Community Management Schemes
and
Sale Contracts

The Body Corporate and Community Management Act commenced on the 13th July 1997. What was previously known as a Building Unit Plan or Group Title Plan is now called a "Community Title Scheme".

Part of the purpose for this change was to increase the flexibility of the law and management relevant to various types of BUPs or GTPs (now "CTSs") rather than have every type regulated similarly. The different types of schemes have been categorised in "modules" eg.

• Standard Module - developments mostly owner occupied
  
  
• Accommodation Module - mostly holiday letting and serviced apartments
  
  
• Commercial Module - non-residential projects
  
  
• Small Schemes - 6 lots or less
  

Each scheme requires a "Community Management Statement" - a comprehensive document describing the scheme and any future development. It identifies the applicable Regulation Module and contains the By-laws, an "Interest Schedule" (previously Lot Entitlement) and a Contribution Schedule. It discloses any service agreement eg. management, care taking, letting etc. An interesting requirement now is the "sinking fund forecast" coving a minimum of 10 years - to ensure there will be sufficient funds for good maintenance.

As regards conveyancing the Contract is now made up of a number of parts-

1. The contract itself with standard terms - very similar to the previous contract;

2. A Seller's Disclosure:

These are warranties by the seller that unless disclosed, there are no -

(a) latent (existing but concealed or not easily seen) or patent (obvious) defects in the common property or assets of the Body Corporate other than for fair wear and tear;

(b) actual contingent or expected liabilities of the Body Corporate other than normal operating expenses, the remedying or discharge of which exceeds the Body Corporate's funds plus 1% of the contract price;

(c) circumstances likely to substantially prejudice the buyer which relate to the affairs of the Body Corporate eg. records not being kept or not being available so as to allow proper searching by a buyer;

(d) exceptions to Clause 7.4(2) of the Standard Conditions.

The buyer can terminate for breach of any of these warranties, if appropriate and timely notice is given.

3. A Disclosure Statement:

This is a statement of information required to be given by the Seller to the Buyer. It must be substantially completed. The Buyer can terminate by appropriate and timely notice should there be-

(a) a failure to give this statement or failure to substantially complete it;

(b) inaccuracies if the Buyer would be substantially prejudiced thereby and they existed at the contract date. However for a proposed lot the seller can give a further Disclosure Statement upon becoming aware of inaccuracies;

(c) an inability to verify the contents of the statement despite reasonable efforts.

4. An Information Sheet entitled "Contract Warning":

This is consumer advice to the Buyer. If it is not given the Buyer can terminate. Note that it must be the first page of the Contract. All Contract pages are numbered and should remain in sequence.

As can be seen both Disclosures are imperative and precise documents containing information that may not be known to the Seller. In the majority of cases the Seller will have to search the Body Corporate Records to provide complete and accurate information for the Sale Contract. Relying on some Body Corporate secretaries will place the Seller and the sale at risk. The engagement of a Body Corporate specialist by the Seller at the time of listing may therefore be warranted.

From a Buyer's perspective to preserve the right to terminate, investigation of the Body Corporate must commence immediately upon signing the contract. Default in this respect may forfeit that right for the Buyer cannot await the result of a finance application before instructing a solicitor to commence such investigations.