Unit Titles Act (UTA) under review

The government has released a discussion document on proposals for amending the unit titles law.

The review proposes differing levels of statutory compliance for body corporates depending on the size of their complex:

• 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.

The UTA currently sets out a three-part disclosure regime comprising pre-contract, pre-settlement and additional disclosure statements.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 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 include:

• Add provisions on 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.
• Introducing a committee member code of conduct including 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.

Proposals to increase professionalism in body corporate management include:

• Requiring body corporate managers to 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).
• Defining 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 include:

• Requiring that LTMPs be signed off by a member of a recognised surveying or professional group.
• Certifying that the building’s defects have been recorded in the LTMP as accurately as possible to the body corporate’s knowledge.
• 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.

If these changes proceed then they will strengthen the protections in the law and assist in the governance and long term planning for the maintenance of unit title complexes.

Alan Knowsley
Partner
Wellington