What To Disclose When Selling A Unit

what to disclose when selling a unitIf there’s been a grisly murder or a suicide in an apartment, do you need to disclose that to potential purchasers?

David Airey wrote on this subject in the Property Observer today talking about stigmatised history of a property.

It’s kind of disturbing that this happens so often that there’s actually a name for it. When a property is stigmatised there has been an “Event” of some description that might impact on some purchasers willingness to purchase the property. Airey notes

Such properties are known as ‘stigmatised houses’, and agents are obliged to be transparent with potential clients. If an agent knows that a house has been stigmatised then it is incumbent on them to advise the client, prior to a sale or leasing contract. The stigmatization does not need to be noted in the marketing for the property but raised with clients if a deal is to be struck.

What to disclose when selling a unit

Section 216 of the BCCM Act 1997 notes that the Seller warrants to the Buyer that the property is free from defects other than those that are included in the contract, which simply means that if there’s a problem in the common property of a body corporate and that fact is not disclosed to the Buyer they may void the contract.

All that’s required to circumvent the section is to disclose that the defects are there, which is the purpose of a section 206 disclosure statement with Implied Warranties.

But does that relate to a stigmatising event? Should that be disclosed in the contract?

Each circumstance is individual of course, however I doubt I would include a stigmatising event. The function of section 216 is to prevent Buyers being lumbered with property that’s clearly not fit to be used without their express consent. That someone’s died is not going to impact on the usability of the infrastructure.

A body corporate records search, which is a search undertaken on behalf of the Buyer, would definitely report any and all stigmatising events. That’s it’s function.

A disclosure statement with implied warranties however is about fulfilling the Sellers legal requirements, and as little as need be reported the better for the Seller.

That said, it does not absolve the real estate agent, or owner is self acting, from disclosing an event to the purchaser.

And of course it would definitely depend on individual circumstances. In the past I’ve seen several fatal incidents where people have fallen from balconies and expired on common property. That I would not disclose in a disclosure, but certainly in a pre-purchase strata report.

That said I have seen several instances of drug labs in lots within body corporates, which I would likely disclose notwithstanding the incident doesn’t relate to common property. Drug labs have devastating impacts on buildings and its unlikely to be successfully contained within a lot only.

What to disclosure when selling a unit has more implications than those with a house because along with the lot the Buyer will also be buying a share of the common property. Reporting on the common property is as important as the lot itself.

THE BASICS OF BODY CORPORATES

A little knowledge can go a long way


I see so many stressful and frustrating issues in body corporate records that result from simple misunderstandings it hurts my head. If I could do one thing to help it would be to teach everyone the basic rules, so they can avoid all these dramas.


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Comments

  1. I was sold a unit which had existing damp and moisture problems 6 years ago. The people who sold the property to me knew there were problems evidenced by the repairs only just revealed to me by a recent building inspection (must add building inspection before purchasing denied any problems) The previous did not disclose any problems. Major structural problems now exist due to ineffective strata management. Does anyone have any suggestions as to where I stand. Does the previous owner or real estate agent have any responsibility?

    • Hi Maryanne

      That’s terrible. I feel for you.

      Most real estate transactions are completed caveat emptor, or buyer beware. The onus to undertake due diligence investigations prior to settling the contract falls to the buyer. The disclosure provisions of the BCCM Act allow the contract to be cancelled if problems are identified before it settles but it rather presupposes the issues are identified.

      You’d need advice from a lawyer about what happens if the issues arise after settlement. Try posing your question on the Lookupstrata.com.au website or flat chat forum (easily found on google). Either or both may be able to crowd source an answer for you.

      If you find an answer please do let me know, I’d be interested to hear.

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