This article provides a comprehensive guide to the changes introduced by the Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Act 2022 in New Zealand. The purpose of the Amendment Act is to enhance the protection and rights of people who buy or own unit title properties. It introduces improvements in disclosure obligations, governance arrangements, body corporate management, long-term maintenance planning, dispute resolution, and compliance measures. Read on to understand the key changes and their implications for unit owners and prospective purchasers.
Table of Contents
1. Introduction
2. Improving Disclosure Obligations
3. Strengthening Governance Arrangements
4. Raising Standards for Body Corporate Managers
5. Long-Term Maintenance Planning
6. Introducing New Dispute Resolution Rules
7. Enhancing Flexibility in Utility Interests and Charges
8. Empowering the Regulator
9. Implications for Large Unit Title Developments
10. Conclusion
1. Introduction
The Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Act 2022, also known as the Amendment Act, was passed into law on 9 May 2022 in New Zealand. The primary objective of this legislation is to provide greater protections for individuals who own or intend to purchase unit title properties. The Amendment Act introduces various changes to improve disclosure obligations, governance arrangements, body corporate management, long-term maintenance planning, dispute resolution, and compliance measures.
2. Improving Disclosure Obligations
One of the key aspects addressed by the Amendment Act is the improvement of disclosure obligations for vendors of unit title properties. The Act introduces a two-stage disclosure process to ensure that prospective buyers receive relevant and detailed information. The first stage, known as the Pre-Contract Disclosure, occurs before a purchaser enters into a purchase contract. The second stage, known as the Pre-Settlement Disclosure Statement, takes place five working days before the settlement of the purchase.
Under the Amendment Act, vendors are required to provide more comprehensive information to prospective purchasers at the Pre-Contract Disclosure stage. This includes details about weathertightness issues, earthquake-prone issues, court or tribunal proceedings involving the body corporate, financial statements and audit reports for the previous three years, notices and minutes of body corporate meetings, significant defects, funding for upcoming works and long-term maintenance plans, body corporate manager details, bank account balances, remediation reports, and insurance details.
3. Strengthening Governance Arrangements
To enhance the governance arrangements within body corporates, the Amendment Act introduces several provisions. These provisions aim to ensure that body corporate committees act in the best interests of the body corporate and comply with the Act and its code of conduct. The Act requires body corporate committees to disclose any conflicts of interest, provide minutes of committee meetings, and carry out their duties professionally, honestly, fairly, and confidentially.
Additionally, the Amendment Act modernizes the governance of body corporates by allowing unit owners and committee members to attend general meetings and body corporate meetings remotely. From 9 May 2024, unit owners will also have the ability to vote electronically. The Act also introduces a 'pay up to vote' provision, requiring owners to have paid their levies to be eligible to vote.
4. Raising Standards for Body Corporate Managers
The Amendment Act raises the standards for body corporate managers, ensuring that they meet prescribed ethical and professional standards. Body corporate managers are now required to perform their services professionally, honestly, fairly, and confidentially. This
provision aims to improve the quality of services provided by body corporate managers and enhance the overall management of unit title properties.
5. Long-Term Maintenance Planning
One significant change brought about by the Amendment Act is the requirement for body corporates to establish a long-term maintenance plan (LTM plan). The LTM plan must cover a period of at least ten years, with larger unit title developments having to establish a plan for a period of 30 years. The purpose of the LTM plan is to identify future maintenance requirements, estimate costs, support the establishment and management of long-term maintenance funds, and provide guidance for making annual maintenance decisions.
In addition to the LTM plan, body corporates are also required to establish a long-term maintenance fund (LTM fund), unless a special resolution is passed to decide otherwise. The LTM fund ensures that funds are available for future maintenance and allows for effective planning and budgeting. These requirements regarding LTM plans and funds must be met by 9 May 2024.
6. Introducing New Dispute Resolution Rules
The Amendment Act introduces new dispute resolution rules and aims to improve the process of resolving disputes within unit title properties. The Act reduces the fees for unit title disputes in the Tenancy Tribunal and increases the threshold of disputes that can be heard by the tribunal. This change provides a more accessible and cost-effective means of resolving disputes for unit owners.
7. Enhancing Flexibility in Utility Interests and Charges
To provide greater flexibility in utility interests and charges, the Amendment Act introduces certain provisions. These provisions allow for more flexibility in determining utility interests and charges for unit owners. This change aims to align utility interests and charges with individual unit owners' needs and usage, providing a fairer and more equitable approach.
8. Empowering the Regulator
The Amendment Act empowers the regulator, the Ministry of Business, Innovation and Employment (MBIE), with new enforcement measures. The MBIE now has the authority to require documents from body corporates, conduct inspections of unit title developments, issue improvement notices, and even appoint an administrator to manage a unit title development on behalf of the body corporate. These measures strengthen compliance and ensure that body corporates adhere to the provisions of the Act.
9. Implications for Large Unit Title Developments
The Amendment Act distinguishes between large and small unit title developments and introduces specific requirements for large developments. Large unit title developments, defined as those with ten or more principal units, are subject to additional obligations. These obligations include the hiring of a body corporate manager unless 75% of owners
vote against it, establishing a long-term maintenance plan for at least 30 years, reviewing the plan every three years, and consulting a building professional when developing the plan unless 75% of owners vote against it.
10. Conclusion
The Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Act 2022 brings significant changes to the regulation and governance of unit title properties in New Zealand. The Act aims to enhance the protection and rights of unit owners and prospective purchasers by improving disclosure obligations, strengthening governance arrangements, raising standards for body corporate managers, implementing long-term maintenance planning requirements, introducing new dispute resolution rules, and empowering the regulator. These changes will contribute to a more transparent, efficient, and fair system for unit title properties in New Zealand.
Please note that this article is a comprehensive guide and does not constitute legal advice. For specific inquiries or legal assistance, it is recommended to consult a qualified professional.
