Property problems: Law review might clarify investment issues

Q: I own several apartments as investments but I have been frustrated with the different way the apartment blocks are managed. Some of my recent problems are:

* The amount of money I have to pay to the body corporate for some of my apartments is too big for the services I get in return.

* I just bought two units in an apartment block and now I have been stung with a bill for big repairs.

* I have fallen into a dispute with other co-owners. I am told the only way to resolve it is by going to court.

Another investor told me that the Government was going to change the law in the area. Will this help me?

A: From how you have described your properties we expect they are all unit titles. This area of law is dealt with by the Unit Titles Act 1972, and it is under review.

The type of problems you have experienced are among the factors leading to the decision to review the law and it is possible that the changes will help you in the future.

The Government has just released a discussion document on unit titles and is calling for submissions.

Owners such as yourself who have experience with different bodies corporate are well placed to make informed comment and we recommend that you make a submission on how the law should be changed.

Dealing with your first concern, under the act each "unit" is assigned an entitlement by a registered valuer (called a "unit entitlement").

Unit entitlements determine the share of costs each unit owner has to pay for maintaining, managing and insuring the property.

The unit entitlement is determined by a number of factors but is based on the relative value of the unit compared with the other units at the time the unit plan is being prepared.

Sometimes the unit entitlement can result in some unit owners paying for a share of services in the development which their unit does not have the benefit of - for example, ground floor unit owners who have to pay for lift services.

Further, the unit entitlement can become unfair over time as the relative value of units change.

The Government has questioned whether a "fair and reasonable charge" for allocating common costs is a better approach. This might solve the issue you raise.

Your second problem reflects the lack of long-term planning by bodies corporate. At present the act requires the body corporate (which manages the property) to levy unit owners for the costs of maintaining, managing and insuring the building.

However, the act does not require a body corporate to plan ahead to cover the cost of capital works (such as replacing lifts).

When a body corporate is required to carry out this work, many get the funding by levying additional amounts from unit owners.

One possible solution is to legally require the body corporate to plan for such expenditure. This may involve creating a "sinking fund".

Sinking funds are established by regularly levying unit owners so that a fund can be built up to cover the cost of capital works.

Your issue regarding resolution of unit owner disputes is a common one. Some suggestions for change have been that the act should provide an adjudication framework or establish a "land tribunal" to hear and determine disputes relating to property matters, or both.

Again, we recommend that you make a submission on how you think the act should be changed so that it better suits your needs.

If you wish to make a submission, we recommend that you read the Review of the Unit Titles Act 1972 discussion document at www.dbh.govt.nz which summarises the issues.