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The enforceability and settlement of contracts is a fundamental exit strategy for banks and other financiers providing funding for property development. Recent disclosure changes may enable a buyer to cancel a contract putting that exit strategy at risk. Contracts that are in the process of being signed or issued will need to be carefully managed to ensure that risk is mitigated.
Sale of a lot in a community title scheme
Under the Body Corporate and Community Management Act 1997 (Qld) a seller or seller’s agent must attach a Body Corporate and Community Management (BCCM) Form 14 – Information Statement to a contract for the sale of a lot in a community title scheme.
New Form must be used from 1 August 2013
A new BCCM Form 14 (version 11) – Information Statement has been introduced for use in all new contracts for the sale of a community title scheme lot on and from 1 August 2013.
No transitional period
There is no transitional period. This means that contracts that are now in the process of being signed or issued will need to be carefully reviewed.
The current form (version 10) still has to be used for contracts issued and fully signed and dated up to and including 31 July 2013. The new form must be used for all contracts issued or signed (by either seller or buyer) on or after 1 August 2013. Failure to use the correct form may give the buyer termination rights.
Recommendations between now and 1 August 2013
For all sales of lots in a community title scheme both off plan and registered, the most prudent approach for sellers and seller’s agents is:
- any new contract package to be issued or to be signed (by either buyer or seller) on or after 1 August 2013 must include the new BCCM Form 14 (version 11) (or the buyer may have termination rights)
- the current BCCM Form 14 (version 10) (and not the new one) must still be used for all contracts issued up to and including 31 July 2013
- since there is no transitional period:
- any contract package issued to a buyer with the current BCCM Form 14 (version 10) on or before 31 July 2013 will need to be fully signed by both buyer and seller on or before 31 July 2013
- any contract package already issued but which will not be signed by both buyer and seller on or before 31 July 2013 will need to be withdrawn and reissued on or after 1 August 2013 utilising the new BCCM Form 14 (version 11)
- any new contract to be issued between now and 1 August 2013 should not be issued until 1 August 2013 when the new form can be used (unless the contract will definitely be signed by both buyer and seller on or before 31 July 2013), and
- any contract that was issued to a buyer containing the current BCCM Form 14 (version 10) that is received on or after 1 August 2013 will not be able to be accepted and will need to be reissued again using the new BCCM Form 14 (version 11) from 1 August 2013.
Other disclosure changes
There are also some other changes to disclosure requirements effective from 1 August 2013 being:
- the removal of the obligation to provide a copy of the CMS to the buyer of a registered lot (but a copy of the proposed CMS must still be provided to off the plan buyers), and
- the removal of some wording in disclosure about the extent to which annual contributions are based on the contribution schedule lot entitlements or the interest schedule lot entitlements and that the lot entitlements are set out in the CMS.
If you are require assistance with understanding how these new requirements will apply to you please contact our Finance team.
Focus covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. Focus is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.