Commercial Property & the Unit Titles Act 2010

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Commercial Property & the Unit Titles Act 2010

Scope Strata Management specialises in Body Corporate administration to commercial, residential and mixed used property including commercial property within Business North Harbour.  The Scope Strata team come from a variety of property, management, banking and finance backgrounds.  In this article Steve Plummer, the Managing Director considers topical issues within commercial bodies corporate.

Long Term Maintenance Plans and Funds
The Unit Titles Act 2010 is presently under review.  One of the proposed changes is to make funding of the Long Term Maintenance Plan in full a legal requirement.  For some commercial bodies corporates current funding may be well below the yearly contributions indicated in the long term Plan.   A quick look at your Plan against funds held and the current budget will give you an understanding of your own situation.  If funding does become an obligation it may significantly increase the overall body corporate budget.  Tenants often pay the body corporate fees as part of their lease obligations. There are various schools of thought on obligations to longer term costs in lease agreements.  A contribution to the current benefit and annual wear of those longer term items is generally accepted if it can be justified.  Sometimes it may take a discussion between the landlord and tenant to ensure both parties are on the same page.

Obligation to payment of levies and other costs
Most body corporate administrators are willing to invoice the tenant for annual levies on request. However, this can also lead to a misunderstanding of the legal obligation to the levies.  The Unit Titles Act 2010 is clear that the levies raised remain the legal obligation of the owner as shown on the Certificate of Title.

Unfortunately, should a default occur on levies any legal recovery is against the unit owner, not the tenant.  The owner does have legal recourse against the tenant under their lease, but the body corporate has no legal recovery as it is not a party to that lease.  The same situation occurs where a tenant does something that incurs a cost to the body corporate.  The body corporate may elect to pass on those costs to the unit owner as an on-charge (Section 127 of the Unit Titles Act 2010).

Owner Cost v Body Corporate Cost
Leaking roofs, leaking decks and replacement of building elements often lead to the question of who pays.  The Unit Titles Act 2010 addresses these questions in Sections 80 (owners obligations), 126 (beneficial basis), and 138 (body corporate obligations).    Section 80 requires the owner to repair and maintain their unit to prevent damage, or harm to another unit, or the common property.

Section 126 addresses when the body corporate does any repair, work, or act that it is required or authorised to do and it is either substantially for the benefit of one unit, or only some of the units.  In that case the expense can be recovered from that unit/s owner where the work benefits the unit/s by a distinct and ascertainable amount.  It should be noted however that the work has to first be undertaken and paid for by the body corporate and then charged on as a recoverable – it cannot be left for those owners to resolve themselves and the cost cannot be levied to only those owners before it is addressed.  One situation could be a stand-alone unit that requires roof work to stop leaking.  The roof is shown as common property on the Unit Plan.  The body corporate repairs the roof, but decides that the cost should be charged back to that unit owner who was the sole beneficiary of the roof work.

Under Section 138 the body corporate must repair and maintain the common property, assets designed for use with the common property, assets owned by the body corporate and any building elements and infrastructure that relate to or serve more than 1 unit.  The cost incurred by the body corporate that relate to repairs to or maintenance of building elements and infrastructure contained in a unit are recoverable from the owner of that unit. The body corporate has a legal obligation to resolve building element and infrastructure issues that affect more than one unit even if they are within private property.  For example a damaged deck membrane causing leaking into another unit is the responsibility of the body corporate to resolve.  It can’t just be left up to the respective owners to address between themselves.

About the writer
By way of background Steve Plummer was formally the CEO of a body corporate management company on the North Shore before leaving in 2016 to start Scope Strata.  Having worked in the industry since 2003 Steve is considered a leader in Unit Title administration.  He was formally a board member with Business North Harbour and Co-Deputy Chair.  He has previously a member of the Architect Review Panel for the Interplex @ Albany commercial development.  He holds a Bacholour degree in Management from Massey University.

For more information on any of the matters discussed, or other general body corporate matters please feel free to contact Steve Plummer 09 320 5215, 027 67 22777, steve.plummer@scopestrata.co.nz

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Steve Plummer