Things are different under the Unit Titles Act 2010 but there are still steps to be satisfied. Some of them are causing practical difficulties.

Simple boundary adjustments

Adjusting a boundary between units can now be done using a process set out in the Unit Titles Act 2010.

The method can be used if the “redevelopment consists solely of the adjustment of the boundary between 1 or more units shown on a unit plan”. A change in the location of the boundary between say unit A and unit B would be covered. It probably also covers a unit changing its boundary with the common property (i.e. the boundary “between 1” unit).

There is no need to obtain the consent of all of the registered proprietors to do a simple boundary adjustment. The owners of the units that will have their boundaries adjusted jointly make an application to LINZ for changes to the unit plan. The other owners are not required to sign. However, the process can only be used where:

• the adjustment does not “materially affect” the common property; and
• the adjustment does not “materially affect” the use, enjoyment or ownership interest of the units that aren’t having their boundaries changed.

A certificate will need to be provided by the body corporate confirming that this is the case. The chairperson of the body corporate will sign off the certificate and they will have to make a judgment about what amounts to ‘material”. There is no stated criteria. You can expect the chairperson to take extreme care.

A certificate is also required from a registered valuer as to the ownership interest of the units. The valuer must also state that the amendment to the unit plan does not affect the ownership interest of any unit that is not having its boundary adjusted. You can expect a valuer to use extreme care in giving any such certificate.

These additional steps mean that a simple boundary adjustment may not be quite so simple.

Redevelopment

All other changes to a unit plan are redevelopments and require a similar but more robust process to be followed. The body corporate (rather than just the affected owners) applies for the deposit of the new plan. Before doing so the body corporate must:

• ensure that all of the owners of the units that are materially affected by the redevelopment have consented in writing to the new unit plan; and
• pass a special resolution agreeing to the new unit plan.

The redevelopment will involve the inclusion of part of the common property and as a result a review, of the ownership interests.

Objection process

There is an objection process which can be used when a special resolution is passed to complete a redevelopment. Notice of the resolution must be given to every unit owner and all of the parties who have an interest over a unit. They each have the right to make an objection to the designated resolution. Once an objection is made the matter will be sent to the High Court for determination.

The Unit Titles Act 2010 does recognise the role of the tenancy tribunal in resolving disputes. However the tribunal does not have jurisdiction in relation to disputes relating to the title of land. A redevelopment or cancellation of a unit plan is a dispute relating to the title of land.

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The two most recent cases concerned covenants that were registered on the title after the agreement for sale and purchase was signed. In both cases the Court found the purchaser had an arguable right to requisition.

Sherman Limited v Harlow went all the way to the Supreme Court. In a judgment on 11 April 2011 the Court held that covenants prohibiting the shooting of wildlife, motorcycling, go karting and other similar activities and restricted the keeping of dogs on the land were something the purchaser was entitled to object to. Sherman had not formally advised Harlow the covenants would be registered.

The purchasers were successful, even though they had not followed the process for requisitioning contained in the agreement for sale and purchase. The judgment turned on whether or not these covenants concerned matters arising out of the subdivision plan, as the standard requisitions process refers to. The Court said they were not matters arising out of the plan, so the time limit for requisitioning in these clauses did not apply. So they had not by default accepted the covenants by failing to follow the right process (whether in the agreement or under the common law). The vendor was in breach of its duty as “constructive trustee” for the purchaser.

In Walter Peak Developments Limited (in receivership and liquidation) v Miller the High Court on 9 May 2011 set aside a summary judgment that the vendor had obtained against Miller, concerning an agreement for sale and purchase of a section by Lake Wakatipu.

As is often done in a pre-sale agreement for a section, the contract deleted the standard requisition process and the purchaser was deemed to have accepted the vendor’s title.

Attached to the agreement for sale and purchase was a copy of the head title. This was a fatal mistake here. The head title showed no covenants registered. However the vendor was in the process of registering covenants in favour of a neighbour. The purchaser was not told about these covenants and duly relied on the title attached to the agreement.

When settlement was required 2 years later, the purchaser’s solicitors objected to the covenants in favour of the neighbour and asked for them to be removed from the title. The vendor refused. The vendor argued the purchaser had accepted the title under the terms of the agreement.

The Court did not buy that argument. They said the clause was worded in the present tense, so the purchaser accepted the title attached to and described in the agreement for sale and purchase. The vendor was entitled to register the necessary subdivision documentation, but not anything else.

In Zhou v Grasshopper Farms Limited in late 2010, the Court of Appeal set aside a summary judgment and quashed an order for specific performance that the vendor had obtained. So they also found for the purchaser. This was on the basis that there was an arguable case that the requisitions the purchaser had made were valid. The requisitions concerned four conditions in the Council’s consent notice, required as part of the subdivision process. These included:

• The owners to meet the full cost of fencing
• That that fencing be maintained in accordance with a fencing plan
• That the design and construction of any structures complied with the geotechnical report
• That the debris protection earth fall bunds be left as is and inspected and maintained regularly at the property owners expense.

The agreement for sale and purchase contemplated a subdivision but did not expressly contemplate consent notices being registered against the title. That is where it appears the vendor has fallen down here. The agreement was not drafted widely enough.

You can see that vendors need to be very precise in this area. That is 3-0 to the purchasers.

