Property / Real Estate
MBIE has recently announced a review of the Unit Titles Act 2010 and published a discussion document highlighting specific areas to be considered in that review. We will keep you updated as that review progresses but in the meantime, we highlight another issue of concern that is undermining the stability of unit title management processes.
With the damage to buildings caused by the Christchurch earthquakes, and more recently, the Kaikoura and Wellington shakeups, earthquake strengthening requirements are a very real issue for all property owners. There is also the recent announcement from Nick Smith, the Building and Construction Minister, that around 300 buildings in the Wellington region that have unreinforced masonry facades in busy pedestrian areas will need to be brought up to Building Code standards within 12 months.
In practical terms a large part of New Zealand is relatively low risk for earthquake damage but, that of itself, is not going to allow property owners to avoid undertaking strengthening works in accordance with proposed changes to the Building Act and its Regulations.
Owners of units in bodies corporate, with often, large numbers of units and unrelated owners, are going to need to confront some special issues, not faced by other property owners, relating to earthquake strengthening obligations.
The likely issues that need to be addressed are:
- Undertaking assessments and anticipating any upgrade costs that may arise;
- Ensuring long term maintenance budgets include such costs;
- Spreading payment of costs so owners are not surprised by one-off significant special levies;
- Managing access to complete works; and
- Dealing with landlord/tenancy issues in leased properties.
We comment on each of these issues below:
The difficulties we have seen with watertightness issues and more recently, cladding issues, especially in unit title complexes, mean that strengthening work is going to be required in conjunction with any such repair work.
Property Owners of earthquake prone buildings (being those which are less than 34% of the new building standard) have requirements to assess and undertake strengthening works within specific trime frames, which differ depending on whether they are located in low, medium or high risk areas.
Given the more recent cladding problems are only just coming to light, and a significant number of watertightness disputes have not been settled, the works required, and any associated upgrade costs, are undefined.
Anticipating upgrade costs
All properties need to be maintained and repaired. Under the proposed amendments to the Building Act and Regulations, owners of a property will need to upgrade earthquake strength to latest standards when work undertaken on a property requires Council consent.
Ensuring long term maintenance budgets include such costs
For many bodies corporate, the costs of such upgrades have not been contemplated and are not included in long term budget planning.
Spreading the requirement for payment of costs so owners are not surprised by one-off significant special levies
Unfortunately, our comments about anticipating and budgeting apply to spreading the payments too. This has resulted in major difficulties for a number of unit owners who have been required to pay special levies for unbudgeted upgrade costs.
Managing access to complete works
With many larger complexes, owners are often non-occupiers and sometimes reside offshore. Although there are provisions in the Unit Titles Act 2010 allowing management to enter without notice and consent to undertake emergency works, co-ordinating access and the likely need for vacant possession for a period of time can be difficult.
Dealing with landlord/tenancy issues in leased properties
Burdens will inevitably be placed on managers by non-occupying or offshore based owners in managing arrangements with tenants. This is especially so in the likely event that insurance held by an owner does not necessarily cover vacancy requirements for earthquake upgrades.
Where to from here?
In preparing long term maintenance plans, bodies corporate need to consider and take professional advice on what, if any, earthquake upgrading works may be required in conjunction with long term maintenance works. The likely costs of such works should be factored in as part of the long term maintenance plan.
Owners also need to review their body corporate insurance cover with their insurer and consider what insurance could be put in place to cover the costs or losses involved with the need for vacant possession.
If you are the owner of a unit title property you should be consulting with your Body Corporate Manage on these issues, and if you are considering purchasing a unit title property you should be investigating the Body Corporate's response to such issues and taking advice.
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