By Thomas Gibbons - November 2013
It’s still the case that many eyes glaze over when the subject “unit titles” is mentioned. There’s probably more attention to be gained from saying “local government amalgamation”. But then, we had 180 people attend the Unit Titles Intensive held in April this year; and I was recently one of over 200 attendees at Griffith University’s Strata and Community Title in Australia for the 21st Century conference.
In Australia, things are different. People talk of strata (when I say strata title, think unit titles) as being a ‘political football’ – that is, interesting enough to the general population to help state politicians win elections. Industry participants want universities to provide more courses in strata, and to contribute to law reform with the expectation that the results will be helpful to industry (and more rigorous than government).
There are owners’ networks actively seeking law reform in areas that dissatisfy them, and there are managers’ networks seeking to respond. Tracking the various law reform proposals among the states would be almost a full-time job.
Because of the scale and sophistication of Australian strata law, what happens there is a useful model for what is likely to happen here. This article sets out a few key trends to watch out for
Insurance commissions
This one caught me by surprise. Insurance commissions earned by strata managers (think:body corporate secretaries) need regulation. And it seems the preferred way to regulate them is to ban them. Not to require them to be disclosed, not to require them to be approved by owners or the body corporate, not to require any particular process – just to ban them. A sledgehammer, not a scalpel. I tried to explain that the usual New Zealand response to a regulatory issue is not simply to ban the matter of concern. But clearly things are different in Australia.
Liveability
When I attended in 2011, the biggest issues were management agreements and the fourth tier of government. Now, ‘liveability’ is the word on everyone’s lips. Of course, it is difficult to hear this phrase in Australia without recalling that Auckland wants to be the world’s most liveable city. (And in the context of debates over the Unitary Plan, I reflect that Aucklanders seem to want to avoid urban sprawl, suburban intensification, and to have affordable housing for their children – a seemingly impossible three-legged stool. But I digress.) In 20 years, it is expected that half the population of New South Wales will live or work in strata title properties.
That’s a lot of units. Liveability has a number of elements, but having unit owners understand the extent of their property rights, and how these are different in a strata development compared to a standalone section, is a good start. It’s not hard to think of reported cases that suggest liveability is an ideal, rather than a reality, for many people.
Title vs community
‘Building community’ was another important theme. This brings us to an important tension. (Tensions are everywhere with unit titles: see Body Corporate Rules: Tensions, Waikato Law Review: Taumauri Vol 16 2008.) ‘Title’ is all about individual ownership – individual property rights. We have individual titles for units to enable them to be bought, sold, and mortgaged; the ability to do so is an essential part of our capitalist economy. Generally, we like the idea of individual ownership, of our own space, place and property.
But we don’t like the idea of neighbours at war – “can’t we all just get along”. For some, strata is less about ‘title’ and more about building community. Owners in strata developments form mini-communities which should be able to regulate themselves, do things in their own ways, and set their own rules. Or should they? There was a fascinating discussion on whether bodies corporate should really be able to ban pets and ban children playing on common property. What if the community wants to interfere with title rights? What if title rights interfere with the community? These are broad philosophical questions, but also practical ones.
Demographics and technology
Who buys unit title properties? Who lives in them? First home buyers? Retirees? Young families with children? One speaker outlined how generational issues can impact on the cohesion and sense of community in developments. Should a young couple buy into a development comprised mostly of near-retiring baby boomers? Who will be more interesting in building an appropriate sinking fund? One speaker suggested that boomers accept authority – as long as they are in control. Younger generations perhaps emphasise individual freedom more than compliance. It is easy to be cynical about demographic generalisations, but it is a useful perspective if you consider that X might buy a (unit title) property without fully understanding that X is getting a share in a community and obligations to a private club as well.
This feeds into technology, which younger generations seem more comfortable with. One speaker suggested doing away with body corporate meetings all together, replacing them with the provision of information, voting, and payment of levies through web portals. The onus for this was put on managers (aka, body corporate secretaries), suggesting it’s better that secretaries develop and implement these portals than having owners DIY through other social media. An interesting suggestion, but I’m not so sure. To me, face-to-face meetings remain important in avoiding and resolving issues, and in building the sense of community that was such an important theme of the conference.
Universality
One of the speakers was American – the CEO of the Community Associations Institute which has 35,000 members (and a great conference in Florida next year, I hear). The issues in the United States are exactly the same as in Australia, and exactly the same as here. Pets, parking, and parties. Building defects, changing demographics, managers, education of owners, group dynamics... (A degree in psychology might help.)
