Statutory warranties in QLD contracts: the body corporate trap that can hand buyers a termination right

TL;DR: When you sell a lot in a community titles scheme, the contract has a “statutory warranties” section about body corporate matters. It is not covered by the Form 2 seller disclosure or the Form 33/34 body corporate certificate – the seller has to answer it personally, from their own knowledge. Get it wrong, or fob it off with “refer to the disclosure statement,” and you can hand the buyer a clear right to terminate under the BCCMA. Here is how it works, and how to build a process so it never bites.

The section that causes the most last-minute panic

There is a part of the REIQ contract that triggers more eleventh-hour scrambling than almost any other – and most people don’t notice it until a buyer’s solicitor is drafting a termination notice. It is the statutory warranties section for properties in a community titles scheme. If you’re an agent preparing contracts, or a seller about to sign one, this is the bit worth slowing down for.

So what is the statutory warranties section?

When you sell a lot in a community titles scheme, the contract includes warranties – promises – from the seller about the body corporate and the scheme. Things like whether there are known defects in the common property, outstanding levies, disputes, or proposed changes.

The contract even prints a warning about it: a breach of a warranty can lead to a damages claim or termination by the buyer. That is not boilerplate filler. It is a live right sitting in the contract.

Why “refer to the disclosure statement” is the trap

Here is the one that catches people out. When the seller doesn’t know an answer, the temptation is to write “refer to disclosure statement” or just leave it blank. Don’t.

The warranties aren’t disclosure – they’re promises. If something should have been disclosed and wasn’t, a cross-reference doesn’t protect the seller. It does the opposite. A blank answer, or pointing the buyer at the disclosure statement, can hand the buyer a clean right to terminate under the BCCMA (sections 223-224), generally within 14 days of signing the contract. It is not an answer, and it does not discharge the seller’s obligation.

It is not in the Form 2 – or the Form 33/34

This one trips up even experienced operators. Since the disclosure rules changed, sellers provide a Form 2 disclosure statement plus a body corporate certificate – Form 33 for community titles schemes, Form 34 for two-lot schemes. People assume those documents cover the warranty questions. They don’t.

The Form 33 lists prescribed information – levy amounts, fund balances, the community management statement. It does not answer the warranties. Those have to come from the seller’s own knowledge and enquiries. This is different to the old section 206 days: you can’t lean on the certificate to carry this section anymore.

(Worth a read alongside this: our first look at the new Form 2 and 9 traps agents need to know about the new REIQ contracts, and what buyers need to know when they receive a Form 2.)

What the warranties actually cover

In plain terms, the seller is warranting they are not aware of things like:

• Latent or patent defects in common property or body corporate assets – ongoing building issues, roof leaks, structural problems, even combustible cladding. A latent defect is hidden; a patent one is visible.
• Liabilities of the body corporate – special levies (including one that has been voted on but not yet invoiced), legal proceedings, or major repair works.
• Circumstances affecting the body corporate’s affairs – disputes or significant unresolved matters affecting the scheme.
• A proposal to record a new community management statement (CMS) – changes to by-laws, lot entitlements or common property.
• Unapproved improvements on common property that benefit the lot – a courtyard fence, pergola, air-con condenser or exclusive-use area that was never formally approved.
• Outstanding by-law contravention notices – notices about pets, noise, parking or unapproved alterations.
• Proposed body corporate resolutions – motions about to be voted on that could affect levies, by-laws or works.

If any of these apply and the seller knew – or should have found out – it needs to be disclosed.

Who answers these – and who can’t

This is where sellers often get the wrong end of the stick: your solicitor can’t answer these for you. We obtain the certificates and searches for the Form 2, but the warranties are about your knowledge of the property and the body corporate. We can explain what each question means. We can’t warrant facts on your behalf.

The good news – if you don’t know, you can find out. The seller, or the selling agent, can order a body corporate records inspection (specifically an implied warranty search) through a search agent. We use My Body Corp Report; it is around $300 and takes 3-5 days. That is a small price to close off a termination risk on a whole sale.

Build a process so it never bites

For agents, the fix is a routine, not a last-minute scramble – the same discipline as the rest of your pre-contract checklist:

• Flag the warranties section with the seller early – at the Form 2 stage, not when a buyer is already on the hook.
• If the seller can’t answer with confidence, get the implied warranty search ordered before the contract goes out.
• Answer every question directly – never “refer to disclosure statement,” never blank.
• Put the answers in the contract and attach a completed implied warranties statement to the contract of sale.

Do that, and the warranties section goes from a settlement-killer to a non-event.

Selling a unit in QLD? Don’t guess this section

Selling a unit, townhouse or apartment in Queensland and not sure how to handle the warranties section? That is exactly the kind of thing we sort out at the contract stage – get in touch with Empire Legal before anything is signed. Our fixed fees are published up front.

Frequently asked questions

What are statutory warranties in a QLD property contract?

When you sell a lot in a community titles scheme, the contract includes warranties (promises) from you about the body corporate and the scheme, covering things like defects in common property, liabilities, disputes and proposed changes. They are separate to the seller disclosure documents and must be answered from your own knowledge.

Does the Form 2 or Form 33 cover the statutory warranties section?

No. The Form 2 disclosure statement and the Form 33/34 body corporate certificate provide prescribed information like levies and fund balances, but they do not answer the warranty questions. Those must be answered by the seller directly, based on their knowledge and enquiries.

What happens if a seller writes “refer to disclosure statement” or answers a warranty incorrectly?

That can hand the buyer a clear right to terminate the contract under the BCCMA (sections 223-224), generally within 14 days of signing, as well as a possible damages claim. A blank answer or a cross-reference is not an answer and does not discharge the seller’s obligation.

Can my solicitor answer the body corporate warranty questions for me?

No. Your solicitor obtains the certificates and searches for the Form 2 and explains what each warranty question means, but the warranties are about your own knowledge of the property and the body corporate, so only you can answer them.

How do I find the answers if I don’t know them?

You or your selling agent can order a body corporate records inspection (an implied warranty search) through a search agent. We use My Body Corp Report, which is around $300 and takes about 3-5 days, and it is designed specifically to help answer these questions.