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Unit Titles Bill - NZPIF submission

New Zealand Property Investors’ Federation Inc
PO Box 20039, Bishopdale
24 April 2009
Mr Matthew Louwrens
Social Services Select Committee Secretariat
Parliament Buildings
By Fax: 04 499 0486
Dear Mr Louwrens
NZPIF Submission on the Unit Titles BILL
The Federation welcomes and supports the Unit Titles Bill and its aim to modernise the way unit title apartments, houses, office blocks, retail and industrial buildings are built and managed.
The Unit Titles Act 1972 is 37 years old and requires substantial reform.
The Bill’s many proposals will be of benefit to unit owners and bodies corporate.
In particular, the Federation supports the proposals which:
·        Enable a 75% vote in favour of change
·        Clarify body corporate operational rules
·        Provide for the body corporate to plan for and to fund long term maintenance
·        Clarify insurance requirements
·        Mandate detailed information for purchasers, including body corporate rules, maintenance plans and audited account details
·        Enable the Tenancy Tribunal to be the first port of call for disputes
This document has been prepared by the New Zealand Property Investors’ Federation Inc. in response to a call for submissions on the Unit Titles Bill.
Established in 1983, the New Zealand Property Investors’ Federation, (NZPIF) has twenty affiliated local associations situated throughout New Zealand. It is the national body representing the interests of over 7,000 property investors on all rental property issues including cross lease and unit title developments.
The Federation welcomes and supports the Bill and its range of draft proposals - particularly those provisions which relate to body corporate powers, functions and responsibilities.
The Federation is is happy to provide the Committee with any further information it may require and wishes to be heard in person before the Social Services Committee in support of this submission.
The residential rental property industry is a vital component of New Zealand’s economy.
According to a recent survey[1] of property investors, it was estimated that there are over 300,000 landlords in New Zealand. There are no corporate or institutional residential landlords.
There are over 450,000 residential rental properties[2], housing over 600,000 tenants, and worth around $150 billion[3].
Over 165,000 people derive income from rental property. ‘Mum & dad’ landlords are common, as 42% own just one rental property and 18% own 5 or more rental properties.
The majority of landlords are using their rental income business as a mechanism for saving for retirement and are professional and committed long-term players.
There is increasing investment by private rental housing owners in multi-owner properties or developments. The legal obligations, increasingly complex, need to be in tune with developments and trends.
Clause by clause comments
The Federation addresses what it considers to be the key provisions of the Bill, in the order of the Bill.
Part 1
Preliminary provisions
Clause 5 proposes:
common property means—
(a) all the land and associated fixtures that are part of the unit title development but are not contained in a principal unit, accessory unit, or future development unit; and
(b) in the case of a subsidiary unit title development, means that part of the principal unit from which the subsidiary unit title development was subdivided that is not contained in a principal unit, accessory unit, or future development unit
The Federation submits that the Bill’s definition of common property should be broadened to include building elements that affect more than one unit.
The Federation recommends that the definition be amended to include driveways, gardens, lifts, and stairways. This would enable more flexibility to deal with the common property for the benefit of the owners.
Part 2
Unit title developments
Subpart 11 Management structures and arrangements
Meetings and voting
Clauses 75-90
The Federation strongly supports provisions that enable a 75% level of consent of unit holders on special resolutions. This will stop some owners “holding-out” and potentially delaying the implementation of, for example, repair or maintenance decisions.
Conversely, the 25% minority viewpoint is still substantial and stringent enough to enable a built-in checking mechanism.
A recent Auckland High Court decision[4] clearly illustrated the issue of “hold outs” and especially the effect of the failure of some unit owners to pay due levies. The Court ruled the owner bankrupt and had his property sold by the official assignee to pay the debt and outstanding levies.
As a further example, this rule will avert lengthy legal and court action[5] (Justice R Joyce) to remove a poor body corporate secretary performance. We note that previously some body corporate secretaries have refused to stand down citing the need for “unanimous resolution” of body corporate owners before they could be removed as secretaries.
The above comments are also relevant at clause 98 “Decision making of body corporate committee”.
Body corporate operational rules
Clause 91 (5) Body corporate operational rules
(5) All the rules referred to in this section are binding on—
(a) the body corporate; and
(b) the owners of principal units; and
(c) any person who occupies a principal unit.
It is proposed that body corporate rules are binding on “any person occupying a principal unit”.
To assist this process, the property investors we represent, who invest in properties with unit titles, need standardised agreements to present to their tenants
Beyond this, the Residential Tenancies Act (RTA) will need to reflect suitable remedy or penalty clauses that directly address any tenant violations of body corporate rules.
Tenants must appreciate that living in apartments means living within close proximity to their neighbours and this carries additional important implications and obligations than might arise from living in a traditional standalone house.
Body corporates should not be permitted to make drastic changes, which will result in t an owner losing his tenant. So some changes should not affect current tenants. For example, newly designated ‘no parking area’ should not be created when the tenant has previously been permitted to park there.
Recommendation: The Federation recommends that the RTA be amended to include reference to body corporate rules and that, as part of a tenant’s responsibility, he/she must abide by them.
Subpart 12Financial and property management
Long-term maintenance plan, funds, and ancillary matters
The Federation fully supports this subpart. A proactive approach to property maintenance will ensure repair and maintenance costs do not take on surprising or frightening proportions, such as in the case of roof repairs and repainting. Further, it might help mitigate situations whereby repairs and maintenance are put off and neglected.
For investor landlords, well-kept properties are more likely to attract better tenants and higher rentals.
Insurance of the building and its improvements is a big issue for property investors and landlords.
We support clause 121 (2) that permits indemnity cover if full replacement cover is not available in the market.
Subpart 13Disclosure of information
Disclosure of information by seller of unit
The Federation supports the proposed disclosure requirements for purchasers, unit owners and the body corporate to enable all parties to make informed choices.
For example, a purchaser will be entitled to a list of information they can view on request, such as body corporate rules, audited accounts and maintenance plans.
We note that the actual information to be disclosed is subject to regulations, which have not yet been drafted.
Part 4
Disputes, cancellation, and conversion
Clause 155
The Federation supports the proposals surrounding disputes, especially the provisions that will enable issues to be dealt with through mediation or adjudication in the Tenancy Tribunal (for amounts less than $50,000) in the first instance, rather than solely through the courts. This should result in the achieving of resolutions faster and cheaper.
As this new proposal may generate more work for the Tenancy Tribunal, the Federation recommends that sufficient resources be made available for the tribunal to carry out its expanded jurisdiction.
The current Unit Titles Act is out of date and is not meeting the needs of modern, intensive property developments. The Federation supports the updating of the Act at a time when investments in residential apartments, houses, offices, industrial and commercial premises are becoming increasingly popular.
Martin Evans

New Zealand Property Investors' Federation

[1] ANZ NZPIF Annual Survey 2007
[2] NZ Herald 19/2/09
[3] NZ Herald 10/1/07
[4] “Bankruptcies pile on misery of leaky homes” 6/4/08 Sunday Star Times
[5] “Judgement exposes property managers” 29/8/03 NBR