Just before Christmas MBIE announced a review of the Unit Titles Act 2010 and published a discussion document. Submissions on the proposals were due 5pm Friday, 3 March 2017. Many submissions have been made, including one from us that looks at the changes predominantly from the developer’s perspective.
The items subject to review include the following:
Different requirements for different sized developments?
MBIE is considering whether larger developments should be held to a higher standard. I think this is a good suggestion as the issues in a medium or large complex are quite different to those in a small complex. The proposal is that developments are classified into three groups:
Small – under 10 units would remain as per the status quo.
Medium – 10 to 29 units would have more rigorous requirements unless they opt out by special resolution.
Large – 30 units or more would have more rigorous requirements. The additional requirements might include reporting on use of delegated powers, a requirement to contract a body corporate manager, have a qualified person to sign the long-term maintenance plan, have a long term maintenance fund and annual audit of accounts.
Another area of focus is improving the disclosure regime. I agree that the disclosure regime does not achieve its consumer protection goal at the moment. Critical information is contained in the pre-settlement disclosure statement and/or must be specifically requested as part of additional disclosure. Nevertheless there is a balance here. The proposal is that the three different disclosure statements be amalgamated into one step. This may be too heavy handed as there is a significant amount of information included within additional disclosure. It might make disclosure more expensive for vendors.
There is also a proposal to expand the requirements. Improving information about things like weathertightness issues, court proceedings, management, financial statements and minutes for the past three years, with ability to redact some committee items. These are significant additional requirements but I agree these are important and not covered well at present.
MBIE has rejected a suggestion that disclosure should be different for new developments, which we have submitted on. This does not make sense as there is a lot that is not relevant or not known at the time disclosure is required to be made by developers. The requirements being imposed on developers will not assist consumers. In fact a disclosure statement tailored to sales off the plan is more likely to do so.
There are proposals to strengthen body corporate governance. These include addressing conflicts of interest, similar to the current Incorporated Societies Bill. I think that would be useful but inevitably as all committee members and the Chairperson must be owners, there will always be conflicts.
There is also a suggestion that large complexes should report on the performance of their delegated powers. Further obligations on committees are proposed similar to Queensland’s Code of Conduct for Committee Members. Again, I believe that would be useful. A lot can happen at committee level.
A question is raised as to whether there should be a limit on the number of proxy votes one person can hold. I do not support a restriction because there is not a one size fits all answer. In my view, the current controls are adequate.
There is also a proposal to allow a body corporate to vary the terms of, or seek to release themselves from, longer term contracts in certain circumstances. I do not agree with these proposals. It’s not appropriate to allow contractual rights to be varied. Developers are now very careful to disclose contracts or other arrangements to buyers up front. Failing to do so exposes them to liability under s139 of the Act. To put it another way, the changes introduced in 2010 have gone far enough in my view to properly manage this issue.
Changes that have a material affect
Amendments are proposed to sections which regulate physical alterations to units and minor redevelopments so that it is clear what a “material affect” is. I agree with these proposals which should hopefully make these sections clearer. They are problematic currently.
Body corporate managers
Body corporate managers are not covered by legislation specific to them at the moment. It is proposed that there be some form of occupational regulation, perhaps by requiring body corporate managers to be members of a professional body or group and comply with the code of conduct for that group. Contracting a body corporate manager is also proposed to be mandatory for medium and large complexes. Most large complexes will have professional body corporate managers already. Operational requirements are also suggested so that the functions of the manager are set out in the Act and requirements are included e.g. requiring separate bank accounts. I expect most professional managers would have no objection to this and it might help owners who are often confused what the manager’s role is.
Long term maintenance plans and funds
As well as requirements on who can sign off on the plans, a new online template is being considered. Considerations include whether the plan should be for 30 years rather than 10 and whether or not the plans need to be reviewed every three years. The danger here is adding compliance costs to developments that do not really need this. The requirement that the Chairperson certify the plan does not make sense to me. It adds little for owners/buyers and adds significantly to the Chairperson’s liability.
A long-term maintenance fund is also proposed as obligatory for large bodies corporate. That might be viewed negatively by owners. My view is that funds are becoming more common and also more important to purchasers of units. I think this is a good suggestion but it might not be popular.
The workings of the Tenancy Tribunal for unit title disputes are being considered. Also under consideration is a suggestion to reduce the fees and add a mediation option. I think both of these are good suggestions. A name change is possible too.