Back in the late 1960s, my parents, along with my grandmother, sold their homes in Whangarei and built four flats on a spare piece of family land.
However, few people lived in high-rise apartments. The exception was a handful of converted office blocks in our major cities.
The Unit Titles Act, 1972, governed management and control of these blocks.
Suddenly there has been a great surge of development in the apartment and terrace house area. Many more New Zealanders, especially in Auckland City, are now living in apartments, and with the Auckland Council’s desire for greater population intensity, more and more will be built in the next 20 years.
The Unit Titles Act was amended in 2010, with new regulations issued in 2011, updating the out-of-date 1972 Act. Experts in the property field believe the new act is grossly inadequate to deal with the complexities of unit title property (apartment or terrace housing) ownership, and buyers often have no idea what they are buying into when they purchase an apartment. Real Estate agents and conveyancing lawyers are not always as well-informed as they should be about this specialised area.
What then are some of the potential traps?
First of all, people need to understand that the owners of any block of apartments with more than nine units are a body corporate, under the Unit Titles Act, and must be governed accordingly. So a body corporate chairperson must be elected, and a body corporate committee. All of these people must be owners. The Body Corporate then operates as a small democracy with each owner having decision-making rights about all issues concerning the complex. Pre-contract and then pre-settlement. This mostly provides financial information pertaining to the unit.
But the first thing I would do if I were considering buying an apartment, would be to contact the body corporate chairperson and discover how the body corporate functions.
You will want a copy of the unit plan for the complex, so you can see where the actual boundaries of individual property are, which walls or entrances or stairwells or any other parts of the grounds are common property for all owners, and to know how the body corporate costs are allocated to each owner, each year. Does the complex have
a long-term maintenance fund? Not compulsory, although a long-term maintenance plan is compulsory. How much is in the fund and what is the status of the maintenance plan: is it running to schedule and budget? For example, if there is no, or very little, money in the fund, will I be up for some thousands of dollars for a repaint of the whole complex next year?
Look at a copy of the complex’s body corporate rules. If there are no rules, the complex defaults to the basic set of rules outlined in the Unit Titles Act. No particular rules would cause alarm bells to ring in my head; the local rules for each complex will vary, but may include rules about pets (no dogs over 300mm in height, perhaps), use of the gymnasium or swimming pool, parking, visitors, security, signage, noise, smoking and possibly many others. Some rules will be detailed and quite prescriptive, while others are more permissive, but they can affect the culture of the living environment considerably.
Other information such as committee minutes and minutes from Extraordinary General Meetings, which it is not mandatory to give to buyers but which often tells the other half of the story, is important to investigate.
A number of wrangles between owners have been documented in the press in recent years, so due diligence before buying is critical.
Local MP Nikki Kaye, is aware of deficiencies in the Unit Titles Act, and is working with a committee of experts to come up with improvements to the act and other ways of assuring new owners, often buying their first home, that all relevant information is accessible so that they know what they are buying into.
It is a minefield, but as more New Zealanders are happy to abandon their quarter acre paradise, it is important that they know what buying into a body corporate complex really means. (JOHN ELLIOTT)