Buyer Information in community schemes

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Every buyer of a lot in a community titles scheme (which can be a community titles (building) scheme or a community titles (land) scheme) or proposed scheme in Western Australia (WA) should receive information about their lot and the scheme before they sign a contract (the offer and acceptance).

A buyer is buying into a community environment (a community scheme). A buyer will be buying a property in a community titles scheme that is one of many schemes in the community scheme.

The buyer will be buying a lot in a community titles scheme and with that lot comes shared ownership of common property in the community titles scheme and shared ownership of common property in the schemes to which the owner’s scheme belongs.

A buyer will have obligations to comply with the scheme by-laws for their scheme and the community titles schemes to which the buyer’s scheme belongs. A buyer will have a liability to pay contributions to the community corporation established for the community titles scheme in which the lot is located. Those contributions may include a proportion for the expenses of the community corporation of the community titles scheme to which it belongs.

It is very important that the right information is provided to a buyer before they buy a lot in a community titles scheme so that the buyer can understand the different rights and responsibilities associated with owning a lot in such a scheme and being part of the broader community scheme.

The seller must also give the buyer information about certain variations (changes) to their lot, the scheme and broader community scheme, should they happen after the buyer signs the contract and before settlement.

The buyer protection provisions in the proposed legislation aim to:

  • give the most relevant information to a buyer about the lot they are buying, the scheme that the lot is in and information about the broader community scheme
  • set out the information in a clear way
  • make sure the buyer knows where they can get more information
  • make sure the obligation on the seller to provide information is reasonable
  • clarify on what grounds a buyer can avoid the contract if the seller fails to provide the information to the buyer or provides it late.

Information the seller will need to provide

The seller must give the buyer the following information before the buyer signs a contract for purchase of a lot in a community titles scheme:

  • the name and address of the seller
  • if there is a community development statement in force for the community scheme, the community development statement
  • the scheme notice, scheme plan, scheme by-laws (including those not yet registered) and schedule of unit entitlements (scheme documents) for the community titles scheme
  • the name and address for service of each related community corporation either:
    • The minutes of the most recent annual general meeting and any extraordinary general meetings held since then or
    • a statement of why the seller has been unable to obtain the minutes
  • either:
    • the statement of accounts last prepared by the community corporation or
    • a statement of why the seller has been unable to obtain a statement of accounts
  • If the seller has received notice of a current termination proposal from the community corporation, a copy must be given to the buyer.

The seller must also give the buyer specific information about the lot before the buyer signs the contract, including:

  • the location of the lot on the scheme plan, or an extract from the scheme plan for the community titles scheme
  • the definition (boundaries) of the lot, as contained in the scheme plan
  • the unit entitlement of the lot and the sum of the unit entitlements of all the lots in the community titles scheme
  • if contributions have been determined by the community corporation within the previous 12 months, the amount and due date of the contributions payable by the lot owner
  • if contributions have not been so determined, a reasonable estimate of the amount of the contributions likely to be payable for the 12 months following the proposed settlement date
  • details of any debt owed by the owner of the lot to the community corporation including how the debt arose, the date on which it arose and the amount outstanding
  • details of any exclusive use by-laws that apply to the lot.

Before the buyer signs the contract the seller must also give the buyer:

  • details of the terms and conditions of any lease, licence, right of exclusive use and enjoyment or special privilege (or proposed lease, licence, right of exclusive use and enjoyment or special privilege) over common property in the community titles scheme or any related community titles scheme in the community scheme and
  • any other information required by the regulations.

If the lot has not yet been created, the information which is required is:

  • the latest version of the draft community development statement, amendment of the community development statement, scheme document or amendment of scheme document, relevant to the lot proposed to be created
  • a reasonable estimate of unit entitlement of the lot or contributions payable which are relevant to the lot as proposed.

Information to be given where the seller is the original subdivision owner

Where the seller is the original subdivision owner the seller has extra information requirements in any of the following circumstances:

  • the community titles scheme has not been registered
  • the first annual general meeting of the community corporation has not been held
  • the original subdivision owner owns lots in the community titles scheme with an aggregate relative unit entitlement of 50% or more, the relative unit entitlement of a tier parcel in the community titles scheme is 50% or more and the original subdivision owner owns lots in the community titles scheme of that tier parcel with an aggregate relative unit entitlement of 50% or more
  • the original subdivision owner otherwise controls 50% or more of the voting power of members of the community corporation.

If the above circumstances apply and the original subdivision owner is the seller, the buyer must be given all of the following additional information:

  • a statement of the estimated income and expenditure of the strata company for the 12 months after the proposed settlement date
  • details of any disclosure that the original subdivision owner has to make to the community corporation, (in relation to remuneration or other benefit arising from a contract, lease or licence entered into)
  • details of any existing or proposed contract for the provision of services or amenities to the community corporation or its members, entered into or arranged by the original subdivision owner or by the community corporation, including its terms and conditions and the consideration and the estimated costs to the members of the community corporation.

In all cases, the seller must comply by giving the buyer a notice in the approved form or by including the information and statements in the contract to be signed by the buyer in the manner set out in the regulations.

