New Zealand is one step closer to a more robust unit title environment. Forthcoming changes in law strengthen body corporate governance, disclosure, and compliance regimes. This will benefit both unit owners and potential buyers, who are increasing in number as our cities become more densely populated. The long-awaited Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Act 2022 (Amendment Act) received royal assent on 9 May. If an earlier commencement date is not set by regulations, the Amendment Act will commence on 9 May 2024.
Last year we commented on the draft Amendment Bill and below we have summarised the main changes that will be made law by the Amendment Act. This is not an exhaustive list of all changes. The legislation does not, and could not, address every challenge of unit title complexes. But in our view the changes should help to promote and facilitate more positive outcomes for those living in, purchasing or working with unit title properties. If you have any queries on the Amendment Act, body corporate governance, or unit ownership in general, please contact one of our experts.
Strengthened Body Corporate Governance Standards
We pointed out last year the lack of a mandated code of conduct and vague body corporate governance restrictions in the Unit Titles Act 2010 (Act). This resulted in varying quality of body corporate management, conduct, and governance. In some instances, this has led to time-consuming and costly litigation. The Amendment Act seeks to strengthen the professional standards of body corporate managers and improve the governance arrangements of bodies corporate as a whole.
The Amendment Act defines a body corporate manager, along with their specific functions and duties including requirements to:
- have a written agreement and disclose any conflicts of interest;
- comply with a code of conduct;
- perform duties honestly and fairly;
- keep confidential information private; and
- act in the best interests of their respective body corporate.
The Amendment Act outlines:
- the type of resolution required in specific decisions;
- the scope of a committee’s delegation authority;
- the requirement for an agenda for each meeting;
- the requirement to retain written records of meetings and outcomes;
- additional obligations to keep records in order to provide disclosure information; and
- changes to utility interest to allow specific costs to be more easily allocated to specific units.
Larger unit title developments (with 10 or more principal units) are subject to further regulatory requirements, including having:
- a body corporate manager (unless a special resolution is passed); and
- a 30-year long-term maintenance plan (which must be reviewed every 3 years or after becoming aware of a matter that may have a “material impact”).
Improved Information Disclosure Regime (for prospective buyers)
The Amendment Act has more stringent requirements on the quality and availability of pre-contract and pre-settlement disclosure statements (but additional disclosure statements are no longer available).
The disclosure obligations in the Amendment Act are comprehensive, placing a heavy responsibility on bodies corporate to guarantee that information in pre-settlement and pre-contract disclosure statements is accurate. If pre-contract disclosure or pre-settlement disclosure statements are delayed, incomplete, or inaccurate buyers now have more power to delay or cancel settlement.
Enhanced enforcement procedures
Changes to the compliance procedures have been incorporated by the Amendment Act to reflect the increased popularity and value of unit titles. The Tenancy Tribunal:
- has jurisdiction up to NZD100,000;
- has specific principles and guidelines for determining appropriate legal fees; and
- can issue monetary penalty orders in circumstances where a body corporate manager has “intentionally and unreasonably” failed to comply with the duties imposed on them under the Amendment Act.
The chief executive has the authority to issue improvement notices, which can be assessed by the Tenancy Tribunal. Improvement notices:
- are for preventing or correcting violations of the Act;
- can be issued if someone is suspected of violating one of the Act’s provisions or regulations – or is believed likely to do so; and
- can direct someone to correct the breach or to prevent a likely breach from occurring.
This article was co-authored by Victoria Tatam, a Senior Solicitor in our Real Estate team, and Amy Colebourn, a Law Clerk in our Property and Real Estate team.
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