Purchasing a Townhouse or Unit?

It is certainly a good idea to engage a law/conveyancing firm when purchasing a townhouse or unit, as the surrounding law can be complex and additional considerations are required within the conveyancing process.The Body Corporate: Where a group of owners share facilities including having their lot contained in a building with other owners then a Body Corporate is set up to manage the situation. The Body Corporate is like a company with the individual lot owners being the shareholders. The owners hold powers and duties in relation to the entire building and land where the townhouse or unit is situated. Their duties include ensuring the building is insured and maintained, and their powers include imposing levies on individual lot owners.

Strata Title

Strata Title is the NSW term for a body corporate set up and people use the term in Queensland when asking if the apartment is part of a body corporate or just part of the one lot. If there is no body corporate then we refer to the apartment as a flat which cannot be separately owned from the other apartments in the building.

Common areas

The owners of the various lots share the common areas of the complex together, which may include:

  • Swimming pool
  • Lifts
  • Carparks
  • Lawns and gardens
  • Stairways

By-laws

When a body corporate is set up there is a community management statement (like a company constitution) which contains various by-laws to regulate the body corporate and the individual lot owners. The body corporate has the power to amend or add to these by-laws. By-laws generally regulate:

  • Parking
  • Noise control
  • Appearance of the lot
  • The keeping of pets
  • Damage to lawns or common property
  • Rubbish disposal
  • Behaviour of invitees

Disclosure statement (when selling)

The seller must provide the buyer with a disclosure statement. The statement must include:

  • Amount of annual contributions payable by the owner of the lot
  • Any improvements they have made on the lot
  • Any other information required by the law
  • Additional searches
    • Buyer conducts additional searches (ideally before the contract is signed) – including Body Corporate Records, Community Management Statement, and Body Corporate Information Certificate;
  • Body Corporate Records
    • Confirms sellers name is properly recorded on roll, checks for any by-laws changes and makes sure there are no problems with complex or operation of the body corporate.
  • Community Management Statement
    • This will include a description of land, name of the scheme, name of the body corporate and the by-laws etc.
  • Body Corporate Information Certificate
    • Includes information about the levy contributions to the administrative and sinking funds.
  • Implied warranties
    • The law does provide for a number of warrants to be implied into the contract for the sale of the lot that give the purchaser a right to cancel the contract for a breach of warranty. These apply regardless of anything else written in the contract.

Levies

As stated, lot owners must contribute for expenses, in the form of levies imposed by the body corporate. There are two main funds established:

  • Administrative fund (for day-to-day (or annual) running costs)
  • Sinking fund (for more substantial requirements needed on a periodic basis, such as replacing a roof or painting the common areas)