Review of the Unit Titles Act 1972
III. Background to the Unit Titles Act 1972
Traditionally, owning a home involved owning the title (in New Zealand generally a freehold title) to a plot of land. Ownership of the plot of land in turn gave rise to ownership of the home, and other improvements, on the land. Traditional concepts of the ownership of property are, therefore, based first and foremost on the ownership of land.
Under the Unit Titles Act, the concept of a unit title focuses not so much on ownership of land, but more on ownership of part of, or a "unit" in, a building.5 The Act provides for the creation of titles to defined parts of a building or buildings (units), which may or may not include specific parts of the underlying plot (or plots) of land on which those buildings are erected. Unit titles are created when a plan, showing in schematic form the division of those buildings into numbered units, is registered – technically "deposited" – against the title to the land involved.6
With ownership of a defined part of the building, or unit, comes shared ownership of the common property.
The common property comprises any part of the land, or the buildings on the land that do not fall within the boundaries of individual units. While each owner owns the unit title to their individual unit, the common property is owned by all the owners of the individual units as "tenants in common".7
As a matter of conveyancing practice and land law, unit titles can be sold, mortgaged and otherwise dealt with in much the same manner that freehold titles registered under the Land Transfer Act can.
There are, however, a number of fundamental differences between the "bundle" of rights that make up a freehold title and the "bundle" of rights that make up a unit title. These differences can be traced back to the basic definition of unit titles. Ownership of a title to a plot of land normally gives the owner an exclusive right of occupation, and a subsequent right to exclude others. The extent of that right is defined by the surveyed boundaries of that property. In contrast, unit titles divide a property between a number of owners. The unit plan, by creating and defining the boundaries between the units, and between each unit and the common property, creates a set of relationships between the owners as "neighbours". Those relationships are added to by the fact that the owners not only own adjoining "units", but also own the common property as tenants in common.
The Unit Titles Act defines aspects of those relationships by providing:
• that owners of a particular unit development form a body corporate for that unit development
• for basic rules relating to the body corporate, to relationships between individual unit holders, and to relationships between unit holders and the body corporate.
Other aspects of those relationships are defined by the particular rules that may govern a unit development and its body corporate.
In many ways the issues raised by commentators on the Act and discussed in this discussion document reflect the tension between the fact that, while a unit title can be dealt with as easily as a freehold title, it brings with it a quite different set of legal relationships and obligations. These arise from the relationships that exist within a unit title development between the individual owners, the body corporate and a range of other parties.
The Unit Titles Act was passed in 1972, and was based on Victorian and New South Wales legislation of the 1960s. Although the Act has been amended since that time, principally in 1979 to provide for what are known as "staged developments", in overall terms it remains very much the piece of legislation that was first drafted in the early 1970s. By contrast, similar Australian legislation, particularly in New South Wales and Queensland, has been extensively reformed and revised. That process continues, with a number of the Australian states currently reviewing aspects of their "strata titles" law, as unit titles are referred to in Australia. Victoria, for example, is currently undertaking a review of its laws in this area, as is New South Wales and South Australia.
Given the time that has passed since the Act was first brought in, developments in the housing market since that time and developments in this area of law overseas and in particular in the Australian states, any review of the Act in New Zealand today inevitably raises a wide variety of issues.
To help organise those issues, and to focus responses, this discussion document has been divided into the following sections:
• creation and administration of unit titles
• the requirement for, and the rules of, bodies corporate
• the functions of bodies corporate
• relationships between bodies corporate, owners and others (including developers and property managers)
• enforcement and dispute resolution
• cross-leases and flat-owning companies
• form of legislation
• other issues.
There is inevitably a degree of overlap between these sections. Submitters should feel free, when responding to questions asked in one section, to refer to material provided in another section.
The Government acknowledges the very valuable work that has already been done in this area by the Law Commission and by the Auckland Regional Council. This discussion document reflects, and builds on, the work of both of those organisations.