When undertaking a major unit title redevelopment, you must first obtain the consent of all owners materially affected by the redevelopment. Then pass a special resolution (designated resolution) agreeing to the new unit plan (section 68(3) of the Unit Titles Act 2010 (“UTA”)).

 

What is a designated resolution?

Designated resolutions are reserved for major decisions by the body corporate for example the subdivision of a principal unit, selling common property, additions to common property and redevelopments under s68 of the UTA.

The designated resolution process entails the body corporate passing the designated resolution and serving notice to every unit owner and every person or entity that has a registered interest over any unit (for example mortgagees).  Those affected have 28 days to object to the designated resolution. While parties can object to a designated resolution, it is a rare occurrence. Tang v Body Corporate 155936 [2020] NZHC 2813, is one of the few cases that highlight the objection process.

 

Example – Tang v Body Corporate 155936 [2020] NZHC 2813

The redevelopment involved an 18-unit commercial development in Ponsonby. 15 of the units were owned by Wilson with the balance of the units owned by Tang, Landcorp and Payne.

Wilson who owned all the ground floor units sought to consolidate three ground floor units and to relocate the common property washroom facilities. This proposal was a “redevelopment” for the purposes of section 68 the UTA.

Under section 68 the body corporate had to fulfil two requirements:

  1. ensure that all owners of the units materially affected by the redevelopment have consented in writing to the new unit plan; and
  2. the body corporate had to agree, by special (designated) resolution, to the new unit plan. It is important to note here that this is a democratic process. Members are able to vote for or against the resolution.

The Court provided at [29] “The applicants are not owners materially affected by the redevelopment such that their consent in writing to the new unit plan was required under s 68(3)(a)”. Only Wilson’s commercial units and common property were affected.

Under s215, the Court had to hear the objections made against the designated resolution, which essentially was against the unnecessary works and costs being imposed on the minority. The Court disagreed and did not see how the work could be argued as unnecessary when it was supported by the majority: “[t]he point of democratic decision-making is the majority perspective generally is to hold sway” (at [36]).

The Court went further and found that the redevelopment’s effects on the common property did not affect its utility; the redevelopment had no material effect on the Tangs’ or Landcorp’s units and the change in the number of units involved no material reallocation of ownership or utility interests.

 

Conclusion

Tang is one of the first cases where an objection under s215 has been exercised. It highlights that the body corporate is governed by a democratic framework. Being in the majority puts you in a strong position to see through objections made by the minority.

 

By Christine Cechova