Bodies Corporate – who pays for what?

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Unit entitlements

In the past all body corporate levies have been assessed on unit entitlements. Because unit entitlements are based on value, historically different owners using the same facilities could be required to contribute to costs to differing extents. This system was criticised as being unfair and imposing an irrelevant assessment model on costs. In some instances use was seen as a better criteria for cost allocation. It seems unfair that the owner of the penthouse unit must pay more for the costs of maintaining the swimming pool then the owner of the bottom unit. It may seem inappropriate that the owner of a bottom unit should contribute to the cost and maintenance of a lift at all. And what about the responsibility to contribute to the maintenance of the common property roof?

The new legislation has attempted to limit these discrepancies with the provision of utility interests and ownership interests.

Ownership interest

Under the Unit Titles Act 2010 each unit title property will have an allocated “ownership interest”. It will be recorded at LINZ and assessed on the basis of the value the unit bears in relation to the value of all of the principal and accessory units, just like unit entitlements have previously been assessed.

The ownership interest attached to each of the units will be assessed prior to the unit plan being deposited. A valuer will certify the comparative value of each of the units. It forms the basis for assessing rights and responsibilities attributable to ownership.

Utility interest

A utility interest is more flexible. It forms the basis of assessing obligations and rights of owners in respect of maintenance. The default position is that the utility interest is the same as the ownership interest, but it is more easily adjusted.

Reassessment

The body corporate can reassess the utility interest on a fair and equitable basis, having regard to the relevant benefits and costs. However, both the ownership interest and the utility interest are to be noted on the supplementary record sheet.

Previously unit entitlements were difficult to alter. A change in assessment required a unanimous decision. Under the new Act, once a plan has been deposited the body corporate can decide by a special resolution to reassess either the ownership interest or the utility interest or both. It can only make a decision to change these interests every 3 years.

The reassessments are undertaken on the same basis as the interests were originally established. A valuer reassesses the ownership interest based on relative value of the units to each other. The body corporate reassesses the utility interest based on what is fair and equitable, having regard to the relevant benefits and the costs to the units.

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