Body Corporate members obligations
All unit-titled properties are governed by the Unit Titles Act 2010 and its Regulations.
The Unit Titles Act 2010 was given assent on 19 April 2010 but was not due to go live until the accompanying Regulations were released.
On 9 May 2011, the Regulations were released and the Act went live on 20 June 2011. The new Act places greater responsibilities on Bodies Corporate, Chairpersons and Committees.
The main highlights of the changes are as follows:
Financial Management
The body corporate must hold a general account and a long term maintenance fund. The body corporate
can by special resolution (75% voting) opt not to have a long term maintenance fund. The body corporate
may hold a single fund that clearly and comprehensively identifies the separate funds. Optional accounts
include a contingency fund and capital improvement fund.
One of the more significant changes is that a body corporate cannot use funds out of its long term
maintenance fund (if it establishes one) for its general operating expenses. Long term maintenance
spending must be approved by a special resolution if any one item is more than 10% of the specified
amount for that item.
The new Act requires bodies corporate to have accurate financial records for all the funds that it manages
and requires audit/external review to take place within two months of financial year end.
Oxygen’s financial management software has been producing statements of the financial position and
financial performance of the body corporate for a couple of years now enabling Oxygen clients to be new
Act ready with their financial reporting.
Governance and Meetings
All bodies corporate must have a Chairperson regardless of their size. The Chairperson is also responsible
for calling meetings.
A body corporate of 9 principal units or less may establish a body corporate committee. Bodies corporate
with 10 or more principal units must establish a committee.
There are now two processes for calling an AGM. The first is known as an intention to hold an AGM. This
notice will need to be sent in advance of the AGM notice. The intention to hold an AGM must have a
requirement for nominations to be called for the role of Chairperson and Committee membership as well
as any items for discussion at the AGM.
The formal requirements of holding an AGM have increased. Motions must be sent in advance of the AGM.
Types of motions will range from the appointment of a Chairperson and Committee, financials, budget,
establishment or non-establishment of certain funds of the body corporate, operation of bank accounts,
fixed levy date, audit of accounts, debt collection, insurance, long term maintenance plan etc.
Procedures for voting and proxies have been detailed. Proxy votes are for a particular general meeting and
expire at the end of the general meeting for which the proxy appointment is made or if the meeting is
adjourned at the end of the reconvened meeting. Postal votes have their own formalities.
The requirements of quorums have changed with a reduction from a third to 25% (which includes postal
votes). Similar requirements (as per the old Act) apply when there is not a quorum present.
Special resolutions can now be passed with 75% of eligible voters who vote in favour to pass the special
resolution. The difficulty under the old Act where unanimous resolutions needed to be “unanimous” has
been removed so that progress is not held up by a few.
Long Term Maintenance Planning
All bodies corporate must now establish a long term maintenance plan that must cover a period of at least
10 years from the date that the plan was last reviewed. The purpose of the long term maintenance plan is
to identify the future maintenance requirements and estimated costs involved. There are several different
types of plans available ranging from the full and comprehensive to the smaller and less detailed but equally
important for maintenance planning and budgeting purposes. Oxygen has access to companies that provide
a range of reports as well as a simple report that may suit some complexes.
Disclosure Requirements
One of the most significant changes is the disclosure regime when a property is being sold. The multiple
step process consists of a pre-contract disclosure statement, pre settlement disclosure statement and
additional disclosure statement. The Regulations highlight the importance of these disclosures and the legal
risk to bodies corporate if they are not done correctly and in a timely manner.
During the sale and purchase of a property, a purchaser can request additional information at any time and
there are strict timeframes for compliance. The seller needs to ensure that any inaccuracies or change of
information during the process is disclosed to the purchaser.
While the Regulations provide a guide to what needs to be captured in the three part process, there are inherent
gaps for owners in self-managed bodies corporate. For example, in the pre-contract disclosure statement, there
is a requirement for bodies corporate having to write explanations about unit titled property ownership.
An explanation would previously been left to solicitors to explain to their clients wishing to purchase into a unit titled
property.
Absentee Owners
Absent owners must now appoint a person in New Zealand to act as agent if they have a leased or licensed
property and if they are absent for more than three consecutive weeks. This is reflected in the Residential Tenancies
Act 1986 with the amendments that came into force late last year where investors must have a representative
managing their property if they are away for more than 21 consecutive days. Owner’s must supply to the body
corporate the agent’s name, address for service and contact details. Any person appointed as an agent including
under the Residential Tenancies Act 1986 has the power to enforce the body corporate operational rules.
Owner's Details
Owners must notify any change in details of the information held by the body corporate. This is a welcome
change and will help resolve situations where owners move and do not notify the body corporate of their
whereabouts.
Body Corporate Operational Rules
The default rules are set out in Schedule 1 of the Regulations. These rules only highlight basic aspects of the
operations of a body corporate. Most large developments have comprehensive rules that go into greater detail
than rubbish in the common areas, creating undue noise, parking requirements or interference with reasonable
use or enjoyment of the common property. Bodies corporate will be able to rely on their existing rules for 15
months from 1 July 2011. If a body corporate does not amend its body corporate rules to adopt the new operational
rules within that timeframe, the default rules will then apply.
Generally:
Oxygen has been working over the last year to ensure that its systems and procedures are new Act compliant.
The Act (which includes the Regulations) requires all bodies corporate to hold an Annual General Meeting
within 6 months of the implementation date of the new Act being 20 June 2011.
The new Act places greater responsibilities on bodies corporate to ensure compliance. As an Oxygen client,
you will feel comfort in having a professional company assisting your body corporate to meet its new obligations.
