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Doing Things by the Book

10 July 2019

Non-compliance with the procedural requirements of the Unit Titles Act 2010 can lead bodies corporate into strife. The Tenancy Tribunal decision, Martin v Body Corporate 71725 [2019] NZTT Christchurch 9010441, provides a useful reminder of the importance of doing things by the book.

In Martin v Body Corporate 71725, a number of unit owners applied for orders relating to Body Corporate 71725’s (Body Corporate) failure to comply with the Unit Titles Act 2010 and Unit Titles Regulations 2011. The primary issues raised by the applicants related to meeting procedures and the way levies were struck. However, the two resolutions that the decision focuses on are resolutions to: (a) opt out of having a long-term maintenance fund; and (b) raise levies on an equal shares basis (where each owner was to contribute in equal shares).

The fact that there were procedural irregularities was not disputed. The defects in the Body Corporate’s processes were acknowledged. The Tribunal, therefore, considered not what had gone wrong, but what remedy should be applied to address the Body Corporate’s failures.

The Tribunal declined to make general declarations about past meetings, but did make the following orders in respect of the annual general meeting held on 4 September 2017:

  • that the resolution to opt out of having a long-term maintenance fund was invalid because it was not passed by special resolution
  • that the resolution to raise levies on an equal shares basis was invalid because section 121 of the Unit Titles Act 2010 requires levies to be calculated on a utility interest basis; and
  • that the levies must be recalculated on a utility interest basis.

On the issue of levies, the Tribunal went on to say that: “There is no provision in the Act to raise levies on any other basis [than as provided for in section 121]. It follows that the only way that…they can be calculated on any other basis is if all owners agree on another basis.”

We disagree that unit owners can agree, even unanimously, to an alternative apportionment for levies. The Unit Titles Act 2010 does not provide for any means of raising levies other than on a utility interest basis for the operating account, long-term maintenance fund, and any contingency fund or on an ownership interest basis for any capital improvement fund.

The lesson for bodies corporate and unit owners is that it is important to comply with the procedural requirements of the Unit Titles Act 2010 and Unit Titles Regulations 2011.

Matters Advised On

We have recently advised bodies corporate, unit owners, and body corporate managers on the following matters:

  • body corporate operational rules
  • easements affecting the base land
  • the sale of common property
  • redevelopment
  • cancellation of the unit plan; and
  • recovery of unpaid levies.