One type of property, unit titles, involve body corporates, which are a collective of unit owners within a multi-unit building or complex.
These are typically the type of title NZ apartment blocks or townhouses have and tens of thousands of Kiwi home owners own property with this type of title.
They involve costs and specific rights and responsibilities which we’ll explain here.
There can be great advantages to owning an apartment or townhouse but because there are significant implications of unit title ownership, you’d be a fool not to at least learn about the basics.
Apartment owners will invariably be required to pay a body corporate fee or levy every year on top of their apartment’s purchase price. This fee can vary widely between apartment complexes, influenced by whether they have few shared facilities or a plethora of luxurious ones. The number of owners sharing the facilities is also important as the cost of maintaining facilities such as a swimming pool, gym, groomed gardens or shared lounges may be spread over many owners or just a few in a boutique complex.
Because there is an element of shared ownership involved owners cannot decide everything for themselves individually and will be bound by the rules of the body corporate.
Bodies corporate are bound by the Unit Titles Act 2010 and the Unit Titles Regulations 2011. These govern all unit title properties and set out the rules and regulations so they can be managed effectively.
The Unit Titles Act is supported by rules and regulations covering:
Proposed changes designed to bring about more modern and coherent updates to New Zealand’s existing Unit Titles Act 2010 are the subject of the current Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Bill.
This member’s bill under National housing spokeswoman Nicola Willis is proceeding through the process required for a bill to become law. It is not in effect at all at this stage, but more announcements are expected as it progresses.
The Body Corporate is the legal entity which “owns” the building or complex which your unit is part of.
If you are the owner of a unit, you are a member of the body corporate. You immediately become a member of it upon buying the unit and you cannot opt out of membership.
The body corporate must hold an Annual General Meeting (AGM) to discuss body corporate matters.
The amount each unit owner pays each year is typically called their body corporate fee, levy or contribution. It is important you understand how these are calculated right from the outset.
The ownership interest of your property is your share of the value of the whole property complex. It is set by a registered valuer when the unit plan is deposited with Land Information New Zealand (LINZ), and can be expressed as a percentage.
Utility interest is used to calculate how much you contribute to the operational costs of the body corporate. Unless otherwise noted with unit plan documentation, utility interest is the same number as the ownership interest. Hence the owner of a large three-bedroom apartment will pay higher body corporate fees than the owner of a small studio apartment in the same complex.
The utility interest may differ from ownership interest if the body corporate agrees that operational costs should be shared in a different proportion to ownership interest.
Many young Kiwis are accustomed to the traditional model their parents likely had, in which they owned a property outright. Here, they were solely responsible themselves for its insurance, rates and either doing their own maintenance or forking out of their own pockets for tradespeople to carry out upkeep.
But with a unit title, part of the body corporate fees you pay will go towards these things. Body corporate fees typically cover the insurance of the buildings themselves, but not the insurance covering your own possessions/contents. They’ll also go towards maintenance of the building and its shared areas, be they fancy facilities such as a swimming pool or more down-to-earth elements such as air-conditioning, driveways or parking areas.
There will be an annual contribution which each unit owner is required to pay, based on their unit’s utility interest, to enable the body corporate to meet its commitments. A body corporate might also raise a special levy for a special project.
A body corporate committee is a subset of the body corporate and is elected by its members. The body corporate may delegate some of its duties and powers to this committee, which is required to report back to the body corporate on its activities.
If a unit title property has more than nine units, the body corporate must form a committee, unless it decides not to by special resolution (which requires 75% agreement). If it has nine units or less, it can decide to establish a committee by ordinary resolution (more than 50% agreement).
The body corporate chairperson must be elected by the body corporate, usually being one of the members of the committee.
Their duties include:
The body corporate’s key powers and responsibilities include:
A body corporate can contract professionals to carry out specific management or administrative functions on its behalf, such as arranging maintenance of the common property or administering the body corporates financial activities.
However it should be noted that even if a body corporate manager is contracted to perform the tasks of operating the body corporate, responsibility still remains with the body corporate’s chairperson or committee.
All unit owners, occupiers and tenants must comply with a body corporate’s operation rules. The default operational rules (which may be amended to suit a development’s individual characteristics) are set out in the unit titles regulations. They are:
An owner or occupier of a unit must not:
Plus, an owner or occupier of a unit must dispose of rubbish hygienically and tidily.
The body corporate must hold AGMs at least once a year, so that all unit owners can discuss any issues of concern, and vote on decisions affecting the complex.