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Legal Chat - By Andrew Padanyi B.A., LL.B. - Who is responsible for paying levies?
On occasions property owners are required to pay levies struck in respect of their property. Common examples include owners corporation levies for major work like re-painting and local council charges for street construction or drainage works. These are one-off impositions and, importantly, are treated differently to recurring charges such as quarterly maintenance contributions and annual council rates.
When a property is sold, consideration needs to be given to whether the vendor or the purchaser will be responsible for payment of these levies.
The vendor may wish to pass responsibility for compliance with the notice imposing a levy to the purchaser. To do so, steps need to be taken to deal with this in the contract. First and foremost, it is necessary for a vendor to include details of the notice in the Vendor's Statement (typically by attaching a copy of the notice), which fulfils the vendor's disclosure obligations under the Sale of Land Act. However, doing so does not, by itself, result in liability for that notice passing to the purchaser.
The best way for a vendor to achieve the desired outcome is to include a special condition in the contract that passes liability for compliance with the notice and payment of the levy to the purchaser. To cover different sale circumstances, the vendor's solicitor might choose to include the special condition in the Vendor's Statement.
While there is some debate about the legitimacy of including contractual conditions in a disclosure document, the moral for prospective purchasers is to carefully scrutinise all contractual documentation in order to determine who is responsible for compliance. You might find that, having signed the contract, there is a condition tucked away in the Vendor's Statement that passes responsibility for pre-contract notices to you as the purchaser.
In the absence of such a condition, the vendor remains responsible for compliance with such notices. If this is the case, the purchaser is justified in deducting the full amount of the levy from the amount due to the vendor at settlement and paying it to the relevant authority.
Note: Readers should not act solely on the basis of the material contained in this article. Peter Rogozik Property Consulting expressly disclaims all liability for any loss or damage arising from the reliance on this document.
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