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Consultation on the Unit Titles Amendment Bill (UTAB)

Consultation closed on 1 February 2013

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Introduction

Purpose of this paper

The Unit Titles Act 2010 (the Act) and the Unit Titles Regulations 2011 (the Regulations) have been in force since 20 June 2011. Since commencement, the Ministry of Business, Innovation and Employment (MBIE),  formerly the Department of Building and Housing together with its partner agencies in administration of the Act, Land Information New Zealand (LINZ) and the Ministry of Justice (the Ministry), have become aware of a number of technical issues with the Act and the Regulations.

We are seeking your views on proposed amendments to the Act to address these issues.

What is the Unit Titles Act?

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.

What MBIE proposes to do to address issues in the Act

MBIE has proposed that issues in the Act be rectified by two legislative methods:

1. Statutes Amendment Bill

MBIE has proposed a series of amendments to the Act for inclusion in a Statutes Amendment Bill (SAB), which is under consideration by Parliament. The SAB is designed as a vehicle for technical, short, and non-controversial amendments to a range of Acts, and offers an effective way of remedying minor issues with legislation. We have included the list of the amendments being sought via the SAB at the end of this document for your reference and information.

2. Unit Titles Amendment Bill

MBIE also proposes to amend the Act through a Unit Titles Amendment Bill (UTAB) to resolve further technical issues.

Your comments sought

As part of the process of preparing the UTAB, MBIE now wishes to consult on the proposed amendments.

This document details the proposed amendments for inclusion in the UTAB. We invite you to consider these amendments, and to provide comments. If you are aware of other sections of the Act or Regulations which in your view contain minor and technical issues, we also invite you to bring these to our attention. Instructions on how to comment are below.

We have divided the proposed amendments to the UTAB into two sections for ease of reference. Section 1A contains minor and technical amendments, for example the correction of drafting errors. Section 1B contains details of more significant amendments relating to the monetary orders that may be made by the Tenancy Tribunal in relation to unit title disputes.

Issues out of scope of the UTAB

The UTAB is intended to address minor and technical issues with the Act. Proposed amendments which are not minor and technical (for example substantial changes in policy) are outside the scope of the UTAB, and are not eligible for inclusion.

MBIE intends to perform a full evaluation of the Act and Regulations, which is expected to commence after October 2013. This review may result in more substantial amendments to the Act and Regulations, after adequate time has passed for the collection of empirical data to support any evidence of policy issues with this legislation.

Unit Titles Regulations 2011

We intend to address issues in the Unit Titles Regulations 2011 by regulatory change at the same time as the UTAB is passed by Parliament.

A list of proposed changes to the regulations is included as Section 2, and we invite your comments.

Glossary

A glossary of the plain English definitions of the meanings of some words used in this document is provided.

For the legal definitions of terms used in this document, please refer to Section 5 of the Act.

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How to make a comment

We welcome your submission on the issues discussed in this paper by 1 February 2013.   To provide feedback  on the consultation, either

Email to: unit.titles@dbh.govt.nz 

Fax to : (04) 494 0290 (please put ‘Unit Titles Amendment Bill’ in the subject line).

Send to:

Ministry of Business, Innovation and Employment - Building and Housing Group
Level 6, 86 Customhouse Quay
PO Box 10-729
WELLINGTON 6142

Attention: Unit Titles Amendment Bill Services Team 

Official Information Act 

Please note that all responses will be public information. Responses may be the subject of requests for information under the Official Information Act 1982 (OIA). The OIA specifies that information is available on request unless there are grounds for withholding it, such as information that is commercially sensitive or personal. Any decision to withhold information requested under the OIA can be reviewed by the Ombudsman.

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Section 1: Unit Titles Amendment Bill

Section 1A. Minor and technical amendments

MBIE is proposing minor and technical amendments in 22 areas of the Act for inclusion in the UTAB. We invite you to review the list of amendments proposed and to provide your views.

1. Public works requiring a new unit plan

Section 15 of the Act contains specific provisions relating to public works under the Public Works Act 1981 where they affect a unit title development. One of the requirements of the section is that if a new unit plan or amendment to an existing unit plan is required as a result of public works, that plan or amendment must be carried out by the authority carrying out the public works, at its own expense. However, the current wording at the beginning of section 15(4) “If the body corporate requests in writing…” could be read as making this requirement optional.

MBIE proposes that this wording be amended to clarify that a new unit plan is not optional in this situation.

The change will reinforce that if a new unit plan or an amendment to an existing unit plan is required as a result of a public work, that new plan or amendment must be prepared by the authority carrying out the public work, at its own expense.

2. Documentation required on subdivision of a principal unit

Section 21 of the Act deals with an application to subdivide a principal unit in a unit title development to create a subsidiary unit title development. Under this section, the application must include both a copy of a resolution of the body corporate allowing the subdivision, and a certificate under section 216 which includes confirmation that the resolution has been passed.