In any court or tribunal proceedings connected with a contract for the sale and purchase of a lot, it is the seller who must prove that the required information was given.

Disclosure forms

Changes to the format of the disclosure forms

New disclosure forms will be developed for community title schemes. The new disclosure forms will be clearly set out, easy to read, and will give the buyer some guidance on relevant issues they might want to consider.

The seller will be able to give the buyer the information electronically

The seller will be able to provide the disclosure electronically as long as:

  • the seller and buyer both agree to that method of providing the information
  • the buyer gives the seller an electronic address to send the information to
  • the buyer provides some acknowledgement that they have received the information.

The seller will still have to prove what and when disclosures were sent to the buyer and keep records of the disclosures they provide electronically.

Notifying buyers of certain variations before settlement

What are notifiable variations?

After the buyer has signed a contract for the sale and purchase of a lot in a community titles scheme, if certain changes (variations) occur, the seller has to give the buyer particulars of the variation by notice in writing.

Notifiable variations will be made up of two classes: Type 1 and Type 2 notifiable variations.

Type 1 Variation

A type 1 notifiable variation means any of the following that occur after a contract for the sale and purchase of a lot in a community titles scheme is entered into but before the settlement date for the contract:

  • the area or size of the lot or proposed lot is reduced by 5% or more from the area or size notified to the buyer before the buyer entered into the contract
  • the relative unit entitlement, or a reasonable estimate of the relative unit entitlement, of the lot is increased by 5% or more, or decreased by 5% or more, from the relative unit entitlement, or the estimate of the relative unit entitlement, of the lot notified to the buyer before the buyer entered into the contract
  • anything relating to a proposal for the termination of the community titles scheme is served on the seller by the community corporation
  • any other event classified by the regulations as a type 1 notifiable variation.
Type 2 Variation

A type 2 notifiable variation means any of the following that occur after a contract for the sale and purchase of a lot in a community titles scheme is entered into but before the settlement date for the contract and that do not give rise to a type 1 notifiable variation:

  • the community development statement or proposed community development statement or amendment of the community development statement is modified

- the scheme plan, or proposed scheme plan or amendment of the scheme plan, for the scheme or a community titles scheme to which the scheme belongs is modified in a way that affects the lot or the common property in which the owner of the lot has an undivided share

  • the schedule of unit entitlements, or proposed schedule of unit entitlements or amendment of the schedule of unit entitlements, for the scheme is modified in a way that affects the lot
  • the scheme by-laws, or proposed scheme by-laws for the scheme or a community titles scheme to which the scheme belongs, are modified
  • the community corporation or original subdivision owner for the subdivision by which the lot is created:

- enters into a contract for the provision of services or amenities to the community corporation or to members of the community corporation or a contract that is otherwise likely to affect the rights of the buyer or

- varies an existing contract of that kind in a way that is likely to affect the rights of the buyer

  • a lease, licence, right or privilege over the common property in the community titles scheme or a community titles scheme to which the scheme belongs is granted or varied
  • any other event classified by the regulations as a type 2 notifiable variation.

The seller must give the buyer sufficient information about a notifiable variation

The seller must give the buyer particulars of the notifiable variation, that a reasonable person would consider sufficient to enable the buyer to make an adequately informed assessment as to whether the buyer is materially prejudiced by the notifiable variation.  In doing this the seller must:

  • give the buyer the notice in writing about the variation: as soon as practicable, if the seller becomes aware of it less than 15 working days before the settlement date
  • not later than 10 working days after becoming aware it, in any other case.

If a court or tribunal proceeding arises in relation to a notifiable variation which happens after the contract is signed, it is the seller who has to prove that proper notice in writing was given to the buyer.

Notifiable variations listed in the contract

The seller is not obliged to provide a written notice of a notifiable variation to the buyer:

  • where the contract has included proposed action or a matter that would be a notifiable variation
  • the action or matter when completed does not differ from that described in the contract
  • the seller has given written notice to the buyer of completion of the action or matter with particulars that a reasonable person would consider sufficient to enable the buyer to make an adequately informed assessment as to whether the action or matter as completed differs from that described in the contract.

The seller must give the notice of completion of the action or matter under the contract to the buyer as soon as practicable, if the seller becomes aware of completion of the action or matter less than 15 days before the settlement date for the contract and in any other case, not later than 10 working days after the seller becomes aware of completion of the action or matter.

Delay in settlement

A buyer may, by written notice to the seller, postpone the settlement date by no more than 15 working days after the latest date on which the seller complies with their disclosure obligations in respect of information to be provided before the buyer signs the contract and notifiable variations after the buyer signs the contract.

When does a buyer have the right to avoid a contract?

Avoidance for failure to give the pre-contractual information to the buyer

If the seller fails to give the buyer the information required to be given prior to the contract being signed and if the seller were to comply and the buyer would receive information that would disclose material prejudice to the buyer (proof of which lies on the buyer) the buyer may avoid the contract.

