Review of the Unit Titles Act 1972 - Discussion Document, May 2006
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5.4 Clarifying rules and responsibilities for management and decision-making
The Act needs to give more freedom to bodies corporate to run their developments. It also needs to explain more clearly what a body corporate must do and can choose to do.
The proposals in this section cover:
- the powers and duties of a body corporate
- how a body corporate will make decisions
- operational rules
(a) Powers and duties
Issues
The Act only states the powers and duties of the body corporate in general terms. There is not enough specific help for body corporate members to understand what they should do and the minimum acceptable standards they must work to.
The Act doesn't clearly define roles, responsibilities and relationships. The different roles of the body corporate committee, the body corporate secretary, the building manager and professional body corporate managers, for example, are often not well defined and understood. Unit owners and tenants may not know much about how the body corporate works, and may not be sure about who is doing what, how well they are doing it, and who they are responsible to.
The uncertainty can make relationships difficult, particularly relationships among tenants, absentee landlords, the body corporate and professional body corporate managers.
When clarifying roles and responsibilities, it is important to achieve a balance between flexibility between individual unit developments and the need for minimum standards of management and administration across all unit developments.
| There will be a new structure for body corporate governance, as shown in Figure 1. |
| The purpose and functions of the body corporate will be clearly stated (see P1) so that unit owners understand everyone's roles and responsibilities. |
The Act will clearly set out the powers and duties of the body corporate and will include information about: - maintenance and management of common property
- disclosure
- record-keeping
- insurance
- establishment of a long-term maintenance plan (see P59)
- establishment of a long-term maintenance fund (see P56)
|
| The Act will distinguish between relationships among unit owners, the body corporate, the body corporate committee, and employees or contractors. |
| Decision-making processes will be more flexible. The body corporate may delegate some or all of its property, administrative, management or contractual powers and duties to the body corporate committee. The body corporate may also decide which decisions it wants to vote on as a whole, and which decisions it would let the body corporate committee make. For example, the body corporate committee could make decisions within financial limits approved by the body corporate. The body corporate would then be bound by these decisions. There will be some decisions that the body corporate as a whole must vote on and that can't be delegated. |
| The body corporate committee can appoint one or more of its members to carry out some of its powers and duties. |
| The body corporate committee may employ others, on behalf of the body corporate, to carry out administration and financial management functions. For example, a professional body corporate manager could be appointed through an employment contract and, in turn, could hire, for example, a building manager, accountant, gardener and other staff. |
| Anyone engaged through an employment contract will be responsible to the body corporate committee, which will in turn be responsible to the body corporate. A contractor will not, simply because of a contract, be a member of the body corporate committee. |
| The body corporate or its committee may employ unit owners. The employee would have to disclose any potential conflict of interest. |
| The body corporate committee must report regularly to the body corporate on its activities. There must be enough detail to give all owners a clear and accurate picture of what is happening. The report must also tell owners about anything the body corporate may need to vote on in a general meeting. |
Tenants
Every tenancy agreement will include the body corporate rules, and every tenant must be informed about their obligations. The current Review of the Residential Tenancies Act 1986 will also look at this requirement. |
| An absent or unavailable landlord must appoint a New Zealand-based agent who is responsible for enforcing the terms of the tenancy. The agent must make sure tenants follow body corporate rules and will deal with other owners' complaints about tenants. The agent's contact details should be given to the body corporate. If both the landlord and agent are absent or unavailable, the body corporate will be able to act as the landlord's agent. The current Review of the Residential Tenancies Act 1986 will also look at this requirement. |
| The body corporate can use the proposed dispute resolution process if the landlord or the appointed agent cannot get a tenant to follow the body corporate rules. |
Effect of proposals
There will be less confusion if the roles, responsibilities and relationships of the people who operate and manage unit title developments are made clearer.
It will be easier for unit owners to make informed decisions about how their chosen living or working environment is managed.
The reporting requirements will make it easier for owners to see how their levies are being spent and to take part in body corporate matters.
Giving tenants more information should help landlords and/or the body corporate to manage tenants better.
| Do you agree with the proposals for governance and managing tenants? If you do, is there anything else we should consider? If you disagree, please explain why. |
| What are the advantages and disadvantages of the proposals for you? |
| Will the proposals have any financial implications for you? If so, please explain giving as much information as you can. |
(b) Voting
Issues
Decision-making can be slow and difficult. The body corporate has to unanimously agree to any changes to buildings, boundaries and common property. It also has to approve unanimously any changes to its Second Schedule rules. The High Court can allow a body corporate to go ahead with less than a 100 percent vote, but it is expensive and time-consuming to apply to the High Court.
| A '75/75 percent vote' will replace the requirement for unanimous agreement. This is defined as agreement by 75 percent of the principal unit owners who vote AND, if requested by any unit owner, 75 percent of the unit entitlement represented by those who vote. |
| A specialist tribunal will be set up and the powers of the District Court widened to help resolve problems. |
| Things that can't be changed by a vote will be included in the main body of the Act. Some of this, such as fundamental ideas about the powers and duties of bodies corporate, is currently in the Second Schedule which may change as a result of this consultation |
The Act will define the areas the whole body corporate must vote on. For example: - property and title – anything to do with land, title, title boundaries, unit plans, common property or the underlying fee simple estate
- financial management – approval of annual budgets, expenditure and levies; the long-term maintenance plan and fund
- legal – approval for the body corporate to take, defend or settle legal actions, for example, matters dealt with by the Weathertight Homes Resolution Service
- contract management – decisions to review a contract for services.
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| Operational decisions such as swimming pool hours, pets and noise restrictions will need support from at least 51 percent of the principal unit owners who vote. A 51 percent vote is enough to operate the body corporate effectively and it means that apathetic or unaffected unit owners won't hold up decisions. |
| A body corporate can call a general meeting at any time if at least 20 percent of those entitled to vote ask for one. |
Effect of proposals
Moving to a voting base of those who actually vote, rather than those who are entitled to vote, will address the issues of unit owners who are apathetic, unaffected or do not participate by choice. Unit owners who do not vote will no longer have the ability to affect or hold up the decision-making process for those who do.
People will be able to use the dispute resolution process if they have a problem (see P78).
| Do you agree with the proposals on voting? If you do, is there anything else we should consider? If you disagree, please explain why. |
| What are the advantages and disadvantages of the proposals for you? |
(c) Flexibility for body corporate operational rules
Issues
There are now many more kinds of development than were anticipated in 1972. Unit titles are now used not only for small residential developments, but also for large, mixed-use developments, residential, commercial and industrial uses, marinas, car parks, gated communities, farm parks and shopping malls, to name a few.
This means a 'one size fits all' approach to body corporate rules and procedures is not appropriate now.
| Operational rules will be flexible. They can be tailored to individual unit developments to suit size, value, design, use, the mix of occupants and the type of common property. For example, in a small residential development they might cover only resident and visitor parking, while in a commercial development they might cover customer and delivery parking, hours of business, permitted uses and signage. |
| There will be a small set of 'core provisions'. These will be rules about fundamental property rights and significant management decisions that will apply to all unit title developments. |
Effect of proposals
Each individual unit title development can have the operational rules it needs to work best.
At the same time, all unit title developments will have the same compulsory rules about property rights, financial management, and powers and duties of the body corporate.
Do you agree with the proposals on flexibility for body corporate operational rules? If you do, is there anything else
we should consider? If you disagree, please explain why. |
| What are the advantages and disadvantages of the proposals for you? |
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