Cabinet Social Policy Committee - Fees Regulations to support the Unit Titles Act 2010
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Proposal
1. This paper seeks approval for fees regulations to support the Unit Titles Act 2010. In addition, I propose regulations be made clarifying how documents are served for unit title disputes. I also seek approval to repeal regulation 3(b) of the Residential Tenancies (Fees) Regulations 1998, which sets out a method of fee payment available when people apply to the Tenancy Tribunal.
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Executive summary
2. This paper reports back on public consultation agreed to by Cabinet Social Policy Committee at its meeting on 17 November 2010 [SOC Min (10) 28/5 refers] with proposals for fees regulations.
3. The public consultation process ran from 29 November 2010 to 21 January 2011. The Department of Building and Housing (the Department) invited comment on the services it and the ministry of Justice will be offering to resolve unit title disputes and the corresponding fees to access them. The Department received 15 submissions, 14 of which opposed fees set at full cost recovery and one in support.
Fees for dispute resolution
4. The proposal is to create two levels of fees payable when an application is made to the Tenancy Tribunal to resolve a unit title dispute.
5. I propose that:
- regulations define non-complex and complex disputes for the purposes of charging fees,
- regulations prescribe the fees for filing an application for a dispute under section 171 of the Unit Titles Act 2010, at $850 for non-complex disputes and $3300 for complex disputes (GST inclusive),
- regulations prescribe that the Department of Building and Housing be permitted to refund (in whole or in part, taking account of any costs incurred to date) any fees paid where an applicant does not use the dispute resolution services to resolve their dispute,
- regulations clarify the authority and process for service of documents by the Tenancy Tribunal for unit title disputes, including circumstances in which notices are deemed to have been given,
- Regulation 3(b) of the Residential Tenancies (Fees) Regulations 1998 be repealed.
These regulations may be implemented as rules made under section 116 of the Residential Tenancies Act 1986.
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Background
6. The Unit Titles Act 2010 (the Act) provides a legal framework for the ownership and management of multi-unit property developments with unit title tenure. Unit title developments are commonly flats, townhouses, apartment buildings and office blocks. There are around 18,449 unit title developments in New Zealand comprising 122,874 units (as of June 2010). In Auckland alone, up to half a million people could be living in multi-unit developments within 40 years. The Unit Titles Act 2010 impacts on all people who live and work in a unit title development.
7. The Act repeals and replaces the Unit Titles Act 1972, which was premised on a small-scale residential model.
8. Under the current 1972 Act the cost of resolving disputes, including legal representation, can vary in the District and High Courts from $2,000 to many tens of thousands. In addition the time to resolve a dispute can take up to a year in the District Court, and as long as 3 years in the High Court.
9 One of the primary intentions of the new Act is to establish an accessible, cost-effective, appropriate and timely dispute resolution process and enforcement regime for disputes relating to unit title matters [CAB Min (06) 44/2 refers].
10. The majority of the dispute resolution service will be provided by the Department, with the Ministry of Justice (the Ministry) providing adjudication services. Cabinet agreed [CAB Min (07) 10/3 refers] that the existing Tenancy Tribunal was the most appropriate jurisdiction to hear unit title disputes. The Tenancy Tribunal allows for self-representation of those involved in disputes. Legal representation is only available in the Tenancy Tribunal in a narrow category of cases, which reduces the need for costly legal representation.
11. The Act provides for regulation making powers to recover costs for services. [CAB Min (07) 10/3 refers].
12. Parties also have the option of resolving unit titles disputes through the Disputes Tribunal, which is relatively inexpensive, with fees varying from $30 to $100. However, its jurisdiction is restricted to cases up to $20,000 and which involve disputes based in contract or tort. Anecdotally, the Department understands that few unit title disputes are heard in the Disputes Tribunal.
13. The proposed dispute resolution system encourages self resolution and the avoidance of disputes in the first instance, with the option of mediation and/or adjudication only if necessary. A two-tiered fee structure is proposed, reflecting the costs of providing services (for complex and non-complex disputes). It provides quicker, more cost effective resolution of unit title disputes than the current options available and, on a full cost recovery basis, places costs where they lie.
