Opinion: Unit Title changes on the way – here’s what you need to know

Love them or hate them, unit titles are bigger than ever and their presence in the property industry is only set to dominate in the future as demand for housing continues to soar and developable land increasingly becomes a rare commodity.     

The Unit Titles Act 2010 has been substantially amended by the Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Act 2020 (Amendment Act) with the final changes to be implemented on 9 May 2024.  We have identified some of the key changes which for those of you working in the property sector should be aware of.

Disclosure   

Purchasers of a unit title property can now elect to delay settlement or cancel an agreement if “complete and accurate” disclosure statements have not been provided by the vendor. Developers need to be aware of these new rights favouring purchasers particularly when it comes to securing finance for a project. To be a “qualifying pre-sale” for the purpose of development finance, any lender is likely to require evidence that all rights of the purchaser to delay or cancel have either been waived or have expired without being exercised.  This means that developers will need to be “on the ball” when it comes to producing and circulating accurate and complete disclosure statements to purchasers as soon as possible.  Developers should request waivers of the purchasers delay and cancellation rights once accurate and complete pre-contract and pre-settlement disclosure statements have been provided to “lock in” purchasers and to ensure no inadvertent breach of their finance arrangements.  

Long term maintenance plan/fund 

A unit title development consisting of 10 or more units is now described as a “large unit title development” and as such, from 9 May 2024, will be subject to additional requirements in respect of its long term maintenance plan and fund.  Long term maintenance plans for large unit title developments will need to be for a period of 30 years from the date of the plan (or the last review date of the plan) and be reviewed every three years (developments of 9 units or less will maintain a 10 year maintenance plan).  It’s likely that such additional requirements for a long term maintenance plan for large unit title developments will result in extra administrative duties on Body Corporates and those that manage them with an increase in costs in preparing such plans. The Body Corporate is required to consult with building professionals when preparing and reviewing the plan for a large unit title development, unless it decides not to by special resolution. Ultimately, this is likely to result in increased Body Corporate levies to cover such costs.   

Governance 

The Amendment Act introduces requirements for Body Corporates to remove the veil of secrecy over the workings of a unit title development. Records of minutes of body corporate committee meetings must now be kept (and provided to potential purchasers under the new disclosure regime); a new code of conduct has been introduced for all Body Corporate committee members and a duty for committee members to disclose any conflicts of interest; a requirement for the Body Corporate to maintain a conflicts register and the introduction of a statutory defined role of “body corporate manager”.  These requirements aim to promote transparency and greater accountability on Body Corporates, and are largely welcomed. Those Body Corporates that are already managed well should not find the additional requirements cumbersome. However, for those Body Corporates that do not have sufficient management in place, there will be an increase in answerability on the Body Corporate and the managing agents from the unit owners if it starts impacting on the quality of disclosure provided for a sale and the desirability of the units when on the market. 

The Consensus 

The policy intention behind the Amendment Act to bring under-performing developments up to par is no bad thing, but the costs of doing so are likely to fall on unit owners with increased levies to cover the additional administration involved.   The changes to the disclosure regime is intended to ensure that purchasers have clear visibility on how the Body Corporate operates by the provision of accurate and complete information.  Only time will tell on how well the Amendment Act will improve the management of unit title developments or whether its implementation will just lead to increased bureaucracy and steeper levies. It is however a step in the right direction, especially as unit title developments will have more of a dominant presence in the market in the future.