Buyers beware. Strata properties can come with hidden costs that sellers might not disclose. Photo: Michelle Kroll.
The perils of buying and selling properties in strata developments have been highlighted in a recent case before the ACT Magistrates Court in which the sellers failed to disclose an outstanding owners corporation levy.
The buyers of a Narrabundah townhouse discovered after exchanging contracts that they were liable for $31,980, the property’s contribution to a $195,000 special purpose fund set up by the owners corporation to fix a leaking roof on the complex’s common property.
The owners instructed the agent to advise prospective buyers of this situation, but it failed to do so for the successful purchasers.
The levy was due by 1 November 2023, and the sellers had not paid anything before the townhouse sold at auction on 2 September 2023.
The buyers took the matter to court, claiming the $31,980 that they had to pay from the sellers. They argued that the contract gave certain warranties that nothing was owing to the owners corporation in relation to a special purpose fund.
They would not have entered into the contract to buy the property if they had known about the fund and outstanding contribution.
The sellers relied on the agent to provide information about the SP Fund and the contribution to their solicitors, but this did not happen.
The sellers admitted the information was not in the contract and that they had breached the warranties, but claimed that if the buyers had been a “reasonably prudent purchaser” they would have checked the owners corporation’s records, which would have revealed the existence of the $31,980 contribution owing and they would have had reason to cancel the contract.
But Magistrate Ian Temby said the buyers had no reason to doubt the correctness of the warranties in the contract, and no reason to check the OC’s minutes of July 2023 when the contribution was set.
“No act or omission of the Plaintiff can be said, in a practical sense, to have contributed to their loss, let alone to have been the sole cause of their loss,” he said.
The buyers also argued that references to water leaks and a need to obtain a quote in the OC minutes from 2021 and 2022, included in the contract, would also have alerted them, and that no further information was required.
But Magistrate Temby said this was not enough.
“The contract did not disclose that there were water leaks of such significance that roof rectification works would be required and that the cost of those works would be such that the owners corporation would need a special levy to fund them,” he said.
The sellers also argued that they had disclosed the existence of the SP Fund to the buyers through their solicitor on 10 October 2023.
But Mr Temby said the obligation was to provide a warranty when entering into the contract.
“Even if the information provided by the defendants’ solicitors was sufficient to disclose the relevant circumstance (something about which I have some doubt), the defendants could not make their warranty correct by disclosing the information after the parties had entered into the contract,” he said.
“I also note that this disclosure was made after the period within which the plaintiffs could cancel the contract under clause 38 had passed.”
Mr Temby found for the buyers and ordered the sellers to pay them $31,980 plus interest.
