The Unit Titles Act
The Unit Titles Act 2010 came into force on the 20th of June 2011. The new Act places greater responsibilities on Bodies Corporate, Chairpersons and Committees.
The Act places obligations on the bodies corporate to ensure compliance. There are seven key areas of responsibility.
1. Financial Management
The body corporate must hold a general account and a long term maintenance fund although it can opt out of the long term maintenance fund if a special resolution is passed.
The body corporate cannot use funds out of its long term maintenance fund (if it establishes one) for its general operating expenses. Long term maintenance spending must be approved by a special resolution if any one item is more than 10% of the specified amount for that item. The Act requires bodies corporate to have accurate financial records for all the funds that it manages and requires audit/external review to take place within two months of financial year end. (unless a special resolution is passed opting out of doing this)
2. Governance and Meetings
Regardless of their size all bodies corporate must have a Chairperson. It is the Chairpersons responsibility to call meetings and there are specified processes for doing this.
There are a range of motions which will be presented at an AGM and these must be sent in advance of any AGM. Examples of the types of motions decided upon at an AGM could include;
The appointment of a Chairperson and Committee, approval of financial reports, approval of budgets, establishment or non-establishment of certain funds of the body corporate, operation of bank accounts, fixed levy date, audit of accounts, debt collection, insurance, long term maintenance plan.
Bodies of 10 units or more must establish a committee (unless a special resolution is passed opting out of having this), this is not a requirement for bodies corporates of 9 units or less.
3. Long Term Maintenance Planning
All bodies corporate must establish a long term maintenance plan that must cover a period of at least 10 years. The purpose of the long term maintenance plan is to identify the future maintenance requirements and estimated costs involved.
4. Disclosure Requirements
When a property within a body corporate is being sold there is a multiple step process which consists of a pre-contract disclosure statement, pre settlement disclosure statement and may even include an additional disclosure statement. The Regulations highlight the importance of these disclosures and the legal risk to bodies corporate if they are not done correctly and in a timely manner. During the sale and purchase of a property, a purchaser can request additional information at any time and there are strict timeframes for compliance. The seller needs to ensure that any inaccuracies or change of information during the process is disclosed to the purchaser.
While the Regulations provide a guide to what needs to be captured in the three part process, there are inherent gaps for owners in self-managed bodies corporate. For example, in the pre-contract disclosure statement, there is a requirement for bodies corporate having to write explanations about unit titled property ownership.
5. Absentee Owners
Absent owners must now appoint a person in New Zealand to act as agent if they have a leased or licensed property and if they are absent for more than three consecutive weeks. This is reflected in the Residential Tenancies Act 1986 with the amendments that came into force in the later part of 2010 where investors must have a representative managing their property if they are away for more than 21 consecutive days. Owner's must supply to the body corporate the agent's name, address for service and contact details. Any person appointed as an agent including under the Residential Tenancies Act 1986 has the power to enforce the body corporate operational rules.
6. Owner's Details
Owners must notify any change in details of the information held by the body corporate. This is a welcome change and will help resolve situations where owners move and do not notify the body corporate of their whereabouts.
7. Body Corporate Operational Rules
The default rules are set out in Schedule 1 of the Regulations. These rules only highlight basic aspects of the operations of a body corporate. Most large developments have comprehensive rules that go into greater detail than just dealing with rubbish in the common areas, creating undue noise, parking requirements or interference with reasonable use or enjoyment of the common property. If a body corporate does not amend its body corporate rules the default rules will then apply.