Because both of these documents are evidence that the resolution approving the subdivision has been passed, including both of them in the application is a duplication.

MBIE proposes that the requirement to provide a copy of the resolution in this situation be removed, while retaining the requirement to provide the section 216 certificate.

3. Assessing ownership interest on subdivision of principal unit

Currently section 32(3)(b) of the Act requires the ownership interest of a principal unit being subdivided to be assessed before subdivision. However this requirement serves no useful purpose, as it is not appropriate for the ownership interest of a single unit to be assessed in isolation. Arranging this valuation can also cause considerable difficulties for the owner.

MBIE proposes that this requirement to obtain a valuation be removed. This will also require an amendment to section 48(b).

The result of the proposed amendment would be that the subdivision of a principal unit would no longer require its ownership interest to be reassessed.

4. Requirement to reassess ownership interest before cancellation of unit plan

Section 177 of the Act relates to the cancellation of a unit plan by the body corporate. One of the pre-requisites to cancellation of a unit plan is that the ownership interests of the units be reassessed. This is currently mandatory.

The purpose of this requirement is to ensure the unit owners’ shares in the underlying land on cancellation are fair. These shares are in proportion to the owners’ ownership interests. However, in some circumstances it may be unnecessary to carry out this reassessment, for example if a single owner owns all the units, or if the ownership interests were recently reassessed.

MBIE proposes that an amendment to the Act allow the body corporate to forego this requirement by passing a special resolution. This will allow the body corporate to proceed with cancellation of the unit plan without reassessing the ownership interests, in situations where it considers that this is unnecessary. Evidence of this resolution will need to be provided to LINZ with the application to cancel the unit plan, as an alternative to the certificate from a registered valuer reassessing the ownership interests.

5. Consent of lessee to subdivision

Section 32(1)(d) of the Act requires the consent of a number of interested parties, before a unit plan for the subdivision of a unit title development may be deposited. However, one consent that is not currently required is the consent of a tenant under a lease of the land.

MBIE proposes that where a freehold parcel of land is being subdivided into a unit title development, the consent of any tenant under a lease of that land be required. In the case of a subdivision of a leasehold parcel of land into a unit title development, the consent of any subtenant would be required.

This amendment will require the developer of a unit title development to obtain the consent of any tenant prior to the deposit of the unit plan unless the lease has been previously surrendered.

6. Recording of layered unit title developments

The effect of sections 21(1)(c) and 48(a) of the Act is that LINZ must record the entire structure of a layered unit title development on the supplementary record sheet for the head unit title development, and every subsidiary unit title development. For more complex layered unit title developments, this would be administratively difficult, as every supplementary record sheet would need to be updated for each subdivision. It could also result in crowded supplementary record sheets.

MBIE proposes that the supplementary record sheet for a unit title development in a layered unit title development be required only to show the subsidiary unit title development or developments immediately below it in the layered structure.

This will result in simpler supplementary record sheets with no loss of information, because the structure of the layered unit title development could still be ascertained by following the titles through the layers.

7. Assessment and reassessment of utility interest and ownership interest

Section 41 of the Act allows the ownership interest and utility interest for each unit to be reviewed following deposit of the unit plan. This section uses the terms reassess and reassessment, which has led to some confusion, because the initial assignment of the ownership interest and utility interest is not described as an assessment.

The wording in section 41(3) also sets out a minimum period of 36 months between assessments, which has been raised as unnecessarily long. This wording is also somewhat unclear.

MBIE proposes that the use of the terms reassess and reassessment be clarified in this section, and the required period between reassessments be reduced to 6 months.

This will result in a clearer clause, which permits a body corporate to reassess its utility interests more frequently, if it desires.

8. Distribution of funds from the sale

Section 56 of the Act covers the sale, lease or licence of the common property. Under section 56(7), the proceeds of the sale, lease or licence must be distributed in proportion to the ownership interests at the “time of sale, lease or licence”. The issue with this wording is that is not clear whether the time of sale is the date of the agreement for sale and purchase, unconditional date, or settlement date. In the case of leases or licences, it also isn’t clear how the wording applies to periodic payments. Both of these issues could lead to disputes between the unit owners.

MBIE proposes that section 56(7) be amended to make it clear that the relevant date for calculating the ownership interests is the date the payment by the purchaser, tenant or licensee is required to be made. In the case of a sale of common property, this will generally be the settlement date. In the case of a lease or licence with periodic payments, it will be the date each payment is due.

This amendment will result in more certainty around the payments to unit owners following the sale, lease or licence of the common property.

9. Covenants and easements

Sections 62 and 63 of the Act relate to the creation of easements and covenants affecting the common property and units respectively.

Statutory covenants in gross

There is currently some confusion as to whether these sections will allow the registration of covenants authorised by statute which are technically covenants in gross (for example open space covenants under the Queen Elizabeth the Second National Trust Act 1977).