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Consultation showed little support for fees regulations at the level proposed
14. On 17 November 2011 Cabinet Social Policy Committee (SOC):
- agreed to the release of the Unit Titles Act 2010 Fees Regulations Discussion Document on 25 November 2010, subject to the fees being set on a full cost recovery basis; and
- invited the Minister of Housing to report to Cabinet Social Policy Committee with a revised discussion document following the consultation [SOC Min (10) 28/5 refers].
15. The proposals in this paper are informed by public consultation on the Discussion Document, which attracted 15 submissions.
16. Public consultation tested the proposal that the unit titles dispute resolution process be fully funded through cost recovery. The Unit Titles Act 2010 Fees Regulations Discussion Document proposed fees at $850 for non-complex disputes requiring mediation and/or minimal adjudication and $3300 for complex disputes requiring adjudication.
17. Fourteen of the 15 submitters, including the New Zealand Law Society, opposed fees set at this level, noting:
- full cost recovery undermines the intention of the Unit Titles Act 2010 to provide accessible, cost effective, appropriate and timely dispute resolution process as directed by Cabinet in 2006 [CAB Min (06) 44/2 refers]. The New Zealand Law Society submitted that “part of the rationale behind the new Unit Titles legislation was to make dispute resolution available to unit proprietors and body corporates (sic) that avoided the present expensive and cumbersome process of taking proceedings to the High Court”.
- full cost recovery is contrary to the fundamental purpose of tribunals, to provide a cost-effective, informal and efficient alternative dispute resolution services.
- proposed fees are significantly higher than those being charged for other similar Tribunals and may be a deterrent to parties seeking resolution.
18. However, one submitter supported fees set at this level and considered that a lower fee will tend to encourage frivolous actions/claims.
19. Submissions on the discussion paper provided a mixed response on how the Department had differentiated between non-complex and complex disputes. Several submitters considered that a significant number of unit title disputes were about debt collection, which could be dealt with by minimal adjudication, and should not be categorised as complex disputes. The Department agrees and will consider debt collection issues as non-complex to address this concern.
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Fee levels for dispute resolution
20. Table One below provides an explanation of the two levels of dispute, non-complex and complex. The Department will seek advice from Parliamentary Counsel Office on how to provide for this in the regulations.
Table One: Explanation of different levels to resolve unit title disputes
| Unit titles disputes |
Non-complex |
Complex |
| Types of dispute |
Simple disputes requiring less time and cost to resolve, on the day-to-day management of the unit title development, body corporate rules, or other matters under the Act requiring simple interpretation, including disputes about:
- behaviour by other residents that affects others,
- non-compliance with the body corporate operational rules,
- failure to pay body corporate levies.
|
Complicated disputes requiring more time and cost to resolve, on the governance of the body corporate or other matters under the Act requiring complex interpretation, including disputes about:
- common property repair and maintenance,
- changes to the body corporate rules,
- other decisions and procedures of body corporate.
A dispute involving both non-complex and complex elements will be a complex dispute.
|
| Resolution method anticipated |
Mediation/minimal adjudication within 1-2 months. |
Mediation and/or adjudication within 2-3 months. |
| Volume anticipated |
750 applications per annum. |
250 applications per annum. |
21. My previous paper [SOC (10) 130 refers] discussed options for fees to access the disputes resolution system. Table Two shows Cabinet’s preferred option for consultation (Option 1), plus the second that used the existing appropriation and implementation delay to reduce the fees, while meeting Government expectations to provide access to an affordable and efficient means of dispute resolution (Option 2).