Human nature, it seems, can’t be avoided. Even with unit titles.
The first article in this series considered a number of unit titles trends and themes from Australia, where strata titles are not just a legal issue, but an important social and business issue as well (NZLawyer issue 219, 18 October). In this article, I outline some of the issues from Griffith University’s Strata and Community Title in Australia for the 21st Century conference in more detail.
Law reform
As noted in the last article, strata title is important enough to the Australian population to be considered a political football, and various reforms are being considered across various states on an ongoing basis. Strata law reformers need to be mindful of various issues, including planning and land use, land titling, management and governance, and dispute resolution. We tend to think of unit titles as being all about titles, but these other aspects need close attention.
Simplicity and uniformity
I have raged elsewhere that there is a “diseconomy of concepts” in strata law. In New Zealand, we have one Unit Titles Act and one (and a half) sets of Regulations. New South Wales has something like 861 pages of strata legislation, while Queensland takes first prize with 2,285 pages of strata legislation. Queensland is often seen to have the most developed legal regime for strata title. But it is arguable whether the denseness of the legislation makes it any more workable or helpful in avoiding legal issues – and it seems obvious that it is less useable for owners without a law degree.
On the other hand, in New Zealand we have one regime and one set of concepts. In Australia, we have ‘strata titles’ in some states, ‘unit titles’ in others, and ‘community titles’ in some instances. We have the familiar ‘body corporate’ in some states, and ‘owners’ corporations’ in others. As one speaker noted, before Australia even considers consistent laws throughout the nation, consistency of concepts and baseline regulatory principles that each state can agree on, would be a good start
Dispute resolution
The Unit Titles Act 2010 led to the Tenancy Tribunal having jurisdiction over some unit titles disputes, though the recent J Star case has restricted this jurisdiction in many instances, and the cost of bringing a unit title claim in the Tenancy Tribunal is high. Two speakers’ comments warrant attention: first, that dispute resolution is often left to the end of the law reform process, effectively tacked on with little thought to the powers or jurisdiction of the forum of first resort. Second, that a nominal filing fee and an informal process can lead to insensible claims. While it is important that disputes can be resolved without great cost, it is also important that if X doesn’t have a real case to bring, that Y is not put to untoward defence costs.
Disclosure
The Unit Titles Act also introduced a disclosure regime to New Zealand: pre-contract disclosure, additional disclosure, and pre-contract disclosure. This formulation has been criticised by a number of New Zealand lawyers for involving too many steps, and often the wrong information at the wrong time. A simpler and clearer disclosure regime is seen as an important goal. However, it is important to consider the right level of disclosure, and to ask how we ensure it is meaningful. Too much information won’t be read. Too little information won’t be enough. One speaker suggested a solicitor’s certificate be required to acknowledge that disclosure has been made and understood; others see this as more a matter of personal responsibility. I know of many unit owners who don’t really understand the complex bundle of rights involved in unit title ownership. But then, do all of them need to?
Building defects and schemes
We tend to think of the leaky buildings crisis as a New Zealand phenomenon, but Australia has had significant issues with building defects as well. As one speaker noted, these can crowd out all other problems and issues in a development. (I did comment that while Australia is putting significant research funding into climate change, given the New Zealand leaky building crisis, it would help if we simply understood our climate first.) But New Zealand has been well served by the flexible and responsive ‘schemes’ regime under section 48 of the Unit Titles Act 1972 (now section 74 of the Unit Titles Act 2010). Many states in Australia face ‘gridlock’ problems, with unanimity required to terminate or alter developments, which impedes not just the repair of individual buildings but also the process of urban renewal. It’s nice to think we can keep things simple here, and avoid “locking owners into a spiral of depreciating wealth”, as one speaker expressed it.
Our story
Everyone, one of the last speakers noted, has a strata story. In New Zealand, this doesn’t seem the case, at least outside Auckland. But unit titles are an essential part of intensification, an essential part of our urban futures.
The scale and sophistication of the unit titles industry is only likely to grow. Lawyers were a minority at the conference: 35 per cent of attendees were strata managers. What I would like to ask is – is there scope for a regular cross-industry unit titles conference in New Zealand, where lawyers, managers, secretaries, owners, law reformers, planners, developers, LINZ representatives, and others can collaborate, share, and help improve our own unit titles industry and practice? If you think so, let me know.
Thomas is a Director in our Commercial Team, specialising in Unit Titles and Body Corporate Issues, and can be contacted on 07 958 7465.