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A case earlier this year illustrated just how precise compliance with the exemption must be.

A developer in Mangawhai sold property that included common areas and an obligation to become a member of a society. At the time the agreement was signed, the society had not yet been incorporated. The rules were in a draft format and were provided to purchasers. From those draft rules the purchaser could see the society requirements and the form the society would take.

However, the exemption required that the rules must be supplied to the purchaser “before subscription”. Subscription occurs when the agreement for sale and purchase is signed.

The court determined that, in order to rely on the exemption, the documents required to be supplied to the purchaser must include the rules of a society that was actually incorporated not those of a society that was proposed to be incorporated under the act.

The consequence was that the requirements of the Securities Act exemption had not been complied with.

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Every year, the University of Otago publishes a Food Cost Survey which is available at http://nutrition.otago.ac.nz. Click on the consultancy section and then food costs. This survey calculates the weekly cost of purchasing a healthy diet for men, women, adolescents and children in major cities and looks at basic, moderate and liberal budgets. It’s no surprise that food costs for a teenage boy are around $107 per week compared to $85 for a grown man! A moderate budget for a couple and two children under the age of five living in Auckland is around $255 per week. For a couple with two teenagers the cost is around $359 per week. Use this guide to set a strict budget for your food, so you don’t eat your money!

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They are told by tradespeople “no, you don’t need a building consent to do this work”, only to find out later that they did. Or.. they were told to upgrade their building unnecessarily.

Then the trouble starts with Council.

This is not good enough. Wouldn’t you expect a professional designer or tradesperson to know the rules of the game (even if they don’t like them that much).

No one is pretending that building law is easy. There are some tricky bits. But that’s what we do at Building Networks.. We make the rules easy to understand. We translate bits of the law into easily understandable steps.

So my job is to tell property managers what I know and how to avoid these same pitfalls.

We run training targeted at your needs and I’ve even written a few books in that vein. The books you can read over a coffee or a glass of wine and all yours for just over $10.00

Please… sign up for our newsletter and get in the loop of some FREE info.

Or grab a copy of the Property Managers Guide to Building Law (written by me under my other pseu de nom). And no it’s not as boring as it sounds. I promise you will learn something and you will save $.

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While we may not have the ability to control all these external matters we do the ability to control how we respond to these challenges.

Rosie’s Boot Camp is designed to give you that kind of kick in the head thinking. To remind you about thinking and responding to these challenges as opportunities. We have planned 24 hours of stimulating physical and mental activities and a heap of fun:)

To find out more and see the programme here

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And being in small business myself I do appreciate how hard it is to find time in the day to train yourself.. But it is necessary and a priority if we are to keep on top of our game.

So to help in this regard I have created a wee training product “Tool Up” that you can read over a cup of coffee or a beer. It will make you think, it highlights areas you need to follow up and gives you an overview of some of the changes affecting the sector. The first one is free.

Have you downloaded your free copy of Tool-Up yet? If not click here Tool Up.

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1) Department of Building and Housing

The DBH website has a link to market rent statistics based on information from all bonds received within the last 6 months to provide an indication of the weekly rent charged in all areas throughout New Zealand. The information is updated every month and is available at:

http://dbh.govt.nz/market-rent

2) Rental Property Websites

Other properties listed on TradeMe and Realestate.co.nz can give a good indication of a likely market rent achievable. Properties listed can be filtered by suburb, number of bedrooms, and even ranked by price, so you can quickly determine where the market rent for your property may lie. Another great benefit of these sites is that the majority of properties also have photos which mean you can quickly look to see how another property stacks up in relation to yours. Have a look at:

trademe.co.nz/Houses-to-rent/index.htm
realestate.co.nz/rental

These sources can give you a good idea of a market rent figure which is likely to be achievable for a property. Make sure you are not under renting your property and you are getting the market rate that you deserve.

If you have a property management question you would like answered please feel free to get in touch!

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On superstars: Who is the largest Real Estate company in NZ?

Just like the Long Tail theory, just like the internet and its mass of niches. The largest Real Estate company in NZ, is not a company. Its the “other’ section. mmm.

Lots of change is heading our way with national sales volume far below what it was just a few years ago. We will see more salespeople and offices be forced to offering better service, better value and providing that service faster and more efficiently than before.

From the unconditional blog this week we learned that LJ Hooker has just bought Harveys. Alistair Helm had this to say:

“As the industry adjusts to the current level of sales which this year is heading for around 60,000 sales as compared to 70,000 last year, and compared to 100,000+ in each of the years spanning 2002 to 2006, the pressure on margins and overheads will and have already lead to closures of some offices and industry consolidation.”

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Since our inaugural property investor survey (Dec 2008) it’s fair to say as property investors we’ve been on a fairly bumpy ride due to global and local market conditions and this has resulted in some severe outcomes including legislation changes that stand to directly affect property investors from 2011.

In 2010 are we still ‘in love’ with property as an investment strategy? Do we believe we can continue to purchase more properties to build our portfolios in 2011 and beyond? When will the next boom time be? These questions and more will be answered by hundreds of people in December 2010 and the collective results published mid January 2011.

Your view counts and we want you to be part of our Survey. Enter the Survey (click here).

Then join in the Survey discussion on PropertyTalk.com – Survey Discussion

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