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Buying an Apartment - What you need to know

Aug. 2020

There are more and more apartments for sale in Auckland but it's not quite like buying a standalone home. A buyer needs to be much more vigilant and investigate in a lot more detail.

As a matter of law (under the Unit Titles Act) the seller must make formal disclosure pre-contract to the purchaser and also again pre-settlement. The important disclosure is pre-contract. What must be in the disclosure is set out in the UTA and is meant to enable the buyer to make an informed decision before committing to contract.

The pre-contract disclosure requirements include:

  • Details of any maintenance the Body Corporate (the committee that runs the apartment complex) plans to carry out in the next year, and how those costs will be met – usually by levy on the individual owners.
  • Whether or not there is court action relating to water penetration that affects the unit or the common property within the complex.
  • Body Corporate levies.

While this is fairly comprehensive, there are some omissions.

There's no mention of any general litigation which doesn't relate to water penetration. In the pre-settlement disclosure, there's a requirement to disclose proceedings pending against the Body Corporate, but it's too late by then since you've already committed.

There's no requirement to provide either Body Corporate or Body Corporate committee meeting minutes. If there is an issue with apartments, it could be disclosed either at a general meeting or at committee. So, you need to read Body Corporate meeting minutes and also committee meeting minutes, perhaps for as long as a five-year period before purchase.

The deficiency in pre-contract disclosure in regards to general litigation is, to some extent, made up for by the warranties in the Sale and Purchase Agreement where the seller warrants there are no unsatisfied judgments or no proceedings instituted against the Body Corporate or that they have no knowledge of the Body Corporate incurring any liability.

The big picture though is that most of the time you need to dig a little deeper to get the correct information from the Vendor/Body Corporate, as there's a natural tendency for a vendor to want to hide information that might be detrimental to the sale. Two precautions you can take are:

  • Include a general due diligence condition clause so you can do your own digging without being committed, and;
  • Withhold payment of any deposit until the condition has been satisfied.

The best advice is: consult your lawyer before signing anything!

Written by Blair Franklin (Property & Commercial Partner) with input from Brian Somervell (Property & Commercial Partner)