The passing of the Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Bill into law, with the Royal Assent on 9 May 2022, represents a major step forward in building a more sophisticated legal framework for apartment living.

‘Apartment living’ and ‘unit titles’ are not phrases that do justice to the topic. As the title of the amendment Act indicates, a key theme is governance. Unit titles are not just about ownership or a type of tenure but also about how people live and work together, make decisions, regulate each other, resolve issues – and what bills they pay. But the issues are not just financial: they are about individual autonomy, communal interests and how people work through issues of right, wrong and in between. It has taken a long time to get to this point. Even before the Unit Titles Act 2010 was passed, technical and policy issues were identified. Many of the technical issues have been resolved through earlier amending legislation in 2013 and 2017, but the policy issues have only grown in importance as more and more New Zealanders come to live in this type of title. There have been stops and starts at a political level and while it’s not perfect, most lawyers who interact with the legislation will be breathing a sigh of relief that it has finally got through the parliamentary process.

The changes

The amendment Act does a number of things (references are to sections as amended).

•  It allows for a utility interest to be a single interest or a multiple
  set of interests – s 39(2B). While utility interests are still
  painfully difficult to change, allowing this flexibility is a positive
  step.
• It aims to clarify the extent of unit owners’ rights and
  responsibilities, through amendments to ss 79-80.
• It sets an obligation for a body corporate to keep records in
  order to allow disclosure information to be provided – s 84.
• It locks in the right of an owner or committee member to
  attend a meeting by audio-visual means – s 88.
• It clarifies that an owner must be paid up to be part of the
  quorum – s 95.
• It clarifies – fortunately – that a proxy may call a poll – s 99.
• It clarifies that matters at a body corporate meeting are to
  be decided by ordinary resolution unless the matter has been
  the position from case law.
• It allows for a vote to be in person, by proxy or electronically –
  ss 102 and 103A.
• It clarifies that a matter to be decided by special resolution cannot be delegated – s 108.
• It defaults to the body corporate chairperson and committee
  chairperson being the same person – s 112A.
• It requires a committee to have an agenda for each meeting
  and to keep written records of meetings and decisions – s 113.
• It requires the committee members to comply with a code of
  conduct. There is an obligation on committee members to
  disclose conflicts of interest and for an interests register to be
  kept: ss 114A – 114F.
• A definition of ‘body corporate manager’ has been added, being
  a person employed or engaged to undertake record-keeping,
  financial and/or regulatory compliance services. Each manager
  must have a written agreement and disclose any conflicts of
  interest. The manager must also comply with a code of conduct
  – see ss 114G – 114J.
• A decision not to have a long-term maintenance fund must be
  confirmed annually – s 117.
• The original owner’s obligations in relation to service contracts
  have been recast and extended to signage agreements.
  Contracts longer than 24 months are subject to additional
  compliance requirements – s 139.
• The disclosure provisions have been extensively written.
  Fortunately, both pre-contract disclosure and pre-settlement
  disclosure have been retained. Additional disclosure has also
  been abandoned through the repeal of s 148.
• There is an express ability for a purchaser to delay settlement
  or cancel if pre-contract disclosure is not provided properly,
  though notice and an opportunity to remedy must be given
  before these rights are exercised. Further, there are restrictions
  on the circumstances in which the cancellation remedy can be
  exercised: the seller may state that the information is
  incomplete or incorrect as full information could not be
  have substantially reduced the benefit or increased the burden
  on the buyer; or the seller may provide the missing or incorrect
  information before cancellation. The emphasis on benefits
  and burdens may be hard to show in practice but it arguably
  brings unit titles disclosure within the broader field of
  contractual remedies and helps avoid issues arising on purely
  technical grounds: see ss 146, 149, and 149A.
• Rights to delay settlement or cancel for issues with pre-
  settlement disclosure have also been rewritten. Settlement may
  be delayed or the agreement cancelled following notice and an
  opportunity for the seller to remedy the failure to properly
  disclose: ss 151 – 151A.
• Additional compliance obligations have been placed on large
  unit title developments: those with 10 or more principal units.
  A large development must have a body corporate manager
  unless there is a special resolution otherwise, and must have a
  30-year long-term maintenance plan.
• The jurisdiction of the Tenancy Tribunal has been increased
  to $100,000 and (reflecting that costs issues often have their
  challenges) detailed provisions have been added as to
  reasonable legal costs: s 176AAA.
• The tribunal has also been empowered to make pecuniary
  penalty orders where a body corporate manager has
  intentionally and unreasonably breached certain duties.
  A body corporate may also be subject to such an order in
  some instances: s 176A – D.
• New provisions as to ‘improvement notices’ have been added
  to help to remedy or prevent a contravention of the legislation
  – s 176E – I. The tribunal also exercises oversight of
  improvement notices.
• The powers for MBIE to require copies of documents or to
  inspect a unit title development have been beefed up –
  s 202A – F.

There are also changes to the regulations though there is an argument these could have been done separately as regulation changes do not need parliamentary time in the same way.

Comment

These changes are generally to be welcomed: they help New Zealand move towards a more mature unit titles environment. Issues of disclosure, governance and conflicts of interest get close attention from Australian researchers and legislatures: it is disappointing they have often received less attention here.

Not everyone will be satisfied with the changes. There are those who wish proxy farming had been more tightly regulated; there are those who consider the disclosure provisions impractical or even unworkable; and there are those who want fines and penalties extended to owners in a greater way. Getting the amendment Act into law is a great step in the right direction. But reform should not stop. As New Zealanders move towards greater intensification in the way they live and work, the law must also move to keep up. Even good law can’t resolve every neighbourly issue, but good law can at least provide a framework for constructive resolution of issues. Put simply, the changes are very much to be celebrated but there is more to be done. ■

Thomas Gibbons has a special interest in body corporate law and is the author of Unit Titles Law and Practice ■