Introduction

The Unit Titles Act 2010 (the new Act) was assented to on 19 April 2010 and as a consequence of the passing of the Unit Titles Regulations 2011, the new Act came into force together with the Regulations on 20 June 2011.  The new Act replaces the Unit Titles Act 1972 (the 1972 Act) except where certain features under the 1972 Act are preserved under the transitional provisions of the new Act.

The purpose statement of the new Act set out in s 3 of the new Act states that the new Act is to provide a legal framework for the ownership and management of land and associated buildings and facilities, on a socially and economically sustainable basis by communities of individual owners, and in particular by:

• permitting subdivision of land and buildings into unit title developments comprising units either owned in stratum estate in freehold or stratum estate in leasehold or under licence;
• creating bodies corporate to manage and operate unit title developments;
• establishing a flexible and responsive regime for the governance of unit title developments; and
• to see protected the integrity of unit title developments as a whole.

The need for reform commenced in the 1990’s since the 1972 Act was only implemented to overcome subdivisional difficulties for small residential developments and not the large scale developments and mixed developments that have resulted over the last two decades.

A feature of developments as they have evolved has only served to highlight the inflexibility of the 1972 Act and inadequacies of protections to consumers.  In addition many revised Second Schedule Rules have been found wanting and has led to a growth industry in High Court cases to test the vires of such rules.

What many unit title developments have been short of is the ability to adopt proper governance and management regimes and the failure to adopt prudent maintenance and capital replacement plans and funds.  There has also been evident an apparent inability of many New Zealanders to accept that a community of interest is not like living in one’s own castle but accepting the disciplines of community ownership and need to respect and understand the environment that one has chosen to live or work in.

Finally the leaking building syndrome in New Zealand has done much to highlight the deficiencies in the 1972 Act, particularly over the demarcation between common property and principal and accessory units, and the consequential responsibility for repair and difficulties over deciding who pays.  Although the new Act has made a bold attempt to address the demarcation issue the contest of who pays remains.

What the new Act does achieve in short is the following:

• vesting of common property ownership in the body corporate and giving bodies corporate the ability to acquire additional common property and to create much more flexibility around easements and land covenants over common property;
• entrusting the body corporate with responsibility to carry out repairs beyond the common property and to include repairs also to principal units and accessory units where structural integrity of the unit title development is most put at risk;
• an adoption of a reasonably comprehensive disclosure regime by developers and sellers of bodies corporate which will need some considerable fine tuning to make it work;
• the adoption of a much needed disputes regime which will see the introduction of the Tenancy Tribunal and District Court being involved;
• the strengthening of the governance regime placing clear responsibilities on chairpersons and body corporate committees and providing for much improved financial management;
• the entrenchment of body corporate rules in the new Act;
• introduction of layered developments; and
• adoption of ownership and utility interests providing an opportunity to achieve a more fair basis for charging levies.

The reform process has been comprehensive but surprisingly there are still some reasonably significant omissions.  Also there are surprising policy decisions which in a number of cases are myopic and simply not practical, as well as there being interpretative difficulties with the new Act and Regulations which will require practitioners to fill the gaps.  Some of the omissions and difficulties are highlighted throughout this seminar paper and in the conclusion.