Buying a unit in a unit title development

Buying into a unit title development is different to buying a stand-alone house. As a unit owner you have different rights and responsibilities and there is some shared property you have an interest in.

The Unit Titles Act 2010 sets out important rules about the disclosure of information between buyers and sellers of a unit in a development. It is important that intending unit owners know of their rights to request the seller disclose information and how this can affect the sale and purchase agreement.

This information sheet outlines some of the additional requirements when purchasing a unit in a unit title development, which are set out in the Unit Titles Act 2010 and Unit Title regulations 2011. It is not intended as an exhaustive guide, and does not cover many of the other important factors which are relevant to the decision to purchase.

The Department of Building and Housing strongly advises you to obtain independent legal advice before signing an agreement for sale and purchase.

What am I buying?

Owning a unit title means you own a principal unit (such as an apartment or townhouse) and any accessory units that come with the principal unit (such as a carpark or basement storage space). Ownership of those units may be freehold, leasehold or through a licence.

In addition, you may also share ownership of common property in the development with the other owners (such as lifts, gardens, swimming pools or gyms). The common property is owned by the body corporate on behalf of all unit owners, who are responsible for paying for its maintenance and upkeep. These contributions from unit owners are levied by the body corporate.

For more information on ownership, see the online publication ‘Quick guide to unit title developments’.

What is a body corporate?

The body corporate for a unit title development is made up of all the unit owners. Every new owner automatically becomes a member of the body corporate.

The body corporate is responsible for a range of administrative tasks, including:

• managing, maintaining and repairing the common property, common building elements and infrastructure
• establishing and maintaining a long-term maintenance plan
• keeping and maintaining a register of all unit owners
• calling general meetings of the body corporate
• keeping accurate accounting records
• taking out insurance that covers the building or buildings that make up the development (unless the units are stand-alone, and the body corporate has passed a special resolution requiring all owners to insure their own units)
• levying contributions on owners to fund the operation of the body corporate
• providing body corporate documents; such as financial statements, meeting minutes and insurance details; to unit owners
• making and enforcing the body corporate operational rules.

For more information, see the information sheet ‘The Body Corporate: An Introduction’.

What information does the seller have to disclose?

The seller of a unit has to give intending unit owners three sets of information. These are:

• pre-contract disclosure statement, which the seller provides before entering into an agreement for sale and purchase
• pre-settlement disclosure statement, which the seller provides after entering the agreement for sale and purchase but before settlement of the sale
• additional disclosure statement, which the seller provides on request of the buyer.

The purpose of the disclosure statements is to provide potential buyers of unit title properties access to information that can help inform their decision.

Disclosure will also make buyers aware of their rights and responsibilities, what the body corporate does, who is responsible for running the development and how well the development is doing financially.

Before you enter into a sale and purchase agreement

Before entering into a sale and purchase agreement for a unit, the seller must provide a pre-contract disclosure statement to the buyer.

The purpose of the pre-contract disclosure is to make prospective buyers aware of what information is available to help them make an informed and confident decision about the purchase, as well as to
provide some basic details on the unit and development.

The pre-contract disclosure statement contains general information about unit title ownership, as well as specific details such as the amount of the levy for the unit, upcoming maintenance to the
development, funds held by the body corporate, and whether the unit or common property has had any weathertightness problems.

A pre-contract disclosure statement template is available on our website at http://www.dbh.govt.nz/unit-titles-templates.

Additional disclosure

At any stage before or after entering into a sale and purchase agreement the potential buyer can also request the seller give them an additional disclosure statement.

The purpose of the additional disclosure statement is to make body corporate records on maintenance, finances, insurance, contracting and governance accessible for those that want them. Because this information could affect your decision to buy the unit, you should consider asking for additional disclosure before signing a sale and purchase agreement. 

A buyer can request an additional disclosure statement at any time before the earlier of the close of:

(a) the fifth working day after the date the agreement for sale and purchase was entered; or
(b) the tenth working day before the settlement date.

If a buyer makes a request, the seller must provide the additional disclosure statement to the buyer within 5 working days of receiving the request.

The buyer must pay to the seller all reasonable costs incurred by the seller in providing the additional disclosure statement, but the non-payment of these costs does not justify the seller withholding disclosure. The estimated cost of the additional disclosure statement will be noted on the pre-contract disclosure statement.

After you enter into a sale and purchase agreement

If a buyer and a seller have entered into an agreement for sale and purchase, the seller must provide a pre-settlement disclosure statement to the buyer no later that the fifth working day before the
settlement date.

The purpose of the pre-settlement disclosure statement is to give the buyer a summary of the current fees and charges relating to the unit, whether there are any proceedings pending against the body
corporate and whether there have been any changes to the body corporate operational rules.

If there are any body corporate levies or charges owing against the unit, you should demand that these be fully paid (including any interest owing) before you settle, or that the full amount of the debt is offset against the purchase price of the unit. Once you are the owner of the unit, you may become responsible to the body corporate to pay these levies.

The pre-settlement disclosure statement must contain or be accompanied by a certificate given by the body corporate certifying that the information in the statement is correct.

A body corporate may withhold this certificate if any debt that is due to the body corporate by the unit owner is unpaid.

Do you understand what you are committing to?

When you are considering buying any property, you should find out certain important information about it, for example whether are any easements or other interests recorded on the computer register (certificate of title) for the property.

When the property is a unit in a unit title development, you should also make sure you understand the extra obligations under the Unit Titles Act 2010, and obtain further relevant information about the unit, the body corporate and the development, before you commit to buying. Your lawyer or legal advisor can help you with this process.

While not a comprehensive list, here are some questions for you to consider:

• By buying this unit, do you know what responsibilities you will have as a member of the body corporate?
• Have you read and understood the body corporate rules and how they apply to you?
• Do you understand your likely financial contributions to the body corporate?
• Do you understand your maintenance responsibilities?
• Have you confirmed there are no unpaid body corporate fees, outstanding adjudicator’s orders or defects in either the common property or the unit?
• Are you aware of any contracts the body corporate has entered into?
• Have you read and understood the pre-contract disclosure statement?
• Do you have a copy of the body corporate’s insurance policy and is it current?
• Do you understand the role of the body corporate chairperson and on-site manager (if applicable)?

If you are not comfortable with your answers to any of these questions you may be able to get more information by requesting one or more of the disclosure statements available to you from the seller of
the unit. The seller may also be required to provide other information under the agreement for sale and purchase of the unit.

In addition there are a range of information sheets and advice available from the Department of Building and Housing that may help you answer any questions you have about unit title developments.

Where can I find more information?

For Unit Titles advice and information call 0800 UNIT TITLE (0800 86 48 84), visit our website www.dbh.govt.nz or email us at info@dbh.govt.nz