The Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Act 2022: What the changes mean and what to be aware of:

As of 9 May 2023, most amendments from the Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Act 2022 (the Act) are now in effect. The remaining sections of the Act, dealing with long term maintenance and Regulator powers, will come into effect by 9 May 2024. The detailed regulations are contained in the Unit Titles Regulations 2011 (the Regulation).

Further Requirements for Vendors

The changes to the Act have placed a greater burden on pre-contract vendor disclosure. The Act now details exactly what vendors must disclose to purchasers prior to agreement, and specifically outlines requirements for off-the-plan contracts as well as refining pre-settlement disclosure requirements.

Regulation 33 Pre-Contract Disclosure Statement

The Pre-Contract Disclosure Statement (PCDS) requires the following information for existing developments. This can be prepared by the vendor, but due to the detailed information required, it would be hard to prepare without the help of the body corporate secretary:

1.       Weathertightness issues and claims;

2.       Earthquake prone issues;

3.       Proceedings involving the body corporate;

4.       Financial statements and audit reports for the last three years;

5.       Notices and minutes for the last three years;

6.       Body corporate manager details;

7.       Proposed works for the next three years; and

8.      Remediation reports for the last three years.

For ‘off-the-plan’ developments, vendors must provide:

1.       Disclosure on a summary budget;

2.       Proposed ownership interests;

3.       Estimated utility interests;

4.       Any draft operational rules; and

5.       Details of any proposed service contracts.

Regulation 34 Pre-settlement disclosure statement

The Pre-Settlement Disclosure Statement (PSDS) now requires vendors to disclose details of any ongoing or pending proceedings, and any unresolved claims against third parties. Vendors must also disclose any changes made to body corporate operational rules since the PCDS, and this disclosure requires body corporate secretarial certification.

Copies of the templates for these disclosures can be found at www.unittitles.govt.nz/forms-and-resources/.

Failure to disclose complete and accurate information in accordance with the Act will trigger purchaser rights, which could enable purchasers to delay settlement or cancel the agreement. Purchasers are entitled to delay settlement by five working days from the date that complete and accurate disclosure is provided. This means that despite providing a statement, vendors could find themselves caught out if it is found to be to be incomplete or inaccurate.

Purchasers may also opt to cancel the agreement if disclosure is inaccurate, incomplete, or late, but must give 10 working days’ notice, thus giving the vendor time to rectify the statement. Once this notice period expires, the purchaser then has five working days to either cancel the agreement or proceed with settlement.

While pre-contract disclosure requirements are burdensome, vendors do have some protection. Section 149A(2) provides that if specific information is – despite reasonable efforts – unavailable, or that it does not exist, vendors are able to explain the absence in their PCDS. Purchaser rights to cancel will not be triggered if the lack of such information does not substantially reduce the benefits, increase the burden, or alter the agreement from what is represented.

Large Unit Title Developments

The Act now provides that developments with ten or more principal units are considered large unit title developments. Large unit title developments must have at least one elected body corporate manager, unless the body corporate opts out by special resolution. These managers are held to a strict code of conduct and must disclose any conflicts of interest.

Long Term Maintenance Plan

Section 157C provides that large unit title developments must now have thirty-year maintenance plans. Regulation 30A states that these maintenance plans must have ten years of detailed costing included, and a further twenty years of anticipated maintenance and expected costing. These plans must be reviewed every three years or as soon as practical after becoming aware of any material impacts to the plan. They must also summarise the current state of the property and detail sources of funding.

Changes to Dispute Resolution

Any disputes can be referred to the Tenancy Tribunal for mediation for a cost of $250, plus a further $250 when adjudication is necessary. The Tenancy Tribunal now has jurisdiction to hear matters of up to $100,000.

The District Court now has jurisdiction to hear matters relating to insurance monies up to $50,000 and disputes unrelated to land title from $100,000 to $350,000. The High Court has jurisdiction to hear matters relating to insurance monies greater than $50,000 and disputes unrelated to land title over $350,000.

Flexibility in Utility Interests and Charges

Developers are to assign interests and charges to all principal and accessory units, but they are now offered increased flexibility in the ability to add single or multiple interests relating to services and other amenities. Utility interests may now be assigned to specific units – for example, ground floor units may no longer be required to pay for elevator use, or commercial units may have to pay for additional services and charges. Body corporates can reassess and reassign single or multiple utility interests by special resolution.

New Powers for Regulator (MBIE)

Section 202 provides for the regulatory powers and duties of the chief executive to the Ministry of Business, Innovation and Employment (MBIE). MBIE is to monitor and assess compliance and can request documents it reasonably needs to carry out any functions. Body corporates or their managers must retain documents for a minimum of three years and must provide documents to MBIE within ten working days once requested.

Under the Act, MBIE are also able to enter units with written consent from body corporates or tenants to investigate potential breaches. The Tenancy Tribunal may also authorise MBIE entry, provided written notice is given. A new tool is now available for MBIE to remedy any breaches: the Improvement Notice, which was traditionally used in the employment sphere.  This notice may be challenged within twenty-eight days in the Tenancy Tribunal.  MBIE may also withdraw the notice or penalise non-compliance.

In the event that MBIE makes a successful application in relation to non-compliance, the Tenancy Tribunal will be empowered to order body corporates or their managers to pay pecuniary penalties. Such penalties will occur if a breach is found to be intentional and without reasonable excuse, with the maximum penalty set between $1,500 to $5,000. However, body corporates and their managers cannot be liable for more than one penalty for the same conduct.

If you have any property, construction, or litigation queries, please feel free to contact Tina Hwang or the Property Team at Queen City Law: property@qcl.co.nz

Disclaimer:
We have taken care to ensure that the information given is accurate, however it is intended for general guidance only and it should not be relied upon in individual cases. Professional advice should always be sought before any decision or action is taken.