Applying for an administrator of a dysfunctional Body Corporate

An owner in a complex of 10 apartments was considering selling his apartment some years ago.  The agent that he spoke to about listing the apartment at the time told him to go to the Body Corporate to ask for a pre-contract disclosure statement to provide to potential purchasers, which would detail levies, insurance etc.

The owner was shocked to find out that the complex was underinsured and had leaks in common areas and in other apartments that the committee knew about but had done nothing about.  It also had no Long-Term Maintenance Fund.  It transpired that the committee was not active and committee members were unaware of their obligations under the Unit Titles Act.

He had naively assumed that these sorts of matters went on in the background so had not taken much notice of the fact that it seemed his body corporate was less active than others.

For years he offered himself to take on the role of chairperson and to help get things back on track.  None of the owners (many of whom lived overseas) were interested in getting the complex compliant with the legislation.  He also approached many Body Corporate managers, but always got voted down by other owners who did not want to spend any money on managers.

He was very aware that this would drastically affect the sale price he could get for his apartment and the effect that the leaks would have on the whole building.

He took legal advice and after many attempts through the Tenancy Tribunal to get the owners to attend to things like having meetings and putting in place a Long Term Maintenance Fund, his lawyer advised him that he could look to apply for an administrator of the Body Corporate.

The Unit Titles Act allows an administrator to be appointed for a Body Corporate by application to the High Court.  Either the Body Corporate itself, a creditor of the Body Corporate, the Chief Executive of MBIE or any person having a registered interest in a unit (ie: an owner or mortgagee) can apply.

The administrator takes over the running of the Body Corporate, usually to the exclusion of the committee and chairperson (if any).  The administrator would often be a professional management company, but can sometimes be an individual such as a lawyer experienced in the unit titles area.

The period of administration can be indefinite or for a fixed period of time.

There is a relatively high level of dysfunction required in order for the Court to grant an order for an administrator.  The factors the Court takes into account are:

1. the extent of dysfunctionality in the body corporate between the unit owner members;
2. the duration of such dysfunction;
3. the apparent willingness or otherwise of the parties to cooperate to resolve the dysfunction;
4. previous attempts at resolving the issues in dispute, and the expected likelihood of such resolution occurring in the future;
5. the existence of any previous court or tribunal determinations, any relevant comments made in those decisions, and the subsequent compliance or otherwise with the orders made in those determinations;
6. the nature and seriousness of the issues in dispute;
7. any relevant professional evidence in relation to the issues in dispute;
8. whether the issues in dispute mean the body corporate is in breach of the unit titles legislation, and the extent and duration of any such breach;
9. the presence of any third parties affected by the dysfunction, and the effect, including any risk posed to them, of the dysfunction on them;
10. the operational and financial organisational structures currently in place, the extent of dysfunction in respect of those structures, and the ability or otherwise of the body corporate to operate functionally;
11. the size of the body corporate, and its ability to meet the costs of an appointed administrator; and
12. any other relevant matter.

When making an application for an administrator, the applicant must confirm who they wish to appoint and must have the consent of that person to being an administrator.

This is quite a costly and lengthy exercise, particularly if other owners challenge the application.

It is always better to try to agree amongst owners to appoint a Body Corporate manager if there is no one willing to properly run the Body Corporate.  However, it is important to be aware of the option of an administrator where you have exhausted all other options to try to ensure compliance with the law.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.