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Your apartment is going on the market, but its owners corporation account still shows overdue fees. If the sale proceeds are meant to clear that balance, the disclosure and payment instructions need to match.
The short answer: Payment from sale proceeds may be arranged for your particular sale, but selling the property or agreeing a settlement payment with the buyer does not give you an automatic right to delay overdue owners corporation fees. The Section 32 must disclose the unpaid position accurately, while the contract and settlement instructions should deal with the proposed payout. A promise to the buyer does not itself mean the owners corporation has agreed to wait or has been paid.
Agreeing to pay at settlement does not stop the debt
The owners corporation, often called the OC and formerly known as the body corporate, is a separate creditor. A seller-buyer agreement deals with the sale; it does not by itself change the OC's rights.
Section 28(1) of the Owners Corporations Act 2006 covers the current owner (the 'owner for the time being'), a buyer who has taken possession (a 'purchaser in possession') and a person entitled to receive the lot's rents and profits, including rental income. It makes those people liable for outstanding OC amounts relating to the lot. A clause saying that the seller will pay is therefore no substitute for actually paying the amount owed.
The Act permits an OC to recover money owed as a debt, subject to applicable requirements and restrictions. Overdue interest is not automatic: the OC may charge it if authorised by a general meeting resolution, subject to the statutory maximum, and may waive interest in a particular case. A proposed sale does not automatically freeze authorised interest.
Give your conveyancer the current account statement, fee or final notices, receipts and any existing payment arrangement. If the proposal depends on the OC waiting until settlement, check separately what the OC has agreed. The buyer accepting a contract condition is not the same as the OC agreeing to wait.
The Section 32 must show the unpaid position
The Section 32, or vendor statement, gives the buyer required information about the property before the buyer signs the contract. A plan to pay overdue fees later is not a reason to describe them as already paid.
For an active OC, section 32F of the Sale of Land Act 1962 ordinarily permits the prescribed OC information to be included in the Section 32 or a current owners corporation certificate to be attached. The required rules and last annual general meeting resolutions must also be attached. There is a separate statutory alternative for an inactive OC, but unpaid fees alone do not establish inactivity.
An OC certificate records current regular fees, the date to which fees have been paid and total unpaid fees or charges for the lot. Check those entries against your receipts and current lot-account statement. If you pay after the certificate is issued, give your conveyancer the receipt so the documents and payout figure can be updated.
This article is limited to overdue ordinary OC fees. A newly approved special levy raises a different allocation question and needs separate review.
Put the proposed payout into the sale documents
Your conveyancer should review the actual contract before deciding whether a special condition is needed. Existing conditions may already deal with outgoings, and any extra wording must work with them.
The documents and settlement instructions should identify a workable payment obligation and how the representatives are expected to carry it out. Check:
the lot and OC account covered by the proposed payout;
which unpaid ordinary fees and properly payable charges it is intended to clear;
how an updated amount will be obtained instead of relying on an old estimate;
the intended payment recipient and correct lot or account reference;
how later payments or credits will be reconciled;
whether the available settlement funds can meet the required payment.
If more than one OC affects the property, identify the relevant accounts separately. One paid account does not show that another is clear.
An agent's email saying the arrears 'will come out at settlement' does not complete the contract wording or payment instructions. The actual sale terms and payment process still need checking.
An adjustment is different from an OC payment
An adjustment allocates an amount between buyer and seller. A payout is the actual payment to the creditor. An entry on the statement of adjustments does not, by itself, prove that the OC received the money.
Before settlement, reconcile the current OC balance with the agreed figures and payment directions. If you pay part or all of the amount yourself in the meantime, provide the receipt so the payout is corrected and the same amount is not paid twice.
After settlement, keep the payment evidence with the account records so the sale obligation, creditor payment and OC account can be matched.
Check the figure again if settlement moves
If settlement is postponed, an earlier payout estimate may no longer be current. Further ordinary fees or authorised interest may become payable, and any creditor arrangement should be checked against the changed date.
Suppose a seller owes $6,000 in ordinary OC fees and proposes to pay them from the sale proceeds. A sale condition records the seller's payment obligation, but the seller later makes a part-payment and settlement is postponed. The representatives need the revised account figure and receipt, enough settlement funds for the actual payout, and confirmation of any agreement by the OC to wait. Neither the original $6,000 figure nor the signed condition proves that the final OC account was cleared.
Keep the account records with the proposed sale documents. Pearson Chambers can review them as part of preparing your sale contract and Section 32, so the disclosure and settlement instructions address the same debt.
About the Pearson Chambers Conveyancing team
Pearson Chambers Conveyancing provides residential purchase, sale and title-transfer services in Melbourne and Victoria. For sellers, the team prepares the contract and Section 32 and manages the conveyancing steps through settlement, including checking the documents needed for an agreed OC payout.
Sources we consulted
Prepare your sale documents with Pearson Chambers
If you are selling with overdue OC fees, contact Pearson Chambers Conveyancing about preparing the contract and Section 32 and managing the sale through settlement. Send the current account statement, notices, receipts and any payment arrangement so the proposed payout can be reviewed with the sale terms.
Email contact@pearsonchambers.com.au.
General information only, current as at the date of publication. Victorian conveyancing rules and legislation change frequently. Please contact the Pearson Chambers Conveyancing team for advice on your specific contract.