MBIE proposes that these sections be amended to clarify that these statutory covenants may be entered into by unit owners and bodies corporate, and that they will require consent from the same parties as other easements and covenants.

Variation or surrender of easements in gross over common property

Section 62(3) is missing a reference to easements in gross, making it unclear whether those easements may be varied or surrendered. MBIE proposes to amend this subsection to clarify that this may be done.

Grant, variation and surrender of easements in gross over units

Section 63(2) and (3) are also missing references to easements in gross, making it unclear whether a unit owner can grant, vary or surrender an easement in gross over their unit. MBIE proposes to amend these subsections to clarify that this may be done.

Dealings with easements and covenants before the deposit of the unit plan

Currently dealings with easements and covenants over common property or units require the body corporate to pass a special resolution. This requirement effectively prevents a developer from registering easements or covenants in the same dealing as the deposit of the unit plan, which may be required where the easements are compulsory for example.

MBIE proposes to amend sections 62 and 63 of the Act to allow a developer to register easements and covenants in the same dealing as the deposit of the unit plan.

10. Redevelopment requiring amendment to unit plan

There has been some confusion around the interpretation of the words “materially affect” in section 65(1) of the Act. This section is intended to apply only to boundaries between units, and not where there is a change to the boundary of the common property (however minor). The wording materially affect has led some to the conclusion that minor adjustments to common property boundaries may fall within this section.

MBIE proposes that the wording in section 65 be amended to clarify that the section only applies in circumstances where the boundaries of the common property are unchanged.

11. Mortgagee consent to voting

Section 96(5) of the Act requires a unit owner to obtain the consent of their mortgagee before voting at a general meeting, if required to do so under the terms of the mortgage. However, if this is a contractual requirement under the terms of the mortgage, then it does not require the legislation to give it effect.

The inclusion of this subsection raises questions as to whether the a unit owner’s vote in breach of the section is invalid, or whether the chairperson is required to make an enquiry as to whether the mortgagee’s consent has been obtained.

MBIE proposes that this subsection be repealed, to avoid these interpretations. The result of this change will be that where a unit owner votes at a general meeting without obtaining the consent of their mortgagee, this may be a breach of the mortgage, but the vote will remain valid, and there will be no suggestion that the chairperson should have enquired into the issue of mortgagee consent.

12. Body corporate decision making

Section 101(1) of the Act sets out that the body corporate must make decisions to exercise its powers and duties by special resolution. With a wide interpretation of powers and duties, it could be argued that the majority of a body corporate’s decision making must be by special resolution.

This section also provides that this does not apply to duties and powers that have been delegated to the body corporate committee. The implication of this is that the body corporate cannot exercise powers and duties that have been delegated, however this is in conflict with section 110.

MBIE proposes that section 101(1) be amended to provide that a body corporate must make decisions by special resolution where this is required by the Act or regulations, and to clarify that the type of resolution required does not change when a power or function is delegated to the body corporate committee.

13. Alterations to body corporate operational rules on deposit of unit plan

The default body corporate operational rules can be altered by the developer under section 105(1) of the Act on deposit of the unit plan, or at any time afterwards by the body corporate under section 105(2).

Currently the ability for the developer to lodge the altered rules together with the unit plan is recorded as an aside in section 105(1). However, this has led to some disagreement as to whether this is enough to empower the developer to do so.

MBIE proposes that it be clarified in section 105 of the Act that alterations to the default body corporate operational rules can be deposited with the unit plan by the developer, and at any time afterwards by the body corporate. This will avoid any misinterpretation of when the body corporate operational rules may be altered.

14. Payment of ground rental

There is an inconsistency in sections 38 and 115 in the Act in relation to the payment of ground rental. Section 38(3)(g) provides that contributions to ground rental are levied in proportion to ownership interest. However, section 115(2)(d) provides that ground rental is paid out of the body corporate’s operating account, which is levied in proportion to utility interest under section 39(3)(a).

MBIE proposes that it be clarified in the Act that a unit owner’s contribution to ground rental is paid in proportion to their utility interest.

Payment of ground rental in proportion to utility interest would be administratively easier for bodies corporate, because it would allow this payment to be included with other body corporate expenses, which are also levied in proportion to the utility interest and paid into the operating account.

The proposed amendment would also give bodies corporate more flexibility in allocating ground rental payments between units, as the utility interest can be fixed by the body corporate on any fair and equitable basis, whereas the ownership interests must be in proportion to the unit values. This would allow bodies corporate to fix utility interests, having regard to the proportion of the ground rental to be paid by each unit.

15. Dealings with the leasehold estate

Variations

Section 167 of the Act allows a body corporate of a leasehold unit title development to exercise a right of renewal of the ground lease, or extend the term of that lease. However, the section does not allow variations of the terms and conditions of the ground lease, which are prevented by section 50(c).

