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Bodies Corporate the next Leaky Buildings Syndrome

Bodies Corporate the next 'Leaky Buildings Syndrome'

I am writing to inform you of an important and impending issue for the Auckland region. This is the problem currently being experienced by the more than 45,000 Aucklanders living in unit titled properties and who are automatically members of their body corporate. Research conducted by the ARC has uncovered numerous problems with how bodies corporate are being run. This research and anecdotal evidence has revealed:

1. Misappropriation of funds

2. Illegal accounting practices

3. Lack of planning for maintenance and consequent problems such as leaking and rundown buildings

4. 'Hijacking' of bodies corporate by property developers at the expense of residents

5. Body corporate companies who refuse to accept notices of dismissal

6. Bitter and costly court disputes over funds, power, and responsibilities

7. Withholding of information such as AGM minutes and financial records

8. Inflexible and unenforceable rules governing body corporates

9. Lack of understanding of body corporates by residents and owners

As an example, a fine of $50,518 has this week been delivered to a body corporate secretary for refusing to accept that they were dismissed by the people they served (see NBR 29/8/03 p62).

Every owner of a unit titled property is a member of their body corporate, though few people understand their purpose or how they are supposed to work before they purchase their apartment. The body corporate employs the services of a body corporate secretary to administer functions such as insurance, levies, and maintenance and in some cases employs a building manager. The Act governing bodies corporate, the 'Unit Titles Act 1972' is inadequate to deal with the challenges of modern apartment living.

The ARC estimates that at least 45,000 people are currently involved in bodies corporate in the Auckland region alone, but this will rise to 500,000 by 2050. It is also a significant issue in Wellington and Christchurch.

While this issue has not yet captured the headlines, it is seriously damaging the quality of life for a large minority of the population, and the lack of an adequate legislative framework to address rights, responsibilities and dispute resolution will likely lead to considerable angst and further court cases. A bewildering array of local interest stories are easily accessible. Examples of anecdotes from the ARC's research include:

"We didn't realise the body corporate secretary was a god and you had to answer to him" (an owners' committee chair in 'Bodies Corporate & Intensive Housing Jan 2003' p34)

"I know one person who had to ring sixteen times and he still didn't get the information, and all that he wanted [from the Body Corporate managment company] was a copy of the AGM minutes" (an owners' committee chair in 'Bodies Corporate & Intensive Housing Jan 2003' p37)

"To try and find a body corporate management company that is even remotely competent is impossible ... basically there aren't any good ones" (a developer in 'Bodies Corporate & Intensive Housing Jan 2003' p40)

A review of the Unit Titles Act has wide support from organisations such as Massey and Auckland Universities, the Law Society, Land Information NZ, the Auckland Regional Council, and the Auckland Regional Growth Forum.

Tim Jones, partner at legal firm Glaister Ennor recently stated that "The Act is outdated, and does not successfully regulate today's more complex relationships in unit title developments. The whole housing environment has changed radically and more sophisticated legislation is urgently required".

The ARC is taking the lead in addressing this issue through a review of the Unit Titles Act 1972. It has so far published three reports. These reports, freely available upon request from the ARC and from the ARC website, are:

· The Mysteries of Bodies Corporate: A guide to the rights and responsibilities of apartment ownership

· Bodies Corporate & Intensive Housing in Auckland

· The Unit Titles Act 1972: The Case for Review: A Discussion Report

The ARC has spoken to both the Minister for Urban Affairs, the Hon Marian Hobbs, and the Minister for Auckland, the Hon Judith Tizard, who have agreed to raise the matter with their political colleagues.

Although problems with bodies corporate committees and management companies are widespread, not all are dysfunctional and many good examples can be found. These examples show that higher density housing is not inherently bad, but is a viable form of housing for the 25% of Aucklanders who could be living in higher density developments by 2050. With the region's population approaching 2 million, higher density developments will become more common and is a major component of the Auckland Regional Growth Strategy.

Good bodies corporate would be encouraged by a good legislative framework and a cooperative mindset from all parties involved. Reviewing the relevant legislation and promoting public education will go a long way towards addressing these problems. In particular, the Auckland Regional Growth Forum would like to see legislation that incorporates compulsory registration of body corporate secretaries and a disputes resolution process.

To promote interest in this issue, a free seminar on a review of the Unit Titles Act 1972 will be held at the ARC, Vodafone House, 21 Pitt St, on the 16th September at 4pm. All are welcome to join this discussion of how common property ownership and management can be improved. This seminar will be particularly relevant to body corporate secretaries, property and building managers, owners of units and apartments, real estate agents, legal and planning professionals, valuers and surveyors, and developers.

The ARC believes this issue is both newsworthy and urgent.


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