As part of our ongoing industry development, we will from time to time provide as an industry resource information we have found that adds value to the industry. This is one of these articles:

QUEENSLAND -V- THE WORLD - New Zealand
Author: Col Myers
Date: December,2010

This is the last article in a series of articles that looks at the ability of developers to establish management rights in the various states of Australia , as well as New Zealand .

In previous articles, I have identified Queensland as the leading management rights state with over 2,350 management rights complexes compared with NSW with no more than 200, Victoria 25, ACT 5, South Australia 10, Tasmania 5 and Western Australia 20.

This article will look at restrictions on developers setting up management rights in New Zealand , where it is estimated that there are no more than 150 management rights complexes currently established.

Restrictions relating to Developer Control Periods

·            The Unit Titles Act 1972 (Act) is the current legislation covering management rights in New Zealand .

·            There are no developer control periods in this legislation.

Unit Titles Act 2010

·            However, the Unit Title Act 2010 was assented to by Parliament on 19 April 2010 and this act represents a complete overhaul of the old Unit Titles Act and is expected to commence in the near future.

·            The Act introduces a ‘control period’, defined as the period beginning on the date the unit plan is deposited (registered) and ending when the developer (and its associates) controls less than 75% of votes, including by way of proxy or contractual obligations.

·            The developer will be required to exercise reasonable skill, care and diligence and act in the best interests of the Body Corporate if entering a service contract during the control period.

Legislation re Terms of Agreements

·            There is no term limitation on Caretaking and/or Letting Agreements in the old and new Unit Titles Act.  Caretakers and on-site letting agents are not recognised under the Act.

·            The key points to understand in respect to Letting Agreements in New Zealand are:

Ø       Nothing within the Act empowers a Body Corporate to enter into a Letting Agreement;

Ø       in Russell Management Ltd & Tourism Flair Ltd v Body Corporate No 341073 a rule empowering the Body Corporate to enter into an exclusive Letting Agreement was regarded as beyond the specific powers of the Body Corporate set out in the Act;

Ø       the powers of the Body Corporate are broadened in the new Unit Titles Act.

The ability to Top Up

·            As there is no term limitation currently applying, a Caretaking or Letting Agreement can be topped up to any term by way of variation.

Financiers Rights

·            There is nothing in the old or new Unit Titles Act that compels a Body Corporate to enter into a Financiers Deed.  Consequently, a Body Corporate can reject outright any request by a financier of a Caretaker to enter into such a Deed.

·            However from a contractual point of view, some Caretaking Agreements do have provisions in them which require the Body Corporate to enter into agreements with Caretakers’ financiers.  As with other jurisdictions, in an ideal situation, financier’s rights in relation to Caretaker and Letting Agreements should be incorporated in detail in both the Caretaking and Letting Agreements as well as the Body Corporate rules.

Legislation relating to use of proxies by Developers and Caretakers when entering into or extending Agreements

·            There are no restrictions in the Act limiting use of proxies by Caretakers, on-site residential property managers or Body Corporate Managers in circumstances where the use of the proxy by a Caretaker or Letting Agent will assist in conferring a pecuniary or material benefit to the Caretaker or Letting Agent.

·            Accordingly, a Caretaker or Letting Agent can obtain proxies and use the proxies to vote on any extension of the Caretaking or Letting Agreements.