Anton KellyThe property buying public is pretty much used to the concept of buying a dwelling before the thing is actually built. We know that it is an opportunity to acquire a brand new property at a good price, with all the latest décor and finishes, where everything works properly and in a community that provides the facilities and services that suit the modern lifestyle.

We also know, or suspect, that there might be some pitfalls to being the first owners in the community. Does everything actually work properly and are the facilities properly planned and functional? Or are we, as the first owners, going to have to dig into our pockets again just to make the scheme what it seemed in the brochures? And what duties and responsibilities might we have as the first group of owners in the scheme? Do we even know that there are indeed some things that the first owners need to do?

A knowledgeable estate agent selling off plan properties can do a lot to reassure and inform prospective buyers.

The concern foremost in the minds of most buyers in new schemes is getting the “snag list” for their section attended to. Some sort of time limited guarantee in respect of the condition of the new property is usually included in the sale contract, and that is the basis for the snag list. Each individual purchaser therefore has a contract with the developer for the delivery of the property in good order and so must deal with the developer directly concerning any problems inside the section: problems that have nothing to do with the body corporate. But it’s also important to get snags that affect the common property sorted out as soon as possible, while the developer still has a relationship with the contractors and subcontractors involved in the construction of the scheme buildings, and that is the body corporate’s problem.

What first owners in new schemes usually do not realise is that, in addition to being owners in the scheme and therefore members of the body corporate, they are all trustees! All owners are trustees of a new scheme until the first general meeting, the inaugural general meeting.  That means that each and every one of them has a fiduciary duty to the body corporate and is responsible to make sure the common property functions as intended and if it does not, to deal appropriately with the developer until it does work properly.

Included in making sure the common property physically functions properly should be a review of service contracts. The municipality must be contacted to establish whether the water and electricity supply contract has been transferred into the name of the body corporate. There are numerous obligatory agenda items for the inaugural meeting, electing trustees, approving a budget and deciding whether or not to take cession of the contracts the developer has entered into for the running of the scheme. So it’s a good idea for someone to know what those contracts are before the meeting.

A specialist sectional title estate agent would know of all these pitfalls and potential difficulties and be able to point them out to the first buyers in a scheme.

Article reference: Paddocks Press: Volume 09, Issue 10, Page 2.

Anton is an extremely knowledgeable specialist Sectional Title and HOA teacher and consultant. Having been the Lead Teacher on all the Paddocks Courses for the last 5 years, Anton lives and breathes Sectional Title and HOA law, all day every day. There are not many issues he hasn’t come across before.

This article is published under the Creative Commons Attribution license.

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