Sourris. Empire Legal.
If you have any questions, you can email me: george@empirelegal.com.au.
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Thanks for reading everybody. See you on the next one.
Ladies and gentlemen, please keep in mind that all advice is general in nature and does not constitute legal advice. This is authorised by George Sourris, Empire Legal, Brisbane, Queensland, Australia.
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Note: all information is general in nature and as each matter is unique please contact our office for tailored advices: the above does not constitute legal advice.