Table Two: Fees for dispute resolution type and timeframe under the 2010 Act
| Dispute type |
Resolution Type |
Time to resolve |
Option 1
Fees at full cost recovery
ex GST (inc GST)
|
Option 2
Fees set with discount
ex GST (inc GST)
|
| Non complex |
Mediation |
Within 1-2 months |
$724 ($850) |
$313 ($360) |
| Complex |
Adjudication |
Within 3 months |
$2831 ($3300) |
$1739 ($2000) |
22. Cabinet directed that consultation be done on the basis of Option 1 above, which would set fees for the dispute resolution service based on a full cost recovery basis, or $850 for non-complex disputes and $3300 for complex disputes (GST inclusive).
23. The benefit of this option is that disputes are able to be resolved without requiring further Crown appropriation and the existing appropriation can be returned to the Crown.
24. Fourteen of the 15 submitters (including the Law Society) opposed full cost recovery fees. The submitters expressed concern that the proposed fee structure may create barriers to justice and thwart the intention of the Act to provide an affordable and accessible dispute resolution process.
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Alternative proposal
25. The Department’s existing dispute resolution system provides for targeted advice education and information services, in order to encourage people to avoid disputes in the first instance and reduce disputes themselves if they do arise. Departmental experience shows parties can self-resolve with good support and tools at the first stage of contact with the Department.
26. These services enable participants to acquaint themselves with the new Act and support them to participate with confidence and encourage avoidance and/or self-resolution of disputes. Through these services, the sector will come to understand their rights and responsibilities under the Act and therefore will not require the more costly interventions of mediation and/or adjudication.
27. In order to mitigate submitters concerns with fees set at full cost recovery, I propose that $150,000 of the existing appropriation be used to deliver the targeted, client-centric advice, education and information services into the Unit Titles sector. This will in turn reduce the overarching costs of providing the complete dispute resolution system. A budget bid in the 2007-08 financial year provided an ongoing appropriation to the Department of $395,000 excluding GST to offset some of the costs [CAB Min (10) 13/5 refers].
28. Advice education and information will be designed and delivered through four key channels: web, contact centre, Department offices and direct stakeholder engagement. These channels ensure that:
- the sector can interact with the Department, informing themselves of their rights and responsibilities at times that suit them
- a low-cost form of intervention is provided, compared to mediation or adjudication by providing the right information at the right time so participants in the sector will not need higher-cost services to participate with confidence or resolve disputes.
29. The benefit of this option is that disputes are able to be avoided where possible at no cost to the parties, and if necessary resolved though mediation and/or adjudication without requiring further Crown appropriation. $245,000 of the existing appropriation can be returned to the Crown. In addition provision of these services at no cost to the sector does take into account the concerns of submitters and closely aligns with the intentions of the new Act as discussed in paragraph 8.
30. The Department will closely monitor costs and evaluate the policy intentions under the 2010 Act.
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Department be permitted to refund fees paid if applicants do not use services
31. I propose that the Department be permitted to refund (in whole or in part, taking into account of any costs incurred to date) any fees paid where an applicant does not use the mediation or adjudication services to resolve their dispute.
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Clarification of requirements to serve documents on parties
32. There are requirements for serving documents under both the Unit Titles Act 2010 and the Residential Tenancies Act 1986, and it is unclear which of these processes the Tenancy Tribunal must follow when serving documents on parties to unit title disputes.
33. I propose regulations be made clarifying how documents are served for unit title disputes, including circumstances in which notices are deemed to have been given. The regulations will avoid confusion, and provide a clear authority and process for the Tribunal to serve documents.
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Residential Tenancies (Fees) Regulations 1998
34. I also seek Cabinet approval to repeal a redundant provision of the Residential Tenancies (Fees) Regulations 1998.
35. The change is minor and technical. Regulation 3(b) allows applicants to the Tribunal to pay their application fee by way of a prepaid stamp. Payment stickers are administratively costly.
36. I propose that regulation 3(b) be repealed to remove the ability to pay an application fee by prepaid stamp. Regulation 3(a) and (c) will be retained. These allow applicants to pay their filing fee either by direct deposit at Westpac Bank, or through any other method determined by the Chief Executive of the Department of Building and Housing. Currently 50% of applications are received through the online application service.