Avoidance arising from notifiable variations

If the seller gives the buyer the pre-contractual information after the contract is signed (ie: later than the seller was required to do), then the buyer must decide within 15 working days of receiving that late notice if they want to avoid the contract and the buyer will also have to prove that they have suffered material prejudice.

  • If seller gives the buyer notice (of the notifiable variation) within the time required (not later than 10 working days after becoming aware of the notifiable variation or if the seller becomes aware of the notifiable variation less than 15 working days before settlement, as soon as practicable):

- for both type 1 & type 2 notifiable variation avoidance then the buyer may avoid the contract within 15 working days of notification provided the buyer:

  1. has not already agreed to the notifiable variation in the contract
  2. the buyer is materially prejudiced by the notifiable variation (proof of which is on the buyer)
  3. If notice of the notifiable variation has not been given by the seller to the buyer:

- for a type 1 variation avoidance the buyer may avoid the contract at any time before settlement (no need to prove material prejudice)

- for a type 2 variation avoidance the buyer may avoid the contract any time before settlement if the seller were to comply with their disclosure obligation and the buyer would receive information or a document that would disclose material prejudice to the buyer

  • If notice of the notifiable variation is given late:

- For a type 1 variation avoidance the buyer may avoid the contract within 15 working days of receiving notice

- For a type 2 variation avoidance the buyer may avoid the contract within 15 working days of receiving notice, provided buyer is materially prejudiced by the notifiable variation.

Buyer’s obligations when avoiding a contract

The buyer’s notice of avoidance of a contract for the sale and purchase of a lot must be given in writing to the seller and specify the grounds on which the contract is avoided, including details of the material prejudice to the buyer, where that is required as grounds for avoidance.

Buying off-the-plan: Deposits

Where a buyer is entering into a contract for the sale and purchase of a lot in a community titles scheme before the lot is created on registration of the scheme or an amendment of the scheme the contract must:

  • require any deposit or other amount payable by the buyer prior to registration of the scheme or scheme amendment to be paid to an Australian legal practitioner, real estate agent or settlement agent to be held on trust for the buyer until the scheme is registered
  • specify the practitioner, or agent to whom payment is to be made and how payment is to be made.

The buyer may avoid the contract at any time before registration of the scheme or amendment if the contract does not comply with the above requirements or the lot is not created within a period after the date of the contract agreed in writing by the buyer and seller or in the absence of such agreement, within 6 months after such date.

Effect of avoidance of contract

On the avoidance of a contract under the proposed buyer protection provisions the buyer may recover from the seller as a debt all money paid by the buyer under the contract and a person holding a deposit or other amount on behalf of the buyer must repay the deposit or other amount to the buyer minus any amount due to the seller as rent during any period which the buyer was in occupation of the lot or entitled to receive rents and profits of the lot.

Contracting out of the proposed buyer protection provisions is prohibited and any purported waiver of a right, remedy or benefit conferred on the buyer under the proposed buyer protection provisions is of no effect.

Getting information from the community corporation

A person with a proper interest in information about a community titles scheme may apply in writing to the community corporation:

  • for information that is contained in the scheme contacts register maintained by the community corporation
  • inspection of information and records that the community corporation must keep and other documents in the possession or control of the community corporation
  • a certificate concerning specified matters.  A community corporation may charge a fee for the application and any fee must not exceed an amount fixed by the regulations.

A community corporation may, but will not be obliged, to provide a copy of any material requested by the person with a proper interest in the information and may charge a fee for the copy of an amount not exceeding an amount fixed by the regulations.

Who is a person with a proper interest in formation?

A person has a proper interest in information about a community titles scheme if the person is –

  1. a member of the community corporation for the community titles scheme
  2. a related community corporation or a member of a related community corporation
  3. a buyer who has entered into a contract for the sale and purchase of a lot in a community titles scheme or related community titles scheme
  4. a mortgagee of a lot in the community titles scheme or a related community titles scheme
  5. a person of a class specified in the regulations.

Access to legally privileged documents

A community corporation must keep certain records, but some of these records may include privileged legal advice to the community corporation. The community corporation will not be required to give or certify any information that is the subject of legal professional privilege or make available a document or part of a document if that would disclose information that is the subject of legal professional privilege.

Defence for providing access to information containing defamatory material

It will be a defence to an action for defamation if the defendant proves that defamatory matter was contained in information or a document that the community corporation is required to keep, make available for inspection and/or provide and the publication consisted of giving or certifying the information or making a document available in accordance with the community corporation’s information obligations.


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Disclaimer

This information has been prepared for the purposes of informing stakeholders and the community on the nature and scope of the proposed reforms to the legislation relating to strata title. Every effort has been made to ensure the information presented is accurate at the time of publication. Because this information avoids the use of legal language, information about the law may have been summarised or expressed in general statements. This information should not be relied upon as a substitute for professional legal advice or reference to the actual or proposed legislation. The contents should not be relied on as a guide for current or future legislation relating to strata title or community title in Western Australia or in relation to current or future subdivision or development proposals, commercial transactions or dealings in strata title.

This page was last updated on: 19 Jul 2018