What is a Pre Contract Disclosure or Form 18?
Pre Contract Disclosure Statement aka Form 18
When selling a property such as an apartment or town house in a body corporate, the updated Unit Title Act 2010 implemented disclosure rules for vendors & agents when selling a unit title property. It’s now a requirement for vendors to provide prospective purchasers with a “pre-contract disclosure” aka “Form 18” upon viewing the property prior to making an offer. This falls under section 147 of the Act.
This provides the purchaser with more detailed info regarding the financial position of the body corporate as well as any upcoming maintenance or possible weather tightness issues in the past. Typically purchasers will also ask for copies of previous AGM and EGM meeting minutes to assist in their due diligence if they’re seriously interested in a property. If you’re dealing with an organised agent they will have all this info ready to send in electronic form to those that want to get started on their due diligence quickly.
Section 146 of the Unit Titles Act
146 Pre-contract disclosure to prospective buyer
- Before a buyer enters into an agreement for sale and purchase of a unit the seller must provide a disclosure statement (apre-contract disclosure statement) to the buyer.
- The pre-contract disclosure statement must be in the prescribed form and contain the prescribed information.
Once a property has been sold, the vendor will also need to provide the purchaser with a “pre-settlement disclosure” which is very similar.
The key points that you will find on a Pre Contract Disclosure Statement (PCDS) or Form 18 are;
The amount of the contribution levied by the body corporate under section 121 of the Unit Titles Act 2010 in respect of the unit. ie: How much is the body corporate levy for this particular unit you’re looking at?
The period covered by the contribution. If the period outlined does not fall within the current financial year this is usually because there is an AGM scheduled in the new future to vote through the new budget for the next financial year, or you have an out of date disclosure document.
- How much the body corporate proposes to levy in the current financial period and when the levy for the next financial year will be decided upon. Typically this will always be the next AGM. If the levy is to be paid in instalments this will also be detailed.
- Any planned maintenance for the current period. This will be a summary of any items due in the Long Term Maintenance Plan (LTMP) and anything else that the body corporate may have decided to add. This could be special projects to add cosmetic value or more major items. If you’re conducting your due diligence on an apartment as a buyer you may want to request a copy of the LTMP as well. It is a legal requirement for these to be budgeted for in a unit title development, larger developments run by 3rd party administrators are generally very good with. With smaller body corporates the are administered by owners themselves it will pay to check this is up to date and budgeted for correctly for piece of mind.
- Details of bank accounts held by the body corporate. Financial statements should also be attached to the PCDS.
- The cost of an additional disclosure statement from the body corporate.
- Whether or not the unit or the common property in the unit title development has ever been the subject of a claim under the Weathertight Homes Resolution Act 2006 or any other civil proceedings relating to water penetration.
General information found on the first pages of every PCDS / Form 18
The following section contains a brief explanation of important matters relevant to the purchase of a unit in a unit title development. You should read and understand the information contained in this section and this statement before signing a contract to buy a unit in a unit title development.
Further information on buying, selling a unit and living in a unit title development can be obtained by:
- reading the publication “A quick guide to unit title developments”, which is available on the Department of Building and Housing’s website: www.dbh.govt.nz/unit-titles
- contacting the Department of Building and Housing contact centre can answer questions on unit titles: 0800 UNIT TITLES
You are strongly advised to obtain independent legal advice regarding any questions or concerns you have about purchasing a unit or your prospective rights and obligations as a member of a body corporate.
Unit title property ownership. Unit titles are a common form of multi-unit property ownership. They allow owners to privately own an area of land or part of a building and share common property with other unit owners. Unit title developments may also be structured in varied ways including staged unit title developments and layered unit title developments.
This combination of individual and shared ownership of land and buildings, often in an intensive built environment, means owning a unit title involves a different set of rights and responsibilities than traditional house and land ownership.
Unit title developments have a body corporate management structure to ensure decisions affecting the development can be made jointly by the unit owners. The creation and management of unit title developments is governed by the Unit Titles Act 2010 and supporting regulations.
Unit plan. Every unit title development has a unit plan, which shows the location of the principal units as well as any accessory units and common property in the development. The unit plan is the formal record of all of the boundaries of the units, and the common property.
Ownership and utility interests. Each unit is allocated an ownership interest and a utility interest and such interests are relevant to the determination of many of the unit owner’s rights and responsibilities under the Unit Titles Act 2010.
Ownership interest is a number that reflects the relative value of each unit to the other units in the development, and is used to determine a range of matters including the unit owners’ beneficial share in the common property, and share in the underlying land if the unit plan is cancelled.
By default, the utility interest of a unit is the same as the ownership interest (unless it is otherwise specified on the deposit of the unit plan or subsequently changed), and is used to calculate how much each owner contributes to the operational costs of the body corporate.
