Unit Titles Act Amendments - strengthening governance

Monday, November 21, 2022

The Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Act (Amendment Act) received royal assent on 9 May 2022, though the changes to the Unit Titles Act 2010 will be implemented over the following two years and will be in force by 9 May 2024.

As the name suggests, the core focus of the Amendment Act is to strengthen body corporate governance, although there are other policy and technical changes to the body corporate regime.

Below are some of the key changes to the body corporate regime under the Amendment Act.

“Large” developments

The Amendment Act introduces a separate definition of a “large” development, being ten or more units.  Large developments are subject to additional requirements, including:

  • employing or engaging a body corporate manager (unless there is a special resolution otherwise); and
  • establishing a long-term maintenance plan for thirty years or more, to be reviewed at least every three years (or as soon as practicable if the body corporate becomes aware of a matter that may have a “material impact” on the long-term maintenance plan). Long term maintenance plans must summarise the current state of the property and detail the sources of funding for the plan.

Body Corporate committee and manager Codes of Conduct

Committee members and body corporate managers must now comply with a legislative code of conduct. Both commit to acquiring an understanding of the legislation and to comply with it and the code of conduct, to act in the body corporate’s best interest, and to disclose any conflicts of interest.

For body corporate managers specifically, there is a requirement that their goods and services are provided at “competitive prices”. There are also now minimum requirements for management contracts to include, such as reporting requirements, code of conduct compliance, performance reviews, grounds for termination, the role of the manager at general meetings and record keeping.

Pre-Contract and Pre-Settlement Disclosure

The disclosure regime has been amended to provide for more fulsome disclosures requirements in a pre-contract disclosure statement (PCDS) and a pre-settlement disclosure statement (PSDS). There is also now a distinction between PCDS for an existing development and an off-the-plans development.

  • A PCDS for an existing development must now include information relating to:
    • weathertightness issues and claims;
    • earthquake prone issues;
    • proceedings involving the body corporate;
    • financial statements or audit reports for the last year years;
    • notices and minutes for the last three years;
    • body corporate manager details;
    • proposed works for the next three years; and
    • remediation reports for the last three years.

 

  • A PCDS for an off-the-plans development it must include:
    • a summary budget;
    • proposed ownership interests;
    • estimated utility interests;
    • any draft operational rules; and
    • details of any proposed service contracts.

If a PCDS or PSDS is not provided in time before settlement, or if it is inaccurate or incomplete, a purchaser may elect to defer settlement until an accurate and complete PCDS or PSDS is given.  If a PCDS or PSDS is not given, the purchaser may eventually be able to cancel the agreement in certain circumstances.

Furthermore, the ability to request additional disclosure has been removed. This is presumably because very few people relied upon it or even requested it in the first instance.

Meetings and record-keeping

Virtual attendance at meetings, such as video calling or audio-only, is now permitted regardless of what the body corporate rules provide.  There are also increased record-keeping obligations, including retaining certain documents for at least three years and producing these documents to the Ministry of Business, Innovation and Employment (MBIE) within 10 working days upon request.

MBIE powers

MBIE’s monitoring and reporting powers have been replaced with more enhanced provisions. MBIE has been given the following powers:

  • to apply for the appointment of an administrator;
  • to bring, defend, conduct, or enforce proceedings on behalf of others (with that person’s consent) where there is a health and safety risk, a serious or persistent breach or actions undermining confidence;
  • to apply for pecuniary penalty orders against body corporates and managers who have “intentionally and without reasonable excuse” breached their duties; and
  • to issue improvement notices to remedy a breach, or proactively to prevent a breach or remedy the item likely to cause a breach.

Tenancy Tribunal

The Tenancy Tribunal’s monetary jurisdiction has been extended to $100,000.00 (from $50,000.00), and fees have been reduced for Tenancy Mediators and Adjudicators.

Other items

Utility interests may now be a multiple set of interests – to allow for example, ground floor units not to pay for elevators, or commercial/retail units to pay for additional services and utility charges.

Thank you to Senior Solicitor Patrick Rozendaal and Senior Solicitor Ben Spence for preparing this article. If you would like more information regarding the Amendment Act, please contact a member of our Property Law Team.

 

Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.

 

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