Simplified vendor disclosure
The Sale of Land Act 1962 (Vic) (“the Act”) has been amended to simplify vendor disclosure and increase consumer protection. The amendments impact the disclosure requirements for the Vendor’s Statement (or Section 32), which accompanies the Contract of Sale.
Prior to 1 October 2014, where a vendor sold a property affected by an Owners Corporation (OC), Section 32 of the Act required the Vendor’s Statement to include an Owners Corporation Certificate. An Owners Corporation Certificate had to satisfy section 151(4) of the Owners Corporation Act 2006 and include details of OC fees, special levies, insurance, legal actions or liabilities of the Owners Corporation and licences affecting the common property.
The Certificate had to be accompanied by the most recent minutes of the Annual General Meeting (AGM),the prescribed Statement of Advice and Information for prospective purchasers and lot owners, and the OC rules.
Inclusion of an Owners Corporation Certificate is now optional – the vendor is now permitted to specify the above information in the Vendor’s Statement, attaching the rules and most recent Minutes of the AGM.
An OC is considered inactive if it has not had an AGM, fixed any fees or held any insurance in the last 15 months, and is therefore not required to include an Owners Corporation Certificate – however, the Vendor’s Statement should clearly note that the OC is inactive. Even if an OC can be described as inactive, other parts of the Act cannot be disregarded – particularly the interplay of section 11 of the Act and sections 59 and 60 of the Owners Corporation Act, which requires a vendor when selling land affected by an OC to have current insurance in accordance with the Owners Corporation Act.
The only other circumstances where OC insurance is not required by the Owners Corporation Act are where there is a two-lot subdivision (Section 7) or where there is no common property and the OC has passed a unanimous resolution that each lot owner agrees to arrange their own insurance (Section 63).
Under sections 59 and 60 of the Owners Corporation Act, all other OCs are required to have reinstatement and replacement insurance for all buildings on the common property and public liability insurance of not less than $10 million.
If the OC does not have the required insurance, a purchaser is entitled to avoid the sale at anytime prior to settlementthis requirement cannot be contracted away Vendors selling properties affected by inactive OCs are forced to run the risk that purchasers will avoid the sale anytime prior to settlement or to obtain insurance at their own expense, usually without a contribution from other lot owners