Body corporate operational rules. The body corporate for a unit title development can make its own operational rules on the use of the development, and governance of the body corporate. These operational rules are subject to the provisions of the Unit Titles Act 2010 and regulations made under that Act.
All unit owners, occupiers, tenants and the body corporate must follow the body corporate operational rules that apply to their unit title development.
Transitional provisions for unit title developments created before the Unit Titles Act 2010 came into effect on 20 June 2011 apply to the body corporate rules in place at that time.
Pre-settlement disclosure statement. Before settlement of the sale of a unit, the seller must provide a pre-settlement disclosure statement to the purchaser, which includes information on:
- the unit number and body corporate number
- the amount of the contribution levied by the body corporate for that unit
- the period covered by the contribution
- how the levy is to be paid
- the date on or before which the levy must be paid
- whether any amount of the levy is currently unpaid and, if so, how much
- whether legal proceedings have commenced in respect of any unpaid levy
- whether any metered charges (eg, for water) are unpaid and, if so, how much
- whether any costs relating to repairs to building elements or infrastructure contained in the unit are unpaid and, if so, how much
- the rate of interest accruing on any unpaid amounts
- whether there are any legal proceedings pending against the body corporate
- whether there have been any changes to the body corporate rules.
There are legal consequences on the seller for failing to provide the pre-settlement disclosure in the timeframes required by the Unit Titles Act 2010 including delay of settlement and cancellation of the contract.
Additional disclosure statement. The buyer of a unit can request an additional disclosure statement at any time before whichever of these dates occurs first:
- the close of the fifth working day after they enter into the sale and purchase agreement
- the close of the tenth working day before settlement of the unit.
The seller has five working days to provide the additional disclosure statement.
The additional disclosure statement contains more information about the unit title development and the operation of the body corporate. It must include:
- contact details of the body corporate and committee (if there is one)
- the balance of every fund or bank account held by the body corporate at the date of the last financial statement
- amounts due to be paid by the body corporate
- details of regular expenses that are incurred once a year
- amounts owed to the body corporate
- details of every current insurance policy held by the body corporate
- details of every current contract entered into by the body corporate
- information about any lease of the underlying land (if the development is leasehold)
- the text of motions voted on at the last general meeting, and whether those motions were passed
- any changes to the default body corporate operational rules
- a summary of the long-term maintenance plan.
The seller may require the buyer to meet the reasonable cost of providing the additional disclosure statement. An estimate of that cost is set out in paragraph 9 below.
There are legal consequences on the seller for failing to provide the additional disclosure in the timeframes required by the Unit Titles Act 2010 including delay of settlement and cancellation of the contract.
Computer register. Previously known as a certificate of title, for a unit title development this document records the ownership of a unit, contains a legal description of the unit boundaries and records any legal interest which is registered against the title to the unit (for example a mortgage or easement). A copy of the computer register for a unit should come with:
- the unit plan attached. Unit title plans were discussed earlier in this section.
- a supplementary record sheet attached. A supplementary record sheet records the ownership of the common property, any legal interests registered against the common property or base land, and other information such as the address for service of the body corporate and the body corporate operational rules.
The common property in a unit title development does not have a computer register.
Land Information Memorandum. A land information memorandum (LIM) is a report which provides information held by the local council about a particular property. You must order and pay for a LIM from the applicable local council. Delivery times vary between councils. The information contained in a LIM will vary between councils, but is likely to include details on:
- rates information
- information on private and public stormwater and sewerage drains
- any consents, notices, orders or requisitions affecting the land or buildings
- District Plan classifications that relate to the land or buildings
- any special feature of the land the local council knows about including the downhill movement, gradual sinking or wearing away of any land, the falling of rock or earth, flooding of any type and possible contamination or hazardous substances
- any other information the local council deems relevant
Full details of what a local council is obliged to provide in a LIM is contained in section 44A of the Local Government Official Information and Meetings Act 1987.
Easements and covenants. An easement is a right given to a landowner over another person’s property (for example, a right of way, or right to drain water). A land covenant is an obligation contained in a deed between two parties, usually relating to the use of one or both properties (for example a covenant to restrict one party using their property in a certain way).
Easements or covenants may apply to:
- a unit and are usually recorded on the computer register for that unit.
- common property and will be recorded on the supplementary record sheet for the unit title development.
Download the REINZ Unit Title Information sheet for more info about buying or selling a unit title property.
Are you seller?
If you want to put together your Pre Contract Disclosure yourself to save the fee from your Body Corporate Administrator you can take use the standard template to fill in the information yourself. Our recommendation is that you do request it from your administrator as there is legal liability attached to this disclosure and you should make sure it is true and correct to the best of your knowledge and the body corporate’s records.