It’s amazing how many apartment complexes have sprung up around Brisbane over the past few years! Here’s a few key things to remember for those looking to get into the game.
1. The Legislation
Like all good things in life, property is governed by an ungodly amount of legislation. For developers selling “off the plan” (selling an apartment before it’s built), the most important of these is the Body Corporate and Community Management Act 1997 QLD (‘BCCMA’). This Act covers, amongst other things, your requirements to potential buyers.
2. Contracts and Disclosure Documents
You’re going to have to plan your developments carefully. This will require a number of consultants, which is good news for everybody except the person picking up the bill (i.e. you). One area you need to pay close attention to is the disclosure documents, which tell the buyer all the relevant facts about the property.
Why’s this so important? Simple — if you don’t comply with the BCCMA, your buyer can terminate the contract at any time up until settlement. Since reaching settlement can take many months or even years, you could be faced with a very long stretch of uncertainty.
Your disclosure statement should include the following:
(i) Identification of the proposed lot and disclosure plan;
(ii) Annual contributions payable to body corporate for each proposed lot; and
(iii) Proposed community management statement including by-laws.
The disclosure plan must be prepared by a surveyor and show details such as the number of the lot, area, dimensions and boundaries and proposed orientation. These can be prepared by a surveyor based on the architect’s drawings.
The annual contributions are generally set out in a set of budgets and table of levies for each lot and are prepared by a strata manager. The strata manager will consider the facilities and layout of the complex and can be of great assistance in the up-front structuring of the development.
As for the community management statement, that job usually falls to your solicitor. They’ll work in conjunction with your strata manager to calculate lot entitlements and figure out the necessary by-laws.
3. Updating Your Disclosure Documents
So you’ve written a disclosure statement, included all the relevant information, and you’re just about ready to sign when… you have to change your lot dimensions. As it turns out, there’s an obscure law preventing you from building on land that could be used for the purposes of goat feeding.
If the information in your disclosure statement becomes inaccurate, you have to provide your buyer with a “further statement” at least a month before settlement. In this statement, you should rectify any inaccuracies, update the details of the property, and rail against the inadequacies of goat-based legislation. Any changes you make need to be double checked and approved by a surveyor.
Unfortunately, every time you make a further disclosure, you create some risk for yourself. If a buyer has been “materially prejudiced” by a change in the information you provided them, they may be able to pull out of the purchase. This is why you should be as thorough as you can when making your initial disclosures.
4. The Body Corporate
When you subdivide and register land as a community titles scheme, this creates a Body Corporate. Anybody involved in the community titles scheme automatically becomes a member of the Body Corporate. Developers need to make sure that they set up a Body Corporate promptly upon completion of construction.
Bear in mind that, while you still retain control of the votes on a body corporate, you do need to consider issues like pets, communal areas and the use of car parks. This should be done in accordance with your disclosures to potential buyers — yet another reason for careful planning.
Management rights comprise the business of providing caretaking and letting services within a community titles scheme. Depending on the size and nature of the project, there may be a viable management rights business that can be marketed to a manager who will reside on-site.
The developer will need to ensure that they arrange for the Body Corporate to enter into the necessary caretaking and letting agreements, including office and storage areas if appropriate, while it still retains voting control. Again, these agreements must be disclosed to all buyers of lots in the project to avoid claims of material prejudice and termination of contracts.
It’s important that developers carefully consider and plan all aspects of their project, especially where it comes to consultants and management. These will really minimise issues further down the track.
If you would like advice regarding a potential development, please do not hesitate to contact our property lawyers.