The Heritage Hotel, one of the buildings managed by Body Corporate Administration (BCA) Photo / Jason Oxenham.
The Heritage Hotel, one of the buildings managed by Body Corporate Administration (BCA) Photo / Jason Oxenham.
Questions have been raised about body corporate governance after a business managing two high-profile Auckland hotel/apartment blocks was successfully taken to the Tenancy Tribunal.
Adjudicator Brian Stephenson has ruled against Body Corporate Administration, previously in charge of unit title businesses in Hobson Street's Heritage Hotel and Queen Street's City Life building.
Nineteen claims, including issues over accounting practices and over a sum of $43,246.49, prompted Stephenson to question the body corporate system and unit title owners' lack of redress to an official authority.
"Had the same facts arisen in the context of a solicitor's trust account, the inevitable result would have been an inspection of the trust account by the New Zealand Law Society, probably followed by disciplinary action. There appears to be no comparable regulatory regime overseeing trust accounts operated by secretary/managers for bodies corporate," Stephenson wrote.
Body Corporate Administration was represented by various managers and director Glenn Kwok, Stephenson said, expressing concern about other cases involving the same firm.
"As it happens, this is the third case I have heard in two months in which the evidence has tapped a reservoir of dissatisfaction with BCA's performance as secretary/manager. Lack of responsiveness was the common threat in all three cases," he said.
Body Corporate Administration ran six unit titles: the Heritage Hotel Farmers Building at 35 Hobson St, Heritage Hotel Auckland Tower, Heritage Hotel Retail, Heritage OGB, Heritage Hotel Carpark and City Life Units at 171 Queen St. It levied all the owners to fund each body corporate and prepared and delivered annual accounts.
As it happens, this is the third case I have heard in two months in which the evidence has tapped a reservoir of dissatisfaction with BCA's performance as secretary/manager. Lack of responsiveness was the common threat in all three cases.
But the Heritage Group became concerned about accounting processes, including lack of double entry accounting and no propriety software so Body Corporate's engagement was ended on March 31 last year, the decision said.
Another business, Boutique Body Corporate, was then appointed and it tried without success to get files and resolve financial issues. Eventually, the case involving 19 claims was lodged with the tribunal which has the power to rule on unit title disputes.
The claims alleged failure to account for outstanding opening balances, wrong disclosure certificates, failure to explain arrears with a swimming pool account, a charge for legal services rendered irrecoverable because of a delay of almost five years, failure to hand over or account for a sum paid into a trust account, an over-payment to a trust account, failure to account for payments made to a unit owner, failure to hand over all hard copy and electronic files and failure to keep an accurate and up to date record of an owners' contact details.
In effect, it appears that BCA pulled down the blinds and hoped that Boutique would go away. In the circumstances, litigation was an entirely reasonable response.
"After lengthy and persistent attempts failed to yield satisfactory explanations from BCA, the bodies corporate commenced these proceedings," Stephenson said. "The evidence leads me to conclude that BCA did not keep proper accounts, failed to hand over funds and records with reasonable promptness and failed over a long period of time to respond to reasonable inquiries from Boutique on behalf of the applicants. In effect, it appears that BCA pulled down the blinds and hoped that Boutique would go away. In the circumstances, litigation was an entirely reasonable response."
Stephenson did not detect in BCA's witnesses a sensitivity to the company's status as a trustee but "rather, its witnesses tended to project an air of irritation at being required to give a detailed account of their stewardship of other people's money - one of the basic obligations of a trustee.
While the evidence does not indicate deliberate misappropriation, the scale of the discrepancies and the delay in accounting for them suggest strongly that BCA's accounting standards were below what is acceptable for a professional secretary/manager," he ruled.
Inadequate stewardship of body corporate funds was proved and BCA was ordered to pay full costs and disbursements of $7092.