As these variations are often desirable for both parties, MBIE proposes that the Act be amended to expressly permit the variation of the terms and conditions of the ground lease in a leasehold unit title development. It is proposed that these variations will require designated resolutions, following the process set out in the Act. Any amendment to section 167 would also clarify the process for registering renewals, extension and variations.

Preservation of unit title tenure

Where a ground lease in a leasehold unit title development is varied or renewed, this will often operate in law as a new lease, rather than a continuation of the existing lease. It has been raised that the expiry or termination of the original ground lease may wind up the unit title development, however in situations where that lease is being varied or renewed, this is unlikely to be intended.

MBIE proposes that the Act clarify that the variation or renewal of the ground lease will not wind up the unit title development. This will operate in a similar fashion to section 216 of the Property Law Act 2007, which allows a head lease to be replaced without affecting a sublease under it.

16. Merger of the base land with leasehold units

Record of merger

Section 169 of the Act covers the situation where in a unit title development either the lessor of the base land has obtained ownership of all the leasehold units, or the unit owners have obtained ownership of the fee simple interest in the base land. In the situation where the estates held by those parties are merged, the certificate of title for the fee simple interest in the base land will need to be cancelled. However, this is currently not reflected in section 169.

MBIE proposes that this section be amended to record this instruction, and clarify that the merger must be recorded on both the fee simple title (prior to cancellation) and on the supplementary record sheet for the (now) stratum freehold unit title development.

Affected instruments

Section 169 does not express how interests registered on the titles for the fee simple and stratum leasehold estates will be dealt with in the merger.

MBIE proposes that before the merger, the title for the fee simple estate must be cleared of all interests, other than the lease and any easements or covenants. Those easements and covenants will remain registered over the base land under section 61. Interests registered against the titles for the stratum leasehold estate will be brought forward onto the newly created titles for the stratum freehold estate.

17. Cancellation of a unit plan following a High Court decision

Section 189 of the Act details the process for cancellation of a unit plan following a decision of the High Court. The process allows for an application to be made to LINZ for cancellation of the unit plan within six months of the declaration. However, six months may not be enough time for all conditions imposed by the High Court to have been complied with. Further, there is not a clear purpose in having this six month time limit when no conditions have been imposed.

MBIE proposes that section 189(2) be amended so that the six month timeframe is removed, and a requirement is introduced in section 189(1)(b) that the Registrar be satisfied that any conditions imposed by the High Court have been complied with. This amendment will also require a consequential amendment to form 23 in the Unit Titles Regulations 2011.

Once amended, section 189 will remove any issues caused by the time constraint for lodgement, while allowing the Registrar to ensure that conditions imposed by the High Court have been fulfilled.

18. Insuring stand-alone units

The body corporate of a unit title development is generally responsible for insuring all buildings and other improvements in that development. One exception to this is where the units in the development are stand-alone units, in which case the body corporate may require each unit owner to insure the improvements within their own unit, under section 137(2)(a) of the Act.

For a unit to meet the definition of stand-alone unit, it must not contain buildings that are attached to buildings in other units. One issue that has been raised is that unit title developments are often made up of separate buildings, where the main structure (such as a residential dwelling) is contained in a principal unit and attached to a secondary structure (such as a garage) contained in an accessory unit. These buildings, which otherwise appear to be freestanding do not meet the definition of stand-alone unit because they cross the boundary between two units. The result of this is that they may not be separately insured by the unit owners under section 137(2)(a) of the Act.

MBIE proposes that the definition of stand-alone unit be amended to include a principal unit and adjacent accessory unit that contain attached buildings but are otherwise freestanding, provided that the units are in the same ownership.

This amendment will allow unit title developments with this unit configuration the option to have each unit owner insure the improvements in their own units. It will however require that if an attached accessory unit is sold to another unit owner, the body corporate will again need to insure all units in the development.

19. Transitional provisions

Transitional provisions are set out in subpart 5 of Part 5 of the Act. It is currently unclear how these transitional provisions apply to some processes commenced under the Unit Titles Act 1972, which now require a designated resolution under the Unit Titles Act 2010.

Where a resolution was made under the Unit Titles Act 1972 commencing one of these processes, but the process was not completed before the Unit Titles Act 2010 came into force, it is unclear how the body corporate can give effect to that resolution under section 226 because of the new requirements relating to designated resolutions.

MBIE proposes that the transitional provisions be amended to clarify that if body corporate is giving effect to a resolution made under the Unit Titles Act 1972 which would now require a designated resolution under the Unit Titles Act 2010, that body corporate is not required to meet the requirements relating to designated resolutions. It is proposed that this exception would only apply where the resolution under the Unit Titles Act 1972 was unanimous. This amendment would also be extended to processes that were commenced with the agreement or consent of all unit owners. Where the process commenced under the Unit Titles Act 1972 required the consent of a mortgagee, it is proposed that this requirement would continue to apply.

