What is a unit title?
Unit titles are the most widely used form of multi-unit property ownership. Unit title developments are typically apartment blocks, units, townhouses, office blocks and industrial or retail complexes.
In a unit title development, owners own a defined part of the building, such as an apartment or unit, and may also have shared ownership in common areas such as lifts, lobbies or driveways. Collectively, all the unit owners in a unit title development make up the body corporate. The body corporate is responsible for a range of management, financial and administrative matters relating to the common property and to the building as a whole.
What is the body corporate?
The body corporate is an entity made up of all the unit owners in a unit title development – if you are a unit owner, then you are a member of the body corporate.
A body corporate is automatically created when a unit title development is created (specifically, when the unit plan for the development is deposited with Land Information New Zealand). This is usually done by the developer – a body corporate does not need to do anything else to register its existence.
Every unit title development has a body corporate, whether or not the body corporate is functional. If you don’t have a functional body corporate, you can find some tips on getting things up and running below.
Bodies corporate have “perpetual succession”, meaning they have their own identity and continue to exist despite changes in membership. When a unit owner sells their unit they are no longer a member of the body corporate, and the new unit owner becomes a member of the body corporate.
Professionals such as building managers and body corporate managers are not members of the body corporate, but they can be engaged to carry out some of the body corporate’s responsibilities on its behalf. You can find out more about building managers and body corporate managers below.
What does the body corporate do?
A body corporate is not the same as other corporations, such as companies or incorporated societies. It is a “creature of statute”, meaning a body corporate only exists because of the Act. The ability for a body corporate to act and the limits on its actions are set by statute.
The body corporate is responsible for a range of management, financial and administrative functions relating to the common property and to the development as a whole. These functions mainly relate to the things all unit owners have a shared interest in – land, money, other property – which is why all unit owners are members of the body corporate.
The Act sets out some key powers and duties of the body corporate, including:
- Owning the common property
- Managing, maintaining and repairing the common property, including common building elements and infrastructure that might not be common property
- Establishing and maintaining a long-term maintenance plan
- Keeping and maintaining a register of all unit owners calling general meetings of the body corporate
- Keeping accurate financial statements
- Insuring the development
- Levying contributions on owners to fund the operation of the body corporate
- Providing documents to unit owners, such as financial statements, meeting minutes and insurance details
- Enforcing the body corporate operational rules.
A body corporate can delegate some of its powers and duties to a body corporate committee.
Getting a body corporate up and running
If you are in a new development, there are some things you need to know to get the body corporate up and running:
- The body corporate must have its first annual general meeting as soon as possible and not more than 6 months after the date the unit plan was deposited or the first unit was sold
- At the first annual general meeting the body corporate needs to elect a chairperson
- At the first annual general meeting the body corporate should also decide whether they need a body corporate committee
- When developer has sold enough units that they no longer have control over the development, they must give the body corporate notice of that fact and call a meeting. At that meeting, the developer must provide the body corporate with a turn-over disclosure statement and disclose any interest they have in contracts made by the body corporate.
If you are in an established development but the body corporate is not operational or performing the functions required by the Act you could:
- Talk to the other unit owners and ask how they think the body corporate should be run
- Talk to other people you know who are members of a body corporate in another development
- Establish an annual social event to discuss any body corporate matters; such as property maintenance, insurance or finances
- Think about engaging a professional body corporate manager
There are a number of different professionals that provide services to bodies corporate. They are not members of the body corporate, rather, they are contracted to provide specific services.
Professional body corporate managers are one of the most common service providers to bodies corporate in New Zealand. They tend to do many of the administrative tasks on behalf of the body corporate, such as organising meetings, preparing financial statements and collecting levies.
Some developments, particularly mixed-use developments that have hotel or serviced apartment units, have building managers. The role of building managers varies. In some cases they are responsible for running the hotel or serviced apartments.
In other cases they organise repairs and maintenance of the building. Sometimes they might provide porter or reception services. The body corporate is usually responsible for paying the building manager.
