What is the Body Corporate Records Inspection Condition in the new REIQ Contracts?

With the introduction of the updated REIQ residential contracts, a new standard condition has been included for properties within a community titles scheme:

The Body Corporate Records Inspection Condition.

This condition changes how buyers carry out due diligence and how and when they may be able to terminate a contract.

One of the most common questions we are now being asked is:

What does this condition actually allow a buyer to do?

Here’s what you need to understand.

What is the Body Corporate Records Inspection Condition?

The new REIQ contracts include a reference schedule item for a “Body Corporate Records Inspection Date.”

If a date is inserted, the contract becomes conditional upon the Buyer:

• conducting an inspection of the body corporate records, which is done by asking the lawyer to order a Body Corporate Records Search; and
• being satisfied with those records.

If the Buyer is not satisfied, they may have a right to terminate the contract.

Is this a “get out of the contract” clause?

Not entirely.

This condition gives Buyers a contractual way to review body corporate records and make a decision based on that review. However, it is not intended to operate as a completely open-ended right to terminate for any reason. For that kind of clause, we would recommend a due diligence condition, whereby you can make any enquiry you wish with regards to property.

The Buyer must genuinely rely on the outcome of the records inspection when deciding whether to proceed.

This means the condition should be exercised in connection with matters revealed in the body corporate records, rather than for unrelated reasons.

What might a buyer be looking for in the records?

Body corporate records can contain a wide range of information that is not apparent from a contract or disclosure statement alone.

For example, a Form 2 Seller Disclosure Statement (for information on what this is, click on our other blog) does not typically include:

• detailed meeting minutes;
• correspondence and complaints;
• full financial history; or
• defect reports.

The Body Corporate Records Inspection Condition allows buyers to carry out a more comprehensive review beyond the disclosure documents.

This may include:

• details of levies and financial position;
• meeting minutes and committee decisions;
• correspondence and complaints;
• building defects or maintenance issues;
• disputes or proceedings involving the body corporate; and
• by-laws affecting the use of the lot.

Depending on what is revealed, this information may influence a Buyer’s decision to proceed.

When must the inspection be completed?

The Buyer must complete their inspection on or before the Body Corporate Records Inspection Date specified in the contract.

By that date, the buyer must:

• give notice that they are satisfied;
• waive the condition; or
• terminate the contract.

If the Buyer does not act within the timeframe, they risk losing the benefit of the condition, and the Seller may be able to terminate the contract, with the refund being able to be provided to the Buyer

What steps should a Buyer take?

Buyers should:

• arrange the inspection as early as possible;
• engage a professional records search provider where appropriate, or obtain it through their lawyer, as that is the easiest and most recommended option;
• obtain legal advice on any issues identified; and
• ensure any decision to terminate is properly based on the records inspection.

What should sellers be aware of?

Sellers should understand that:

• this condition is now standard in REIQ contracts;
• it creates a period for buyers to do their due diligence on the body corporate records; and
• matters contained in the body corporate records can still impact the transaction.

To reduce risk, Sellers should consider:

• reviewing body corporate records before listing;
• identifying any potential concerns early;
• ensuring disclosure documents are consistent with the records; and
• ensure that they disclose everything they come to know about the Body Corporate, so as to minimise any potential ability a buyer may have to terminate the contract

Key takeaway

The Body Corporate Records Inspection Condition formalises what was previously dealt with through special conditions.

It provides Buyers with a structured opportunity to review body corporate records, while introducing clearer timeframes and expectations around how that process is carried out.

If you are entering into a contract for a property in a community titles scheme, obtaining advice early can help you properly navigate this condition.

Contact us today if you would like advice on how this condition applies to your contract, or assistance reviewing body corporate records before making a decision.