20. Certification under section 224(f) Resource Management Act 1991

It has been raised that in a staged unit title development, section 224(f) of the Resource Management Act 1991 applies only to the proposed unit development plan under section 28 of the Act, however it is difficult for a territorial authority to give a meaningful certification under section 224(f) before construction work on site has progressed. When the proposed unit development plan is deposited with the first stage unit plan, construction work may not have begun on the subsequent stages.

MBIE proposes that section 28 be amended to allow a territorial authority to issue a section 224(f) certificate in respect of either the proposed unit development plan, or each stage unit plan and the complete unit plan, as is currently the case for a section 224(c) certificate.

21.Unit title disputes fees structure

Currently the regulation making powers in the Act require fees for unit title disputes brought to the Tenancy Tribunal to be set as a single fee payable on application. There is a general power to set fees under section 217(n) of the Act, and this application fee is prescribed under section 86 of the Residential Tenancies Act 1986, which applies to unit title disputes by virtue of section 176 of the Act.

MBIE considers that it would be desirable for the regulation making powers under the Act to allow for fees to be set on a more flexible basis (for example charging a separate fee for mediation and adjudication services, or charging based on an hourly rate) and proposes that the Act be amended to allow this. This would allow a range of alternatives to be considered when the Tenancy Tribunal fees relating to unit title disputes are set.

22. Disclosure statements

Sections 144 to 153 relate to the disclosure of information by the seller of a unit in a unit title development to the buyer.

Disclosure with short settlement period

The pre-settlement disclosure statement must be provided under section 147(2) of the Act no later than the fifth working day before the settlement date. However, it is unclear how this subsection will operate when an agreement for sale and purchase has a short period between the date of the agreement and settlement, which will not allow the seller sufficient time to provide this disclosure statement, or the accompanying certificate under section 147(3)(b). This situation may lead to postponement of settlement, or cancellation of the agreement for sale and purchase under sections 149 and 151 of the Act respectively.

An additional disclosure statement may also not able to be requested or provided where there is a short period until settlement.

MBIE proposes that an amendment to the Act clarify that the parties can contract out of the requirements to provide a pre-settlement or additional disclosure statement, which will be an option where both parties desire a short settlement period, and providing the disclosure statements is not practical. Alternatively, the parties may confirm in the agreement for sale and purchase that these disclosure statements will be still be provided, but within a shorter timeframe than is set out in the Act.

When disclosure statements are deemed to have been received

It has been raised that the relatively long timeframes for when notices are treated to have been delivered under section 205 of the Act do not work well with the relatively short timeframes for providing disclosure statements.

MBIE proposes that an amendment to section 144 of the Act allow the buyer and seller of a unit to set out in the agreement for sale and purchase the methods which a disclosure statement may be delivered, and when it is considered to have been received under each method. Where this information is not specified in the agreement, then the default requirements under section 205 will instead apply.

MBIE further proposes that the timeframe for a notice delivered by post under section 205(5) be amended to four working days.

Timeframe for cancellation by buyer

Section 151 of the Act allows a buyer to cancel and agreement for sale and purchase of a unit where the seller has not provided the pre-settlement or additional disclosure statements in the required timeframe. Cancellation under section 151(2) requires 10 days’ notice to be given, however it is not clear what purpose this notice period serves, as the seller has no opportunity to remedy the breach. This requirement makes it unclear whether the buyer has an obligation to settle, if the settlement date falls within the 10 day period.

MBIE proposes that this section be amended to remove the requirement for 10 days’ notice, and allow the agreement for sale and purchase to be cancelled immediately by notice in these circumstances.

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Section 1B - Monetary orders

In addition to the amendments proposed above, MBIE is proposing a more significant amendment for inclusion in the UTAB, which will clarify and expand on the monetary orders that may be made by the Tenancy Tribunal (the Tribunal) in a unit title dispute.

As this proposal involves consideration of policy options with potential regulatory implications, MBIE is required to prepare a Regulatory Impact Statement when submitting this proposed amendment to Cabinet. Accordingly, this part of the document is structured around the RIS framework in order to seek your views about the different options and our proposed way forward, which will inform our development of both the proposed amendment and the RIS.

Background

The implementation of the Unit Titles Act 2010 followed a substantial review of the Unit Titles Act 1972. Under the 1972 Act, disputes would generally be heard by the Court. In contrast, under the 2010 Act, the Tribunal now has exclusive jurisdiction to hear most unit title disputes, for claims of up to $50,000. The mediation services run in conjunction with the Tribunal are also made available to the parties to a unit title dispute.

The intent of Cabinet was that the Tribunal jurisdiction would be expanded to include a unit title disputes resolution service that closely mirrored the service provided by the Tribunal for residential tenancy disputes. It was expected that unit title disputes would often be for minority relief.

