New Zealand Law Society - The search for body corporate maintenance

The search for body corporate maintenance

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Sometimes the needs of the many outweigh the needs of the few. Or the one. By this time, some will be thinking of Spock and Kirk. Some of JS Mill, more or less. And some will be thinking of body corporate maintenance.

For that is the key message of recent court decisions on body corporate maintenance and remediation. A few years ago, the Wheeldon decision (Wheeldon v Body Corporate 342525 [2016] NZCA 247) showed that body corporate maintenance obligations could arise under section 138 of the Unit Titles Act 2010 because building elements related to or served each other in economic terms, as well as in physical terms.

Last year, the Cook decision (Body Corporate 199380 v Cook [2018] NZHC 1244) showed that a body corporate will need to trace through a painstaking series of steps before deciding whether to seek recovery under section 126 or 138 of the UTA 2010. Also last year, the Gu decision (Gu v Body Corporate 211747 [2018] NZCA 396) highlighted the importance of understanding how works may benefit all owners, and not just some. And finally, also last year, the Court of Appeal declined an appeal in Otway (Body Corporate S73368 v Otway [2018] NZCA 612), holding that the substantial benefit test under s 126 of the UTA 2010 applies more narrowly than many people thought.

What these decisions emphasise is that weathertightness, fire protection, and other matters will generally be an interlinked and indivisible part of an entire building. So in Otway, at [66] we see the Court of Appeal saying: “we see the weathertightness of the entire building … as being interlinked and indivisible”, and in Gu at [71], we see that in relation to the need for a new code compliance certificate, the Court of Appeal noting:

“We can see no good reason why the costs of the additional works – incurred for the benefit of all owners – should not be apportioned between the owners by reference to their ownership interests. The additional works were not for the benefit of individual unit owners. Apportioning the cost between the owners by reference to the ownership interest of each is consistent with both the 1972 and 2010 Acts. It is also fair. The works benefit all, and all should contribute to them.”

Factual circumstances are important, and in some circumstances bodies corporate will consist of structurally separate units or elements, but the importance of economic relationships between units or building elements must, as per Wheeldon, also be kept in mind. In wording I have used elsewhere, unit owners need to be aware that rather than “my house, my castle”, the law of unit titles is better understood as “my house, part of somebody else’s castle”.

This line of case law has emerged very quickly, though the emphasis on the whole over the one – the many over the few – was foreshadowed some years ago in various commentary on the UTA 2010, as well as in cases such as Berachan Investments Ltd v Body Corporate 164025 [2012] NZCA 256. However, there are probably many remedial projects where bodies corporate or their advisers have in good faith sought to allocate costs to particular units; or sought to assess benefit in a particular way; or sought to use formulas based on an analysis of common property vs unit property – and will now find that their earlier assessments run against the broad tide of case law. Remediation projects, levying, and cost allocation are all generally more sophisticated than they used to be. But old ways can die hard, and there is often a temptation to deal with issues and problems discretely rather than holistically.

Every body corporate decision on maintenance, remediation, cost allocation, and recovery needs to be re-run through the lens of recent case law. If one of the fundamentals of our Torrens system is “title by registration”, then it could be said that one of the fundamentals of our unit titles regime is “title by registration via governance”.

And within this governance regime, the needs and interests of the many are, in recent case law, clearly held to outweigh the needs of the few or the one.

Thomas Gibbons is a director of Hamilton firm McCaw Lewis. He writes and presents extensively on property law and is author of Unit Titles Law and Practice (2nd edition) published by LexisNexis.

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