Further compliance requirements for bodies corporate

Bodies corporate and their managers will soon have greater compliance requirements under the Unit Titles Act 2010 ('the Act'), once further changes come into effect under The Unit Titles (Strengthening Body Corporate Governance and Other Matters Amendment Act 2022 ('the Amendment Act'). Our previous article 'Big changes for bodies corporate and their managers' discussed significant changes that came into effect in 2022 and 2023. The third and final wave of amendments is set to take effect on 9 May 2024.

The Unit Titles Amendment Regulations 2024 came into force 6 May 2024 and will amend the Unit Titles Regulations 2011. These regulations will help to give effect to the changes under the Amendment Act.

In this article, we cover the following impacts of the 2024 amendments:

• Management Contracts: Requirements for a contract between a body corporate and a body corporate manager to contain specific terms.
• Electronic Voting: Procedures for electronic voting and remote attendance at general meetings.
• Enhanced Long-Term Maintenance Plans: Changes to requirements for long-term maintenance plans and funds (specifically plans for 'large unit title developments' consisting of 10 or more units, which must meet the long-term maintenance requirements by 9 May 2024).
• Enforcement: An increase in enforcement provisions for MBIE as regulator.

Contracts between bodies corporate and a body corporate manager

New regulations introduced by the Amendment Act set out specific terms that must be included in agreements when engaging with a body corporate manager.

Agreements setting out terms of engagement must include the following terms:

• The manager's reporting requirements to the body corporate on the performance of the manager's functions and duties;
• The requirement to comply with the code of conduct set out in Schedule 1B of the regulations;
• The requirement for reviews of the manager's performance at specified intervals and the key performance targets and other measures by which the manager's performance is to be judged;
• Grounds for termination and the process for doing so, if met;
• The role, if any, of the manager at general meetings of the body corporate;
• Records, funds, or other things of or relating to the body corporate that must be returned by the manager to the body corporate if the agreement is terminated or the term of the agreement ends; and
• The latest date, whether specified or able to be calculated, by which the things relating to the body corporate must be returned by the manager to the body corporate if the agreement is terminated or the term of the agreement ends.

Electronic voting and remote attendance

The Amendment Act introduces the ability for eligible voters to cast votes electronically at body corporate meetings. Votes can be cast electronically before or during a meeting, and must be cast in accordance with the regulations. Bodies corporate must inform unit title owners about:

• how to attend remotely;
• how to cast a pre-meeting vote electronically;
• the date/time of return for electronic pre-meeting votes;
• how to cast a vote electronically during the meeting; and
• a statement on a validity of an electronic pre-meeting vote if the general meeting is adjourned, or if the motion is materially altered at the meeting.

To ensure that electronic voting and remote attendance is secure, bodies corporate must have reasonable methods of verifying the ID's of owners voting electronically. They also must take reasonable steps to ensure the electronic facilities are sufficient and that remote attendees can participate with both audio and visual inputs. Voters will be given access to electronic voting forms before at least the minimum required time for a notice for that type of general meeting.

Long-term maintenance plans

A long-term maintenance plan must now summarise the current state of the common property and state the sources of funding for the plan. Previously, bodies corporate were required to state the amount determined to maintain the long term maintenance fund each year. They must now apply it each year, less any amount that has been applied to maintain any item in that year.

The Amendment Act allows bodies corporate to determine the level of funding to be held in the long-term maintenance fund. If a body corporate has decided not to establish a fund, they must review the decision annually and may establish a fund by special resolution (a 75% vote).

Special provisions for 'large unit title developments' (consisting of 10 or more units) now include additional requirements regarding long-term maintenance plans. Large developments must:

• Ensure the plan covers a period of at least 30 years from the date of the plan or the last review of the plan and comply with the requirements and include the matters prescribes by regulations;
• Review the plan every 3 years or when the body corporate becomes aware of a matter that will have a material impact on the plan;
• Provide a high-level indication of the expected cost of maintenance and replacement of the items covered by the plan in respect of years 11-30;
• Consult with building professionals when it develops and reviews the plan, unless it decides by special resolution not to; and
• Ensure their plan meets the new requirements by 9 May 2024. Any existing plans, or plans that are under review will need to be updated by that time.

New regulatory powers

As regulator, MBIE will have a range of new enforcement measures to ensure compliance by bodies corporate and their managers under the Act. These will include the right to request relevant documents from bodies corporate, issue improvement notices, use powers of entry to inspect unit title properties and apply to the Tenancy Tribunal to enforce a pecuniary penalty for breaching duties.

Regulator requiring documents

MBIE will be able to request documents it reasonably requires to carry out any of its functions under the Act. Certain documents will now need to be retained by bodies corporate and body corporate managers for at least 3 years in case requested (in writing) by MBIE.

A list of these documents can be found here.

Improvement Notices

The Amendment Act introduces improvement notices as tools that MBIE can issue to a person for a breach or likely breach of the Act or the Regulations. MBIE can require the person to remedy the breach or put a stop to actions likely to cause a breach.

A person who has been issued with an improvement notice will be able to challenge the notice in the Tenancy Tribunal within 28 days.

MBIE will also have powers of entry to inspect a unit title development.

Pecuniary Penalties

The Tenancy Tribunal may, on application of MBIE, order a pecuniary penalty for the following breaches:

• A body corporate manager fails to disclose a conflict of interest or has engaged as a body corporate manager for more than one body corporate. The maximum penalty for a breach is NZ $5,000.
• A body corporate or a body corporate manager fails to procure documents to MBIE. The maximum penalty for a breach is NZ $1,500.
• A body corporate or a body corporate manager obstructs or hinders MBIE from exercising a power of entry. The maximum penalty for a breach is NZ $3,000.
• A body corporate or a body corporate manager fails to comply with an improvement notice. The maximum penalty for a breach is NZ $3,000.

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