Unit Titles Act 2010 And What It Means For You

Introduction

The Unit Titles Act 2010 (‘2010 Act’) and the Unit Titles Regulations 2011 (‘Regulations’) came into force on 20 June 2011 replacing the Unit Titles Act 1972 (‘1972 Act’). The 2010 Act brings in big changes to the creation, management and administration of unit title developments (a ‘UTD’) which will have a big impact on everyone with interests in UTDs – principally UTD Developers, UTD Body Corporates, and owners, occupiers & prospective purchasers of units in UTDs.

Mandatory and Operational Rules

The 2010 Act contains mandatory duties and rules (‘Mandatory Rules’) which override the provisions contained in all existing UTD Body Corporate Rules as from 20 June 2011. The Mandatory Rules are extensive and include such things as:

1. Members register (section 85).
2. Meetings and voting (sections 88 – 104).
3. Delegation of duties & powers by a UTD Body Corporate (sections 108 – 111).
4. Long term maintenance plans, funds and ancillary matters (sections 115 – 120).
5. Spending, borrowing, investing & distributing money or property (sections 130 – 131).
6. Auditing and monitoring (sections 132 & 133).
7. Duty of a UTD Body Corporate to repair and maintain (section 138).
8. Insurance (sections 134 – 137).
9. Disclosure requirements (sections 144 – 153).

The 2010 Act also contains limited operational rules (‘Operational Rules’) which can be varied by the UTD Body Corporate Rules, but will otherwise apply to existing UTD Body Corporates.

Transitional Provisions

The 2010 Act contains limited, but important, transitional provisions in respect of the Operational Rules and maintenance obligations, including the requirement for a maintenance plan. We deal with each in turn below.

1. Operational Rules
   The Operational Rules are set out in the Regulations and address issues such as damage to common property, use of common property and the right to quiet use of units. These rules will not apply to existing UTD Body Corporates until 1 October 2011. This allows UTD Body Corporates some time to review their existing rules and to consider how they would like to amend them in light of the Operational Rules.
2. Maintenance Plan and Maintenance Fund
   Under the 2010 Act it will be compulsory for UTD Body Corporates to have a maintenance plan (‘Maintenance Plan’). A Maintenance Plan needs to provide for maintenance of the common property, infrastructure and building elements of the UTD. The requirement for a Maintenance Plan does not arise until 1 October 2012, unless it is specifically adopted by the UTD Body Corporate. This will allow UTD Body Corporates some time to discuss and create an appropriate Maintenance Plan. The 2010 Act also provides for administration of a long term maintenance fund (‘Maintenance Fund’). Although it is possible to opt out of having a Maintenance Fund, it is likely that such a fund will, in most large scale UTDs like apartment buildings, be adopted and put in place (if such a fund hasn’t already been set up), as it will ensure the effectiveness of the Maintenance Plan ultimately adopted by the UTD Body Corporate. Again, any Maintenance Fund does not have to be implemented until 1 October 2012. Maintenance Plans, and any supporting Maintenance Fund, will undoubtedly lead to an increase in the levies imposed on unit owners by UTD Body Corporates.

Some Significant Changes

It is worth pointing out a number of the more significant changes that will affect all UTD Body Corporates from now on – although these are by no means exhaustive!

1. Administration
   No matter the size of the UTD (whether it consists of 2 units or 100), all UTD Body Corporates are now required to establish and maintain the following:

1. an operating bank account for the purpose of meeting certain expenses such as services and amenities which benefit the UTD;
2. accounting records; and
3. a register of all unit owners.

2. Common Property
   The common property of a UTD no longer belongs jointly to the unit owners, but instead, it now belongs to the UTD Body Corporate. The UTD Body Corporate is able to deal with that common property as any owner is able to deal with its land. For example, it is able to grant rights of way or leases in respect of that common property.
3. Voting
   Significant matters put before a UTD Body Corporate now only requires 75% of the vote of the unit owners, rather than a unanimous decision, as was the position under the 1972 Act.

Disclosure on the Sale of a UTD Unit

This is a such a significant change that we thought it needed its own heading!

The vendor of a unit in a UTD (‘Unit Vendor’) now has significant disclosure obligations under the 2010 Act. Details of the information that a Unit Vendor has to disclose can be found in clause 33 of the Regulations and includes such things as:

1. Amount of the UTD Body Corporate levies.
2. Details of the maintenance to be carried out by the UTD Body Corporate in the next year.
3. Balance of every fund and bank account held by the UTD Body Corporate
4. Whether the unit or UTD Body Corporate have been the subject of a claim under the Weathertight Homes Resolution Services Act 2006.

NB: This list is not exhaustive!

If a Unit Vendor does not comply with the disclosure requirements, the purchaser will be able to refuse to settle or, cancel the sale contract.

What Now?

Most importantly, if you own or occupy a unit in a UTD, you need to be sure that your UTD Body Corporate is aware of its obligations in respect of the Mandatory Rules, so that they can be implemented. Perhaps you could provide the UTD Body Corporate with a copy of this article and if it has any questions, we would be more than happy to discuss these with the principal representative of the UTD Body Corporate.

If you are contemplating selling your unit in a UTD, then you will need to make sure that you are in a position to provide the requisite disclosure statement to any purchaser. It is worth noting that some of the disclosure requirements arise directly out of implementation of the Mandatory Rules.

Moving forward and by 1 October 2012, all UTD Body Corporates must review its existing rules in light of the Mandatory Rules and Operational Rules, and establish a Maintenance Plan. These things should be done in consultation with all of the owners of units in the UTD.

If you have any questions about the contents of this article, please do not hesitate to contact us.