The jurisdiction was expanded, but some elements under the Residential Tenancies Act 1986 (the RTA) available to the Tribunal were not carried over to unit title disputes. The whole of the jurisdiction of the Tribunal set out in section 77 of the RTA was excluded in relation to unit title disputes.

It could not have been within the contemplation and expectation of the drafters of the Act that there would be uncertainty over the limit of the Tribunal powers, such as to compromise the Tribunal’s ability to make appropriate orders to resolve unit title disputes.

There are cases currently before the Tribunal, and there may be more to come, that will require the Tribunal to direct that a party do something or refrain from doing something. It is important for the effective operation of the new jurisdiction that the Tribunal’s ability to make orders of the nature described is clarified.

Objective

When hearing unit title disputes, the orders the Tribunal can make are restricted to those orders which have been designed for application in cases involving residential tenancies.

There is some similarity between unit title and residential tenancy disputes (primarily at the level of the neighbourhood dispute variety), but a number of the unit title disputes coming before the Tribunal for resolution are significantly more complex than “everyday” residential tenancy disputes.

Concerns have been raised that the existing range of orders available to the Tribunal does not adequately equip it to deal effectively with certain types of unit title disputes. It is imperative that when bodies corporate, unit owners or other parties to unit title disputes bring their disputes to the Tribunal, that it is adequately equipped to make the necessary orders to effectively resolve and bring remedy to those disputes.

Uncertainty over the extent of the Tribunal’s ability to make orders may compromise the Tribunal and has potential to undermine a central aim of the 2010 legislation, which was to establish an effective forum for the resolution of unit title disputes.

It is not sufficient for the Tribunal to make simple findings that a party is in breach, effective resolution of disputes of this nature requires that the Tribunal has the ability to make orders which would allow the Tribunal to award damages or compensation to any party.

It has been identified that the Tribunal is lacking the power to make a number of orders which are available to it under the RTA, and are also necessary for the effective resolution of unit title disputes. A summary of these orders are:

  1. The power to order a party to do anything necessary to rectify a breach (section 77(2)(l) of the RTA).
  2. The power to order a party to refrain from doing anything which constitutes a contravention (section 77(2)(m) of the RTA).
  3. The power to order a party to pay damages or compensation (section 77(2)(n) of the RTA).
  4. The power to make orders of a consequential or ancillary nature (section 77(2)(q) of the RTA).
  5. The power to order the payment of exemplary damages (section 109(4) of the RTA).

The power to make these orders is currently excluded by the operation of section 176 of the Act. MBIE’s objective is to address these gaps in the Tribunal’s order making powers.

Statutes Amendment Bill

MBIE has proposed that the Tribunal be provided with the power to make the orders set out in items 1, 2 and 4 above through an amendment to the Act set out in the Statutes Amendment Bill. This option is preferred as an easy and obvious remedy is available.

Any attempt to remediate the problem by introducing legislative change through the mechanism of the Statutes Amendment Bill by reference to remedies currently available under the RTA cannot be seen to be controversial or difficult. The suggested amendments do no more than incorporate existing provisions available under the RTA, and that approach is entirely consistent with the current legislative approach, in that the orders available to the Tribunal are RTA orders.

Unit Titles Amendment Bill

MBIE has proposed to address the Tribunal’s lack of the powers to make the monetary orders set out in items 3 and 5 above through an amendment to the Act set out in the UTAB.

As this change has potential regulatory implications, we have identified three feasible options, which are set out below.

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Policy options

Option One is to do nothing. However, this does not address the current gaps in the Tribunal’s order making powers, carrying the risk that the Tribunal will be unable to provide a remedy in some unit title disputes. This has the potential to deny justice to some applicants, who have a legitimate expectation that the Tribunal can provide them with an effective remedy.

Option Two is to amend the Act to clarify that the Tribunal can make the order set out in section 77(2)(n) of the RTA (with necessary modifications) in relation to a unit title dispute. This amendment will confirm the Tribunal’s power to order the payment of damages or compensation in a unit title dispute.

This option will also include an amendment allowing the Tribunal to award exemplary damages against a party to a unit title dispute. The Tribunal currently has this power in relation to residential tenancy disputes, where a party has committed an unlawful act under the Residential Tenancies Act 1986. The amounts payable for various unlawful acts are set out in Schedule 1A of that Act.

Because there are a much wider range of unit title disputes than residential tenancy disputes, it may not be feasible to prescribe a definitive list of unlawful acts and associated penalties in relation to unit title disputes. Rather, MBIE proposes that the Tribunal be given a general power to award exemplary damages, where the unconscionable conduct of a party justifies the award. Awards of exemplary damages would be up to a maximum amount of $4,000, which is consistent with the maximum award for exemplary damages which the Tribunal may make under Schedule 1A of the Residential Tenancies Act 1986.

MBIE prefers this option as it offers the most effective way forward out of the various options to provide the Tribunal with the ability make these monetary orders.

