Unit titles amendment passed: better management, greater peace of mind
As Auckland grows rapidly and medium- and high-density residential development becomes more widespread, increasing numbers of apartments and townhouses are being completed. How to improve the management of these unit title properties has become a focus of public attention.
As Auckland grows rapidly and medium- and high-density residential development becomes more widespread, increasing numbers of apartments and townhouses are being completed. How to improve the management of these unit title properties has become a focus of public attention.
To provide better protection for prospective buyers and owners, members of Parliament proposed reviewing and amending the Unit Titles Act in 2020. After nearly two years of discussion, Parliament finally passed legislation this May entitled the Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Act 2022【Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Act 2022】, amending the existing Act.
The Act makes amendments concerning owners, prospective buyers, body corporate general meetings and administration. These changes will help New Zealand move towards a more mature unit titles system. The Act will take effect no later than 9 May 2024.
Key changes:
- Allowing remote attendance at body corporate general meetings:
Before the pandemic, all body corporate general meetings had to have a physical venue. During the pandemic, Parliament passed temporary emergency legislation allowing online meetings. This amendment permanently authorises online meetings and requires bodies corporate to offer owners both online and in-person attendance options. This provision cannot be overridden through operational rules.
This means owners can choose to attend body corporate general meetings in person or remotely, but in-person/remote voting must follow the prescribed procedures. This new provision will undoubtedly make it easier for more owners, particularly those overseas, to participate personally in meetings and avoid missing opportunities to discuss important motions.
- Improving disclosure requirements for prospective buyers:
The 2022 amendment expands the information required in pre-contract disclosure statements. This includes at least three years of annual financial statements and meeting minutes, the manager's contact details, maintenance plans, property insurance and any third-party building inspection reports. For off-the-plan developments, developers must provide draft budgets, draft operational rules, estimated ownership interests and any service provider contracts arranged in advance. If disclosure statements are provided late, are incomplete or are not provided at all, buyers have the right to delay or cancel settlement.
Previously, pre-contract disclosure statements only needed to contain basic information about the unit; providing documents relating to the building was not a legal requirement. This led some inexperienced buyers to make purchasing decisions without adequate information, only to discover later that the apartment building had leaks or other hidden problems. The new provision aims to give prospective buyers the fullest possible access to information before deciding to buy an apartment, enabling them to make the best choice for their circumstances.
- Strengthening operational management requirements:
The 2022 amendment introduces a prescribed code of conduct for body corporate committees. The new Act clearly sets out committee duties, including committing to understand unit titles legislation, acting honestly and fairly when performing their duties, protecting confidential information and acting in the body corporate's best interests. The current Act does not clearly specify a committee code of conduct or duties, leaving many owners uncertain about their responsibilities when serving on committees.
It clearly defines professional managers' work, responsibilities and code of conduct, raising their professionalism and standards. The current Act does not clearly specify body corporate managers' duties and requirements, resulting in inconsistent practices and a lack of standards.
It adds procedures for managing conflicts of interest and introduces an interests register that other body corporate committee members can inspect, helping protect the body's collective interests.
The 2022 amendment also differentiates body corporate management requirements by size, helping address operational challenges arising from different scales and aiming to give owners predictable stability and better services. For example, larger buildings or developments with more than 10 units face additional mandatory requirements, including appointing a professional manager, preparing a thirty-year long-term maintenance plan and raising a long-term maintenance fund.
- Strengthening long-term maintenance planning and funding requirements
Stronger long-term maintenance planning and funding requirements are clearly intended to ensure bodies corporate maintain buildings more promptly and systematically, safeguarding their continued use and value.
The current Act only requires bodies corporate to prepare a ten-year long-term maintenance plan, without detailed requirements for its contents. Under the 2022 amendment, all long-term maintenance plans must identify every building defect or necessary repair and include further details such as estimated costs for addressing those defects or repairs. To fulfil their obligations, bodies corporate may need to engage professional building consultants to help prepare plans and budgets.
Bodies corporate for larger buildings with more than 10 units must prepare long-term maintenance plans covering at least thirty years and engage professionals to prepare or review them, with reviews required at least every three years.
To support the new long-term maintenance planning requirements, the 2022 amendment introduces a mandatory requirement for bodies corporate to establish and maintain long-term maintenance funds. The existing Act does not address these funds, and many buildings choose not to establish them. The new requirement will help buyers and sellers better understand the costs of maintaining a building throughout its life cycle. An adequately funded long-term maintenance fund can effectively prevent bodies corporate from imposing extra maintenance levies on owners in a year when major work is undertaken. The fund also has a positive effect on property values when owners sell their units.
- Enforcement and oversight
The 2022 amendment will also expand the Tenancy Tribunal's jurisdiction and increase its monetary limit to NZ$100,00. It will allow the Tribunal to award related legal costs and expenses, change mediators' and adjudicators' fees, and empower the Tribunal to fine managers who breach unit titles legislation.
The chief executive of the Ministry of Business, Innovation and Employment (MBIE), or another authorised person, will have inspection powers and the power to issue improvement notices and bring proceedings against organisations or individuals in breach. This will help strengthen public confidence in unit titles and increase the cost of non-compliance. These powers do not exist under the current Act: apart from initiating expensive and time-consuming legal proceedings against a party themselves, owners have no other government agency able to investigate breaches or act as an enforcement authority. This makes it difficult to secure timely improvements in poorly managed or operated bodies corporate.
The 2022 amendment also requires bodies corporate and managers to retain at least three years of records for inspection when needed. Previously, there was no explicit requirement, and some poorly managed bodies did not keep documents properly, leaving owners without access to relevant information when they needed it.
*This article outlines and explains selected key points of the 2022 amendment. It is not a comprehensive analysis or legal advice and is provided for reference only.