KEY CHANGES TO THE UNIT TITLE AMENDMENT ACT

It is no secret that the property market has been red hot across New Zealand over the past few years. This was initially great for both sellers and purchasers, but various factors such as COVID-19 dampened homeowners’ appetite to sell, creating a shortage of existing homes. Whilst purchasers struggled with the low number of properties on the market, developers saw an opportunity to shift the way we move forward with property developments. One solution that has become increasingly common is townhouse and apartment developments, which are legally classified as unit title properties. As unit title developments continue to rise, current unit owners, prospective unit owners, and body corporate managers should be aware of the key changes to legislation that govern these types of dwellings.

What is a unit title?

A unit title property is when an owner owns a defined part of a building (such as an apartment unit) rather than the entire complex. Unit title owners often share areas such as driveways, stairs, lifts and lobbies with other owners in the building. Purchasers of unit title properties automatically become a member of the body corporate, who handle the everyday management and maintenance of that building.

Legislation governing unit titles

Unit title properties have unique rights and responsibilities to reflect both the combined and shared ownership affiliated with their unit. The Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Act (the ‘Act’) was introduced in 2020 and gained royal assent on 9 May 2022, creating major changes to how unit-title properties are governed across New Zealand. The Act was in response to a recent review of the Unit Title Amendments Act 2010. Its findings demonstrated that the current protections in place for prospective unit title purchasers were inadequate. The purpose of the Act was to reduce the risk for purchasers of units by ensuring that vendors and body corporates are strictly complying with their obligations.

Key change 1: Improvement of compulsory disclosure of information

An important amendment for prospective unit-title purchasers is the changes to disclosure requirements. Disclosures are made in statements given by the body corporate at both the pre-contract and pre-settlement stages of a property purchase. The changes imposed by the amendment provide purchasers with greater transparency during this due diligence process. Additional information that must be contained within the disclosure statement includes:

• The name and contact details of the body corporate manager;
• Any issues with weather tightness to be explained;
• Financial statements or audit reports from the previous 7 years;
• Notices and meeting minutes from the previous 3 years; and
• Whether the body corporate is involved in legal proceedings.

The proposed changes also provide prospective buyers with the right to delay or cancel settlement when pre-contract disclosure statements are incomplete or have not been provided at all. The amendments have also clarified the consequences and rights of buyers when disclosure has not been correctly completed. This means there is a greater risk for vendors that agreements could be cancelled, so it is important that vendors ensure they are meeting these requirements.

Key change 2: Strengthening body corporate governance and improving their management

The minimum standards that body corporate managers must abide by have also been increased. The role of the body corporate is now formally defined and a mandatory code of conduct has been implemented for them. It is now a requirement for body corporates to retain most records and make information available to unit owners when requested. Body corporates have greater responsibility to ensure information and compliance is up to date, and that planning and funding of long-term maintenance projects are adequate and proportionate to the size of the complex concerned.

Key change 3: Changes to compliance and dispute resolution

The last key change is the new fee structure for resolving disputes. The Tenancy Tribunal can award up to $100,000.00 in dispute resolution and also allow for costs awards to cover legal costs and disbursements. The Act also tightens compliance regimes and empowers the chief executive of Ministry of Business, Innovation and Employment, or other authorised persons with the powers of inspection, the power to issue “improvement notices” to rectify contraventions of the Unit Titles Act, and the power to issue proceedings.

The changes that have been implemented are a major step forward towards improving the governance of unit title living and strengthening protections for current and future owners. The Act is intended to strike a balance between the benefits of additional compliance requirements and any costs that these may impose, benefiting both buyers and owners alike across New Zealand.

As you can see, unit titles can be complex, so it is important to get this right. If you are looking to sell or buy a unit title property, or would like more information about how you may be impacted by these legislative changes, please contact Wakefield’s Lawyers on 04-970-3600 or email info@wakefieldslaw.com.

– Kailey Northcott (Solicitor)