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The new cladding checklist regime—what are the seller's obligations?

October 2018

Building owners in Queensland are currently undergoing a forced audit to identify if combustible cladding was used in the building's construction and whether the method complies with the National Construction Code.

We have recently written about how to identify whether your building is affected. Here partner Kristy Dorney explains the seller's notice obligations under the new regime.

OBLIGATION TO GIVE NOTICE TO THE BUYER

If you are selling a building caught by the cladding checklist regime then you should be aware of the obligation to give notice to the buyer before settlement as to what stage you are up to in the cladding checklist. The notice must be in the approved form. You are also required to deliver all the relevant supporting documents and lodge a copy of the notice (not the documents) with the Queensland Building and Construction Commission (QBCC).

The approved form includes a signing panel where the buyer acknowledges it will assume the obligations of owner under the cladding regulations. The cladding regulations do not require the seller to secure the buyer's signature or acknowledgement before the form is lodged with QBCC (or at all). However, the QBCC has informed us its current position is that the approved form must be completed in full to comply with the regulations so the buyer's signature must be obtained.

Bearing in mind the QBCC's current position, when serving the notice it would be prudent to request the buyer to sign and return the form. However, unless the contract includes a special clause compelling it, a buyer would be within its rights to refuse to sign it. If the form is not signed by the buyer prior to settlement, then the seller should ensure they lodge the unsigned form with the QBCC prior to settlement.

WHAT IF THERE ARE MULTIPLE OWNERS?

Where the building has multiple owners under a community management scheme (CMS), the 'owner' for the purposes of the cladding checklist regime and the seller's notice is the body corporate, not the individual lot owners. This means if you are selling an individual lot in a CMS you do not have to give the prescribed notice. However, you should consider whether the building's involvement in the regime may require disclosure obligations under the Body Corporation and Community Management Act (BCCMA) implied warranty provisions. If the cladding checklist has been completed and the building is designated as an 'affected building' likely to require remediation works, disclosure would seem to be required in the Statutory Warranties and Contractual Rights or Seller's Disclosure section of a standard REIQ contract.

HOW WE CAN HELP?

If you require assistance in navigating the cladding checklist regime or are buying or selling a building which may be affected by the new cladding regulations, contact one of our Real Estate lawyers to discuss how we can assist.

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