The legal set-up of a new subdivision or unit title development should be treated with as much care as the physical design. It’s very easy to leave a mess – one that is difficult and expensive to resolve.
The rights, rules and restrictions that a developer puts in place for the new neighbourhood are generally quite difficult for new owners to alter if the regime does not work. Unit titles can have a bit more flexibility than other subdivisions, given only an ordinary resolution is needed now to make changes to the body corporate operational rules.
By contrast other subdivisions are typically quite inflexible as arrangements are recorded on all the owners’ titles, changes will require the consent of all owners and mortgagees and there is always at least one owner who will not play ball.
When looking at the development and designing the neighbourhood consider things like:
• Problems in previous developments you or others have undertaken;
• What type of people will live in the development;
• What kind of behaviours are to be encouraged or discouraged;
• The facilities that will be available and shared;
• Creating fairness and a neighbourhood that works.
The ADLS model operational rules are a very good base for a unit title development, but should be viewed only as a draft. For example, a body corporate manager will tell you that pets, parking and parties are typically problem areas.
It may be appropriate in some cases to deal with the concerns by way of amendment to the body corporate operational rules. There is a need to take care that the rules that are put in place are not ultra vires. There must be the power to make the rule, so it must meet the requirements set out in the UTA 2010. In some circumstances it may be better to consider creating easements or covenants. These can be created over common property under the UTA 2010. Use the right tool for the job. But these will be very difficult to alter.
Where the subdivision sits outside the UTA 2010 there can be more work needed to create a well-designed neighbourhood. The provisions of the UTA 2010 (e.g. how decisions are made, the finances, the annual meetings) will not automatically apply. For example, there will need to be effective remedies if owners are not paying their way or complying with rules.
Problem areas we have seen in some Auckland developments include:
- long term leases, e.g. repair and maintenance obligations not being well drafted creating disputes between lessees and lessors
- public and private planning requirements conflicting (e.g. building covenants conflicting with resource consent requirements)
- inconsistent sub-schemes or schemes only partly imposed (e.g. if developments are undertaken in stages do the cost-sharing arrangements for the rights of way still work?)
- dealing with continuing obligations under resource consents (who looks after this, the new owners or the original developers?)
- ultra vires body corporate operational rules e.g. restrictions on use, developers controlling interests
- easements granted by one body corporate to another not being sufficiently clear.
It goes without saying that there should not be conflict between the various requirements and the various documents establishing the legal requirements of the development must work cohesively.
Consider 10 years from now; will the rights, obligations and terms you impose on owners still work? What about in 50 years or 100 years?
Will your legacy be one of a well run easily managed community or one where factions of owners debate how the structure is intended to work.