Maintenance Planning Specialists
Bodies corporate are required to establish and maintain a long-term maintenance plan. Some bodies corporate might consider engaging a specialist to create the plan and update it regularly, especially if you have a large development with a lot of common property.
Many long-term maintenance specialists will provide advice on what the plan should cover, when maintenance needs to be undertaken on different parts of the building and how much it is likely to cost. Some long-term maintenance specialists will also provide advice on how much you should save to pay for maintenance in the future.
Things to consider when engaging a service provider
Regardless of what kind of service provider you are thinking about engaging, you should:
Check references. Some service providers are better than others. Find out what kind of experiences other people have had with their service provider, and ask for references.
Decide on exactly what you want a service provider to do and put it in a contract. You might want to consider having a lawyer look over the contract for you. Don’t let a service provider try to write their role into the body corporate rules and think twice about contracting with someone who tries this: you have more consumer protection if you have a contract.
What can the body corporate do about a service contract entered into by a developer?
Sometimes a developer will commit the body corporate to a contract with a service provider.
If the developer enters into a contract with a service provider that the body corporate has to honour, they must exercise reasonable skill, care and diligence and act in the best interests of the body corporate in ensuring that:
the terms of the contract achieve a fair and reasonable balance between the body corporate and the service provider
the terms of the contract are appropriate for the development
the powers and duties of the service provider are appropriate for the development and do not adversely affect the body corporate’s ability to carry out its functions.
If you are in the situation where the developer has entered into a contract on behalf of the body corporate and you think the contract is not fair, you can apply to the Tenancy Tribunal, District Court or High Court (depending on the value of the dispute) for an order:
- requiring the developer to pay the body corporate compensation for any loss or damage
- terminating the contract on the grounds it is “harsh or unconscionable.”
You should consider taking independent legal advice before making either of the above applications.
What elections are needed?
Your body corporate must hold elections at each Annual General Meeting (AGM) for the following positions:
Election of a body corporate chairperson. Because the body corporate chairperson’s term in office ends at the close of each AGM (unless they resign or are removed earlier), the body corporate must elect a chairperson by ordinary resolution at every annual general meeting. Even if your body corporate already has a chairperson, the members must elect a new one or re-elect the current one.
Election of body corporate committee members. If your body corporate has a committee, the committee members’ terms of office will also end at the close each AGM. As with the body corporate chairperson, even if your body corporate already has committee members, you must elect new ones or re-elect the current ones.
Election of a subsidiary body corporate representative. If your body corporate is a subsidiary body corporate, elections must also be held at the AGM for a subsidiary body corporate representative. The subsidiary body corporate representative’s term in office is the same as the chairperson’s, ending at the close of each AGM. Even if your body corporate already has a subsidiary body corporate representative, you must elect a new one or re-elect the current one.
What are the responsibilities of a body corporate chairperson?
The chairperson must:
- maintain the register of unit owners
- prepare the agenda for each general meeting
- chair each general meeting (unless it is agreed at the start of a general meeting that another person will chair that meeting)
- prepare minutes of each general meeting
- record resolutions voted on and whether they were passed
- keep financial accounts and records
- submit the body corporate’s financial statements to an independent auditor
- receive reports from the body corporate committee and distribute them to unit owners
- sign documents on behalf of the body corporate
- prepare and issue notices of resolutions to be passed without a general meeting
- notify unit owners of the result of any vote on a resolution to be passed without a general meeting
- notify the body corporate committee of any delegation of a duty or power by the body corporate to the body corporate committee
- undertake any other duties relating to the administration of the body corporate that the body corporate has decided by ordinary resolution to confer on the chairperson.
- The body corporate could delegate some or all of these tasks to the body corporate committee, if there is one.
The body corporate could delegate some or all of these tasks to the body corporate committee, if there is one.
The body corporate could also decide to contract a professional body corporate manager to do some or all of these tasks (as well as any other tasks that may need to be done). If your body corporate wants to enter into such an arrangement it is important for it to be clear in the contract what exactly the professional body corporate manager is contracted to do.