Option Three is to make the amendments to the Act proposed in Option Two, but instead of a general power to order exemplary damages, the Tribunal would instead have a schedule of exemplary damages it can order in specific circumstances, in the same way that Schedule 1A currently provides a list of unlawful acts for residential tenancy disputes, and the appropriate monetary penalty.

As discussed above, because there are a much wider range of unit title disputes than residential tenancy disputes, this option may not yet be feasible. It is not possible to directly translate the residential tenancy dispute set out in Schedule 1A into unit title disputes, because the two deal with quite different subject matter.

The Act has only been in place since 20 June 2011 and to date less than 80 applications have been made to the Tribunal to resolve unit title disputes. MBIE considers that more time is needed for the Act to bed down, and more empirical data can be collected about the nature and types of disputes dealt with by the Tribunal, before it would be possible to identify the range of unit title disputes and determine the appropriate penalty for those disputes. Once the Tribunal has heard a wider range of unit title disputes, it will be more viable to assess this option.

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Section 2: Unit Titles Regulations

As well as amendments to the Act, MBIE is proposing some minor and technical amendments to the Unit Titles Regulations 2011. Some changes are required as a consequence of amendments to the Act proposed in the UTAB. Other changes are to correct minor and technical errors that have been identified in the Regulations. Any amendments to the Regulations will come into force at the same time as the UTAB.

1. Register of unit owners and service of documents

There has been some confusion as to whether the contact details held in the register of unit owners can be used by the body corporate to serve documents on the unit owner in the case of a unit title dispute. MBIE proposes that an amendment to the Regulations clarify that this is permitted.

2. Notice periods for layered unit title developments

Regulations 7 and 8 set out the notice periods for the body corporate of a layered unit title development, when giving notices relating to general meetings. However, those notice periods do not take into account that a layered unit title development may have more than 2 layers.

MBIE proposes that these notice periods be pegged to the number of subsidiary unit title developments that exist below the unit title development that the general meeting relates to. This will ensure that subsidiary bodies corporate in unit title developments with more than two layers have enough time to meet and vote on issues of the parent body corporate.

3. Companies and other corporations as body corporate chairperson

The Regulations currently require the chairperson of a body corporate to be the owner of one of the principal units. Where a company owns a principal unit, it may put forward one of its directors for the position of chairperson. Where the owner is a corporation other than a company, the person put forward must be the equivalent of the director. The same applies for the subsidiary body corporate representative position, and members of the body corporate committee.

These requirements have raised issues for some companies and corporations that own units in unit title developments. Especially with larger organisations, the directors may not be available to take on the responsibilities of these roles.

MBIE proposes that a company or other corporate also be allowed to put forward an officer or employee for the roles of chairperson, subsidiary body corporate representative and committee members.

This amendment will allow a company or other corporation to put forward a person for the governance positions in the body corporate, where they do not have a director that is able to fulfil the role.

Further, MBIE proposes that a unit owner be permitted to nominate themselves for the roles of chairperson and subsidiary body corporate representative, as is currently the case for the role of committee member.

4. Duties of chairperson

Regulation 11 sets out some responsibilities that are by default carried out by the chairperson. There has been some confusion over whether accountability for these responsibilities sits with the body corporate or the chairperson personally and also whether the responsibilities may be contracted out to a contractor of the body corporate, such as a body corporate manager.

MBIE proposes that regulation 11 be amended to clarify that these are responsibilities of the body corporate which are by default carried out by the chairperson, and they may be transferred to the body corporate committee, or contracted to a third party by the body corporate.

5. Resignation of chairperson, subsidiary body corporate representative and committee members

It is not clear from Regulation 12 whether a chairperson that is acting on behalf of a company or corporation unit owner must resign if that company or corporation sells its unit. The same issues exist in Regulations 20 and 25 for the roles of subsidiary body corporate representative and committee member respectively.

MBIE proposes that the Regulations be amended to clarify that where a company or corporation unit owner sells its unit, any chairperson, subsidiary body corporate representative or committee member must resign.

6. Method of contracting

Regulation 17 sets out the way in which a body corporate must sign contracts and other enforceable obligations. There has been some confusion over which documentation this regulation applies to. In some cases with larger unit title developments, the number of documents required to be signed is also taking up significant amounts of the chairperson or body corporate committee’s time.

MBIE proposes that this regulation be expanded to cover a wider range of documents, and allow for signing of some documentation by other authorised signatories of the body corporate.

The proposed amendments to the regulation will clarify the signing requirements around other documentation commonly signed by bodies corporate, such as notices, certificates and registrable instruments, and will allow the body corporate to authorise other individuals to sign documentation, to relieve some of this burden from the chairperson or committee.

7. Forms

Some of the amendments to the UTAB and Regulations will require consequential amendments to the forms prescribed under the Act. These will be included together with any amendments to the Regulations.

