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Body Corporate Business Update April 2019

16 April 2019

The Importance of Proof

Is the owner at fault? If so, can you prove it? A body corporate’s power to recover costs from an at-fault owner is tied to its ability to prove the owner was at fault.

Section 127 of the Unit Titles Act 2010 (UTA) relates to the recovery of money expended where a person is at fault. It applies where a body corporate does repairs, work, or any other act (work) that it is required or authorised to do under the UTA and that work is necessary because of any:

  • or negligent act or omission
  • breach of the UTA
  • breach of the body corporate operational rules; or
  • breach of the Unit Titles Regulations 2011 (UTR)

by a unit owner, unit occupier, lessee, licensee, or invitee.

Where both of those circumstances exist (the work is authorised and necessary because of a breach), the body corporate may recover its costs from the unit owner at the time the expense was incurred, or from the unit owner at the time debt recovery proceedings are instituted. It is important to note that the body corporate’s powers are limited to cost recovery only: section 127 does not authorise charging a fine (or imposing a liquidated damages charge).

The importance of being able to prove that work was required because of a wilful or negligent act or omission or breach of the UTA, operational rules, or UTR came up in a recent decision on the Tenancy Tribunal (Body Corporate 346799 v Lai [2019] NZTT Auckland 9012682). In that case, Body Corporate 346799 claimed reimbursement under section 127 of costs associated with a flood in Mr Lai’s unit.

The Body Corporate’s claim failed due to lack of proof.

The Body Corporate claimed that, on 12 June 2018, the bathroom in Mr Lai’s unit flooded, and water from this flood entered the common property corridor outside the unit. The building manager of the unit title development engaged a contractor to clean up the water and to dry the affected parts of the unit and common property. The Body Corporate sought to recover the cost of this work from Mr Lai.

At the time, Mr Lai’s unit was rented. His tenants were however away from the unit from 7 to 18 June 2018 and so were not present when the Body Corporate alleged the flood occurred. Mr Lai (and his property manager) was first advised of the flood when he received the invoices together with some black and white photographs from the building manager and contractor

The Tenancy Tribunal’s principal finding was that there was no evidence as to what actually caused the flood. Neither the invoices, nor the photographs revealed what had caused the flood.

The Body Corporate’s position was that the Tribunal could assume that the flood “must” have been caused by some wilful or negligence act or omission or other breach by the unit owner or his tenants. The Adjudicator did not agree.

The decision records that:

  • it is for the applicant to prove its claim on the balance of probabilities
  • it is the applicant’s role to provide sufficient evidence to support its claim; and
  • it is not the Tenancy Tribunal’s role to speculate.

This decision highlights the importance of satisfying the second limb of section 127(1) – and having proof of the wrongdoing – for bodies corporate.

Matters advised on
We have recently advised bodies corporate, unit owners, and body corporate managers on the following matters:
• designated resolutions
• common property licences
• reinstatement schemes
• the implications of the boundary definition between common and unit property; and
• unpaid levies.