Developers – Unit Titles Act changes on 9 May 2023
Get ready, here’s a rundown of the changes:
If you are currently selling units, either off the plan or completed, then make sure you are across Unit Titles Act changes from 9 May 2023. The key things to be aware of as a developer are as follows:
New Pre-Contract Disclosure Statements for off-the-plan sales
- A budget for 12 months, including an estimate for an “average” 12 months
- The proposed ownership interest** for each unit, based on sales value
- If different from the ownership interest**, the proposed utility interest*** for each unit
- Draft body corporate operational rules
- Services contracts in place or anticipated for the body corporate, including utility supply contracts and the body corporate manager’s contract.
**“Ownership interest” is the percentage attributed to each unit based on relative value. It is used to calculate levies for capital improvements, voting rights, and beneficial ownership.
***“Utility interest” is the percentage used to calculate all other levies and is set by the body corporate.
New extensive Pre-Contract Disclosure Statements for sales of completed units including new requirements to:
- Disclose known defects including weather tightness issues or earthquake-prone issues.
- Provide full copies of minutes for both the body corporate and committee for 3 years prior.
- Provide a copy of the long-term maintenance plan, including identifying the next 3 years of works anticipated and the estimated cost of those works.
- Provide any remediation reports commissioned by the body corporate.
- Provide 3 years of financial statements and if applicable, audit reports
If there are not 3 years of information then this will need to be clarified. Most developers have a body corporate manager to assist with the above.
Disclosure obligations generally:
- Make sure the correct form of the Pre-Settlement Disclosure Statement is used. There are only minimal changes here but there are two additional requirements as to details of the body corporate manager and insurances which must be included for this to be a compliant statement.
- There are now stated consequences for failure to comply with the Pre-Contract disclosure regime. Ensure good records of disclosure are retained. Bank financiers will wish to know these requirements are met as purchasers have express rights to delay settlement or cancel if they are not.
- Consider whether the development would benefit from having multiple “utility interests”. It will be possible to have different percentages set for different services or amenities. That may be useful for a mixed-use development or where some units have services or amenities others do not.
- Make sure you take advice on contracts that the body corporate is to enter into or inherit. These include utility supply, body corporate management contracts, supply contracts, and building management contracts. There are now much stricter rules around the terms of these contracts.
- Keep in mind large bodies corporate of 10 units or more need 30-year long-term maintenance plans going forward.
- Consider carefully the new governance and conflict of interest rules. This is especially important if you will be the first chairperson of the body corporate.
- An updated form of Agreement for Sale and Purchase of Real Estate has been published by ADLSi/REINZ on 9 May 2023. Consider moving to the updated form for any new sales, off-the-plan, or existing units.
- There are precedent forms of pre-contract disclosure statement and pre-settlement disclosure statements at www.unittitles.govt.nz/forms-and-resources/. These are the preferred forms to use.
What should developers do where existing sales are in place?
If, as a developer, you have existing sales in place where pre-contract disclosure statements have already been given to a purchaser (or pre-settlement disclosure statements for that matter), then a new form of disclosure statement does not now need to be served as a consequence of the Unit Titles Act changes from 9 May 2023. However, it’s also important to be mindful of any other obligations, and this would need checking contract to contract.