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Consultation
37. The following government agencies were consulted on this Cabinet paper: Land Information New Zealand, the Ministry of Justice, the Treasury, the Ministry of Economic Development, Housing New Zealand Corporation and the Department of Internal Affairs. The Department of Prime Minister and Cabinet has been informed.
38. Agencies’ comments have been included in this paper where relevant.
39. The Ministry of Justice (the Ministry) :
… notes the comments from submitters that the proposed fees will undermine the fundamental purpose of the Act, which is to provide accessible, cost effective, appropriate and timely dispute resolution. Fees at this level may disincentivise people using the Tribunal service and instead continue to use services already offered by the Courts for a similar fee. The Ministry will monitor the use of the Tribunal service. The Ministry also notes that there is wider work on fee levels and Tribunal services underway and officials will report to relevant Ministers in March on this work.
40. Cabinet agreed to consultation on full cost recovery, and should the Ministry’s wider work on fee levels and tribunal services being undertaken lower Departmental costs, through any efficiency and effectiveness gains, these would be passed on.
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Financial implications
41. The financial implications for the Crown are that the Department would only return $245,000 of the $395,000 appropriation.
42. The Department will apply $150,000 of its annual funding for unit title services of $395,000 to the provision of advice, information and education services as this supports the principle of encouraging people to avoid or self-resolve disputes in the first instance, which will in turn reduce the overarching costs of providing the dispute resolution system. The remaining balance of $245,000 will be returned to the Crown.
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Human rights
43. The proposals in this paper appear to be consistent with the New Zealand Bill of Rights Act 1990 and the Human Rights Act 1993.
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Legislative implications
44. Regulations will be required to give effect to the proposals in this paper.
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Regulatory impact analysis
45. A regulatory impact statement (RIS) is attached. The Deputy Chief Executive, Service Delivery, of the Department of Building and Housing, has reviewed the RIS and considers that the information and analysis summarised in the RIS meets the quality assurance criteria.
46. The regulatory impact statement was circulated to the same agencies identified in paragraph 37.
Consistency with Government Statement on Regulation
47. I have considered the analysis and advice of my officials, as summarised in the attached RIS and I am satisfied that, apart from the risks, uncertainties and caveats already noted in this Cabinet paper, the regulatory proposals recommended in this paper:
- are required in the public interest
- will deliver the highest net benefits of the practical options available, and
- are consistent with our commitments in the Government statement “Better Regulation, Less Regulation”.
Publicity
48. I propose this Cabinet paper and supporting regulatory impact statement be released on the Department’s website once it has been considered by Cabinet.
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Recommendations
49. I recommend that the Committee:
1. note the Unit Titles Act 2010 provides a legal framework for the ownership and management of multi-unit property developments with unit title tenure
2. note that on 17 November 2011, Cabinet Social Policy Committee invited the Minister of Housing to report back to Cabinet Social Policy Committee with a revised discussed document on the results of consultation on fees regulations to support the Unit Titles Act 2010, and with proposals for fees regulations [SOC Min (10) 28/5 refers]
3. agree that non-complex and complex disputes are defined as set out in this paper
4. agree that regulations prescribe the fees for filing an application for a dispute under section 171 of the Unit Titles Act 2010 at $850 for non-complex disputes and $3300 for complex disputes (GST inclusive),
5. agree that the Department of Building and Housing be permitted to refund (in whole or in part, taking into account of any costs incurred to date) any fees paid if the applicant does not use the dispute resolution services to resolve their dispute
6. agree that regulations be made that clarify the authority and process for service of documents by the Tenancy Tribunal for unit title disputes, including circumstances in which notices are deemed to have been given
7. agree that Regulation 3(b) of the Residential Tenancies (Fees) Regulations 1998 be repealed
Other matters
8. invite the Minister of Housing to issue drafting instructions to the Parliamentary Counsel Office to give effect to the above proposals
9. agree this Cabinet paper and regulatory impact statement be published on the Department of Building and Housing website after it has been approved by Cabinet.
Hon Phil Heatley
Minister of Housing
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