The Ministry of Business, Innovation and Employment (MBIE) is currently undertaking a review of the Unit Titles Act 2010 (“UTA 2010”). The review’s purpose is to ensure that the legal regime for unit titles functions well and is fit for purpose to govern the growing unit titles market.

MBIE has released a discussion document which contains proposals for amending current unit titles law to address issues identified by various stakeholders.

We summarise these proposals below. Please note that written submissions on the proposals are due to MBIE by Friday, 3 March 2017.

Size threshold requirements for more rigorous legislative requirements

The review proposes to introduce differing levels of statutory compliance criteria for bodies corporate depending on the size of their unit title complex as follows:

• Complexes under 10 units (“small”): Minimal statutory compliance requirements apply.

• Complexes with 10 to 29 units (“medium”): Rigorous statutory compliance requirements apply unless the body corporate resolves by special resolution against adopting these requirements.

• Complexes with 30 units or more (“large”): Rigorous statutory compliance requirements apply.

The compliance requirements that would then apply to medium (unless opted out of by special resolution) and large complexes are proposed to include requirements to:

• Report on the performance of delegated powers at body corporate general meetings.

• Contract a body corporate manager to perform the functions as specified by the UTA 2010.

• Have a long-term maintenance plan (“LTMP”) which complies with proposed requirements that it be signed by the body corporate chairperson and a qualified professional (discussed further below).

• Establish a compulsory long-term maintenance fund (“LTMF”) (which is currently optional).

• Perform annual audits of body corporate accounts and the LTMF.

A number of these proposals are discussed further below.

Changes to government services to the UTA sector

Stakeholders have expressed concern about a perceived lack of government stewardship for the unit title sector, including with respect to where to find information and guidance on unit title operations and a lack of connectivity between the government departments that administer the UTA 2010 (primarily MBIE and the Ministry of Justice). The review does not make any proposals on these matters, but asks for comment on the following topics:

• How government agencies responsible for the unit titles regime could achieve a more coordinated approach;

• How government can improve unit title-related services; and

• Whether a separate dedicated entity for the unit title sector should be established and, if so, what functions and responsibilities should it deliver.

Proposals to improve the UTA 2010 disclosure regime

The UTA 2010 currently sets out a three-part disclosure regime comprising pre-contract, pre-settlement and additional disclosure statements. Concerns have been expressed that this regime does not adequately protect unit buyers or ensure that they are adequately informed, and that buyers have limited options for redress for incomplete or false disclosure.

The discussion document proposes the following changes to improve the disclosure regime:

• Combine the current requirements of the pre-contract, pre-settlement and additional disclosure statements into one step.

• Add further disclosure requirements to disclosure statements including, for instance, whether the building has weather tightness issues or whether the body corporate is currently involved in court proceedings.

• Require a statutory warranty on all disclosure statements

Proposals to strengthen body corporate governance

The discussion document states that the review has considered a number of options to address perceived gaps in the current body corporate governance regime. It makes the following proposals which are intended to strengthen or clarify aspects of the governance regime:

• Add provisions to the UTA 2010 that address how to deal with conflicts of interest, including requirements to disclose conflicts of interest and to maintain an interests register.

• Require committees of large bodies corporate (30 units or more) to report on the performance of their delegated powers at every general meeting.

• Additional provisions on the duties of body corporate committee members, which would be based on the committee member code of conduct in Queensland unit titles law, and which itself includes criteria to have a commitment to understand the relevant law, to act honestly, fairly and maintain confidentiality, to take reasonable steps to comply with unit titles law and disclose any conflict of interest.

• Amend the UTA 2010 to allow bodies corporate to vary the terms of or seek to release themselves from longer-term contracts in certain circumstances.

• Amend the UTA 2010 to clarify that all duties or powers not delegated to the committee should be decided by ordinary resolution.

Proposals to increase professionalism in body corporate management

It is increasingly common for bodies corporate to employ a body corporate manager, who are integral to the effective operation and management of a complex. The discussion document contains proposals to address concerns about the adequacy of current regulation of body corporate managers. The proposed changes are as follows:

• MBIE to actively encourage the continued development of voluntary self-regulation of body corporate managers alongside industry bodies.

• Require that body corporate managers maintain membership of a professional body or group and comply with that body or group’s code of conduct.

• Medium (10 to 29 units) and large (30 units or more) complexes will be required to contract a body corporate manager (medium bodies corporate will be able to opt out of this requirement by special resolution).

• Amend the UTA 2010 to define the role and functions of body corporate managers and introduce operational criteria that managers must comply with, including with respect to financial statements and reporting to the body corporate, conflicts of interest and time limits for returning records and funds following contract termination.

Proposals to ensure adequate long-term maintenance planning

The discussion document contains proposals intended to address issues concerning current long-term maintenance planning provisions, including issues with the adequate disclosure of LTMPs to prospective purchasers, the adequacy of LTMPs and possibly establishing a separate entity to receive and ensure each body corporate’s LTMP is compliant with the UTA 2010. These proposals include:

• Requiring that LTMPs be signed by a member of a recognised surveying or professional group (such as the New Zealand Institute of Building Surveyors or the Institute of Professional Engineers New Zealand).

• Requiring that LTMPs be signed by the body corporate chairperson at the AGM, certifying that the building’s defects have been recorded in the LTMP as accurately as possible to the body corporate’s knowledge.

• Amending the UTA 2010 regulations template LTMP to require more in-depth descriptions of the current state of the common property.

• Extending the mandatory timeframe of LTMPs to 30 years for medium and large complexes.

• Requiring body corporate committees of medium and large complexes to review their LTMP every three years.

In respect of long term-term maintenance funds (LTMF) the document proposes to amend the UTA 2010 to require:

• Medium complexes (unless they opt out by special resolution) and large complexes to have a LTMF.

• Annual audits of LTMFs.

Proposals to improve accessibility to the unit titles dispute resolution regime

The discussion document also provides proposals to address issues identified with the unit titles dispute resolution regime, including fees levels and compliance with Tenancy Tribunal orders. These proposals include to:

• Reduce fees for applications to the Tenancy Tribunal and introduce reduced fees for mediation.

• Change the name of the Tenancy Tribunal to the ‘Tenancy and Unit Titles Tribunal’ to reflect its jurisdiction over unit title disputes.

Next steps

Submissions on these proposed changes to unit titles law are due to MBIE by 5pm Friday, 3 March 2017. MBIE will then develop final proposals for submission to the Government for approval and which, if approved, will form the basis for new unit titles legislation.

It is therefore vital that interested parties and stakeholders provide their views and submissions regarding these proposed changes to MBIE as soon as possible.

We are available to assist with further advice regarding the efficacy of the proposed changes or in drafting your submissions.