Unit titles – who pays?

apartments

The Court of Appeal looks at how costs for remedial works should be shared at Auckland’s Shangri-La apartments.

Wikipedia notes Shangri-La is meant to be a “permanently happy land”, not so Auckland’s Shangri-La. The Court of Appeal was asked by the body corporate (i.e the owners) to look at:

  • the cost allocation for remedial works; and
  • the penthouse owner’s claim for compensation for the 18 month period they had been denied use of their unit whilst remedial works were completed.

The scheme

The High Court had approved a scheme under the Unit Titles Act 2010 that allocated costs for the installation of the new curtain wall at Shangri-La 50% equally between the each of the 15 units and 50% based on utility interest. This meant the penthouse owner, relatively speaking, paid a smaller share than the other owners. The new glass curtain wall did not have to extend to level 16. It finished at the lower level of the penthouse on level 15.

The Court of Appeal upheld the scheme. The Court considered the scheme obtained the requisite fairness. The body corporate wanted all costs allocated based on utility interest. The Court considered that would be unfair to the penthouse owner whose unit had the same amount of work done as the other units in the tower.

Compensation

All owners were denied use of their units for 6 weeks, but the penthouse owner was out of their unit for 18 months. The curtain wall and support beam were installed on level 15 and other works needed to be done from the penthouse unit. The Court of Appeal agreed compensation was appropriate and should be calculatedbased on the lost market rent. The use of the penthouse during the 18 month period was for the common benefit of all unit owners. However “there will need to be a significant loss for a particular unit owner before a claim for compensation should be contemplated”. Remember also that this compensation payment was being ordered as part of the scheme, which can only be ordered by the Court following destruction or damage so this does not necessarily open the floodgates for compensation claims by unit owners.

Cost allocation

This decision does not change how costs are allocated day to day by bodies corporate. The body corporate does not have the same flexibility as the Court in this respect. We believe bodies corporate should have more flexibility to determine different utility interests for different budget items. Others are lobbying for this too as part of the review of the Unit Titles Act 2010. For the moment, the body corporate must use the tools it has:

  • charging individual owners for repairs or maintenance to building elements or infrastructure contained in their unit
  • using utility interest for allocation of levies rather than ownership interest
  • recovering money spent on any repair, work or act for the benefit of individual owner(s) or caused by those owner(s) from those owner(s)

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