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List of amendments to the Unit Titles Act 2010 sought through the Statutes Amendment Bill

MBIE is seeking to progress 20 amendments to the Unit Titles Act 2010 through the Statutes Amendment Bill. The public will have the opportunity to comment on these amendments when submissions are called by the Select Committee. Please check regularly with Parliament’s website for more details: http://www.parliament.nz/ Link to the Parliament website.

These are listed in section number order for your reference.

Section Proposed amendment
5(1) Align the definition of access lot with the definition set out in the Property Law Act 2007.
30(1)(b) Correct the cross-reference so that it includes section 64.
39(2) Include a requirement for utility interests deposited with the unit plan to be set on a fair and equitable basis, having regard to the relevant benefits and costs to the units.
55 Clarify the operation of this section in relation to access lots.
56 Clarify that the sale of, or a lease or licence over, the common property may relate to the whole or any part.
60(3) Clarify that this subsection also applies to covenants.
86(5) Correct the cross reference to subsection (3), which should instead refer to subsection (4).
89(1) Clarify that the first annual general meeting of the body corporate must be within six months after the later of the two events set out in this subsection.
100(3) Clarify that an ordinary resolution where a poll is requested must be passed by the majority.
104(3) Clarify that an ordinary resolution without a general meeting must be passed by the majority.
127 Correct the reference to the body corporate rules, which should be to the body corporate operational rules.
138 Clarify that the body corporate has the same obligation of repair and maintenance in relation to the items in subsections (1) and (2).
144 Confirm that disclosure statements may have the prescribed information either contained in them, or attached to them.
148 Confirm that in relation to an additional disclosure statement, the requester may request only some of the prescribed information.
166 Clarify that the Registrar may not cancel a unit plan for a leasehold unit title development where the ground lease has expired and an application for relief has been lodged, unless the Registrar is satisfied that the application for relief has been withdrawn or refused.
171 Confirm that a unit title dispute may relate to a claim for unpaid levies.
Clarify that the jurisdiction of the Tenancy Tribunal includes the power to make the orders set out in section 77(2)(l)(m) and (q) of the Residential Tenancies Act 1986.
173 Confirm that the High Court has jurisdiction to hear unit title disputes relation to the application of insurance money under section 136(4) for amounts in excess of $50,000.
210 Confirm that this section does not apply to designated resolutions.
211 Provide for a 28 day timeframe for lodging an application for relief under this section.

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Glossary

The meanings given in this glossary are plain English definitions. For the legal definitions of the terms, please refer to Section 5 (Interpretation) of the Act.

Accessory unit – a unit designed for use with any principal unit (including a garage, car parking space or storage space) and that is on the unit plan as an accessory unit.

Body corporate – an entity made up of all the unit owners in a unit title development that owns the common property, and has responsibility for a range of management and administrative functions relating to the unit title development.

Body corporate committee – a committee established by a body corporate

Common property – all the land and associated fixtures that are part of the unit title development but not contained in a principal unit, accessory unit or future development unit.

Eligible voter – a person who is over the age of 16 years and

  • whose name is on the register of owners of principal units as the owner or representative of the owner of that unit; or
  • who is the nominee of a company the name of which is on the register of owners of principal units as the representative of the owner; or
  • who is a subsidiary body corporate representative.

Head unit title development – a unit title development where at least one of its principal units is subdivided to create a subsidiary unit title development.

Layered development – a grouping of unit title developments in which there is one head unit title development and at least one subsidiary unit title development.

Ordinary resolution – a resolution passed during a body corporate meeting where a majority in the number of participating eligible voters must vote in favor of the resolution.

Ownership interest – fixed by a registered valuer based on the relative value of the unit in relation to each of the other units.

Parent body corporate – the body corporate of a parent unit title development.

Parent unit title development – the unit title development that contains the principal unit that was subdivided to create the subsidiary unit tile development.

Principal unit – a unit designed for use as a place of residence or business or for any other use of any nature, and that is on a unit plan as a principal unit.

Quorum – the persons entitled to exercise the voting power in respect of not less than 25% of the principal units and their proxies at a general meeting of a body corporate.

Stage unit plans – specify each unit and part of the common property that is so far complete with the uncompleted units marked as future development units.

Special resolution – a resolution passed during a body corporate meeting where at least 75% of eligible voters vote in favor of the resolution.

Subsidiary body corporate – the body corporate of a subsidiary unit title development.

Subsidiary unit title development – a unit title development created by a subdivision of a principal unit into another unit title development.

Unit plan – a plan that has been or is intended to be deposited under the land Transfer Act 1952 in accordance with the Unit Titles Act 2010.

Unit title development – the individual units and the common property comprising a stratum estate.

Utility interest – an interest used to apportion a unit’s contribution to the operating account and long-term maintenance account and which is the same as the ownership interest unless the body corporate decides to fix it by another method.

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