Pressure builds on govt to fix the Unit Titles Act

ADLS is a member of the Unit Title Working Group which is lobbying the government to reform the Unit Titles Act 2010.

Joanna 

Joanna Pidgeon

The law governing New Zealand’s $50 billion apartment sector has significant gaps, particularly in relation to disclosure (which is inadequate), long-term maintenance plans, strengthening governance (such as legislating on proxy stacking and conflicts of interest), codes of conduct, professionalism for body corporate managers and better accessibility for dispute resolution (see also LawNews 7 June 2019).

So, due to ongoing inaction, FLAU – an acronym for Fix Laws on Apartments and Units – has been launched. On its behalf, Charles Levin has filed a petition urging the government to reform the law.

Along with ADLS, FLAU’s members include the Body Corporate Chairs Group (BCCG), Home Owners and Buyers Association NZ (HOBANZ), Real Estate Institute of New Zealand (REINZ) and Strata Community Association New Zealand.

The Working Group’s view is that with intensification, including Kiwibuild and the construction of other affordable housing, many of these new builds are unit titles because it is hard to have affordable freestanding homes in large cities.

So, it is more important than ever to address these issues; otherwise we are setting up people without much discretionary income to deal with flawed legislation.

How things unfolded
Since the Unit Titles Act 2010 was passed, there has been unhappiness among lawyers and body corporate managers that legislators did not listen to submissions on the Bill and passed flawed legislation. Over time, these perceptions and views were confirmed by events in the sector.

Nikki Kaye, MP of Auckland Central, received many complaints and requests for help. She galvanised the formation of the group which wrote an extensive paper and delivered it to the then Minister of Building and Housing, Nick Smith, in 2016.

The paper, and the group’s lobbying, led to an MBIE consultation which looked at proposed changes to the legislation through late 2016 and early 2017. However, the election got in the way and despite assurances from Phil Twyford that the issues would be addressed by the incoming government, to date there has been no action, apparently due to capacity issues. The government at the time was focusing on Kiwibuild and other house construction matters.

Not to be deterred, the Unit Title Working Group drafted the Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Bill, supported by Judith Collins (National’s housing and urban development spokesperson) and Nikki Kaye.

It dealt with the key issues and it was hoped the Bill could be sent to select committee, enabling people to make further submissions. But the government is not willing to do this.

What needs to happen
As a result, the Working Group has launched FLAU and Charles Levin, on behalf of the group, has filed the petition calling for urgent reform.

People’s homes are their greatest asset, and there needs to be greater transparency and greater access to key information for buyers. The essential information should be disclosed prior to purchasers entering into agreements, not later or never.

For example, the legislation currently requires disclosure only if there has been leaky building litigation, not if there may be litigation in the future, or any other litigation involving the body corporate.

While the ADLS/REINZ agreement for sale and purchase in warranties tries to address these gaps, it would be better if these matters were disclosed before an agreement was signed, rather than having to enforce a breach of warranty later.

There needs to be better quality assurance around long-term maintenance plans and their funding, and better body corporate governance, dealing with conflicts of interest, proxy stacking and other issues.

Codes of conduct for committee members and guidelines around conflict of interest have been part of Australian legislation for some time.

Professionalism and rigour around the role of body corporate managers is also desired as they can hold millions of dollars of body corporate funds with no rules or legislation about who can be a manager or how they should operate. Body corporate managers are not even referred to in the current legislation.

The lack of progress in reform to deal with the flaws and pitfalls has led to a trend for property developers to build terraced housing as fee simple developments with party wall easements, and with incorporated societies overseeing joint communal issues.

The Incorporate Societies Act 1908 is more than 100 years old. Although a Bill is to be introduced to Parliament this year, this legislation is designed more for the operation of sports clubs and charities than property ownership. Owners will not be able to refer matters to the Tenancy Tribunal for decisions.

If these incorporated societies do not deal adequately with insurance, there will be problems in situations such as natural disasters, as happened in the aftermath of the Canterbury earthquakes. This will create further problems for property owners in the future.

Lawyers and property developers will try to find a way of getting around problems and market perception (the last time we did that was with cross leases!) Our preference is for the legislation to be amended to address the gaps which have been widely identified throughout the property and legal communities.

We encourage you to sign the petition and for your colleagues, family, friends and clients to do the same.

If you are reading this digitally, the petition may be accessed by clicking on the link below.

https://www.parliament.nz/en/pb/petitions/ document/PET_92641/petition-of-charles-levinurgently-amend-the-unit-titles

Joanna Pidgeon is a partner at Pidgeon Law and the immediate past President of ADLS. 

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