The Body Corporate - an introduction

This information sheet introduces unit owners to the role of the body corporate and outlines their rights and obligations as members of a body corporate under the Unit Titles Act 2010 (the Act).

The Act provides a legal framework for the ownership and management of unit title developments, where multiple owners hold a type of property ownership known as a unit title. The Unit Titles Regulations 2011 are like a handbook supporting the Act and setting out operational guidelines for people to do.

The Act covers the creation and ownership of unit title developments, body corporate governance, the rights and obligations of the body corporate and individual unit owners, disclosure between buyers and sellers of unit titles, dispute resolution and a range of technical title and survey matters.

What is the body corporate?

The body corporate is an entity made up of all the unit owners in a unit title development - if you are a unit owner, then you are a member of the body corporate.

A body corporate is automatically created when a unit title development is created (specifically, when the unit plan for the development is deposited with Land Information New Zealand). This is usually done by the developer – a body corporate does not need to do anything else to register its existence.

Every unit title development has a body corporate, whether or not the body corporate is functional. If you don’t have a functional body corporate, you can find some tips on getting things up and running below.

Bodies corporate have “perpetual succession”, meaning they have their own identity and continue to exist despite changes in membership. When a unit owner sells their unit they are no longer a member of the body corporate, and the new unit owner becomes a member of the body corporate.

Professionals such as building managers and body corporate managers are not members of the body corporate, but they can be engaged to carry out some of the body corporate’s responsibilities on its behalf. You can find out more about building managers and body corporate managers below.

What does the body corporate do?

A body corporate is not the same as other corporations, such as companies or incorporated societies. It is a “creature of statute”, meaning a body corporate only exists because of the Act. The ability for a body corporate to act and the limits on its actions are set by statute.

The body corporate is responsible for a range of management, financial and administrative functions relating to the common property and to the development as a whole. These functions mainly relate to the things all unit owners have a shared interest in – land, money, other property – which is why all unit owners are members of the body corporate.

The Act sets out some key powers and duties of the body corporate, including:

• owning the common property
• managing, maintaining and repairing the common property, including common building elements and infrastructure that might not be common property
• establishing and maintaining a long-term maintenance plan
• keeping and maintaining a register of all unit owners
• calling general meetings of the body corporate
• keeping accurate financial statements
• insuring the development
• levying contributions on owners to fund the operation of the body corporate
• providing documents to unit owners, such as financial statements, meeting minutes and insurance details
• making and enforcing the body corporate operational rules.

A body corporate can delegate some of its powers and duties to a body corporate committee. See the “Body Corporate Governance” information sheet for more information.

Getting a body corporate up and running

If you are in a new development, there are some things you need to know to get the body corporate up and running:

• the body corporate must have its first annual general meeting as soon as possible and not more than 6 months after the date the unit plan was deposited or the first unit was sold
• at the first annual general meeting the body corporate needs to elect a chairperson
• at the first annual general meeting the body corporate should also decide whether they need a body corporate committee
• when developer has sold enough units that they no longer have control over the development, they must give the body corporate notice of that fact and call a meeting. At that meeting, the developer must provide the body corporate with a turn-over disclosure statement and disclose any interest they have in contracts made by the body corporate.

If you are in an established development but the body corporate is not operational or performing the functions required by the Act you could:

• talk to the other unit owners and ask how they think the body corporate should be run
• talk to other people you know who are members of a body corporate in another development
• establish an annual social event to discuss any body corporate matters; such as property maintenance, insurance or finances
• think about engaging a professional body corporate manager, even if it is only to get things up and running.

Professional managers

There are a number of different professionals that provide services to bodies corporate. They are not members of the body corporate, rather, they are contracted to provide specific services.

Professional body corporate managers are one of the most common service providers to bodies corporate in New Zealand. They tend to do many of the administrative tasks on behalf of the body corporate, such as organising meetings, preparing financial statements and collecting levies.

Some developments, particularly mixed-use developments that have hotel or serviced apartment units, have building managers. The role of building managers varies. In some cases they are responsible for running the hotel or serviced apartments. In other cases they organise repairs and maintenance of the building. Sometimes they might provide porter or reception services. The body corporate is usually responsible for paying the building manager.

Maintenance Planning Specialists

Bodies corporate are required to establish and maintain a long-term maintenance plan. Some bodies corporate might consider engaging a specialist to create the plan and update it regularly, especially if you have a large development with a lot of common property.

Many long-term maintenance specialists will provide advice on what the plan should cover, when maintenance needs to be undertaken on different parts of the building and how much it is likely to cost. Some long-term maintenance specialists will also provide advice on how much you should save to pay for maintenance in the future.

Things to consider when engaging a service provider

Regardless of what kind of service provider you are thinking about engaging, you should:

• Shop around. There are a number of different companies and individuals providing services to bodies corporate, so find the one that is right for you.
• Check references. Some service providers are better than others. Find out what kind of experiences other people have had with their service provider, and ask for references.
• Decide on exactly what you want a service provider to do and put it in a contract. You might want to consider having a lawyer look over the contract for you. Don’t let a service provider try to write their role into the body corporate rules and think twice about contracting with someone who tries this: you have more consumer protection if you have a contract.

What can the body corporate do about a service contract entered into by a developer?

Sometimes a developer will commit the body corporate to a contract with a service provider.

If the developer enters into a contract with a service provider that the body corporate has to honour, they must exercise reasonable skill, care and diligence and act in the best interests of the body corporate in ensuring that:

• the terms of the contract achieve a fair and reasonable balance between the body corporate and the service provider
• the terms of the contract are appropriate for the development
• the powers and duties of the service provider are appropriate for the development and do not adversely affect the body corporate’s ability to carry out its functions.

If you are in the situation where the developer has entered into a contract on behalf of the body corporate and you think the contract is not fair, you can apply to the Tenancy Tribunal, District Court or High Court (depending on the value of the dispute) for an order:

• requiring the developer to pay the body corporate compensation for any loss or damage
• terminating the contract on the grounds it is “harsh or unconscionable.”

You should consider taking independent legal advice before making either of the above applications.

Where can I find more information?

For Unit Titles advice and information call 0800 Unit Titles (0800 864 884), visit the Unit titles developments section of our website or email us at info@dbh.govt.nz