The Unit Titles Act 2010 is currently under review with some major changes proposed – including new requirements for long term maintenance plans. Prendos Senior Building Surveyor, Leon Goodwin, runs through the proposed amendments and what they might mean for body corporates.
The government’s proposed changes to the Unit Titles Act (UTA) are included in the Unit Titles Amendment Bill (strengthening body corporate governance and other matters), which as of July 2021 was going through its second reading.
The Bill is intended to address a number of issues, such as the disclosure of information to prosective buyers of units in a body corporate development, strengthening of body corporate governance, and increasing the professionalism of body corporate managers. The bill also proposes changes to the planning and funding of long term maintenance plans (LTMPs), with the objective of improving the quality of the plans and encouraging body corporates to seek good advice from property professionals at the outset.
Below, we run through the proposed key changes to the Unit Titles Act with relation to LTMPs. It’s important to remember that these changes may not necessarily pass into legislation in their current form, so it’s somewhat premature to consider them a requirement. However, we will closely follow how they develop into amendments to the current Act.
1. Identification of Defects
The Unit Titles Amendment Bill firstly proposes a change to s116(3) – ‘the purpose of a long term maintenance plan’ – now stating that it is to ‘identify any defects in or repairs required to the unit title development and estimate the costs involved in resolving the issue’.
Currently, the Act does not include any requirement to identify inherent issues or defects in the building/s – something Prendos has unfortuantely found lacking in many of the pre-existing LTMPs that body corporates have asked us to review or update. The financial effect of remedying building related defects can be considerable and can seriously impact the funding projections of long term maintenance plans, so this proposed change would lead to greater transparency for both owners and potential buyers.
2. Changes to Medium and Large Unit Title Developments
The Bill also proposes introducing a new section (2A), which outlines further obligations for medium and large unit title developments. Medium developments are defined as those with between 10 and 29 residential units, while large developments have 30 or more units. The proposal states that while medium developments may vote to opt out of these additional requirements if they wish, large developments cannot. The proposed additional requirements include:
i) A Minimum 30 Year Reporting Period
Under the current UTA requirements (s.116(2)), a LTMP must cover a period of at least 10 years from the date of the plan. From our perspective this minimum period is insufficient, and Prendos has been recommending it should increase since the UTA was established. 10 year LTMP reports generally only cover items with a short maintenance cycle such as paint coatings and floor coverings. However, they don’t cover the (often costly) replacement or refurbishment cycles for many major building elements such as roof coverings, exterior joinery, electrical fixtures and fittings or HVAC equipment.
The proposed changes under section 157D(3) extend the minimum LTMP period to 30 years – allowing for the inclusion of short-term replacement items while ensuring provision is made for the replacement/refurbishment of more ‘durable’ building elements in the longer term.
ii) Regular Review of LTMPs
The proposed changes also include a mandatory requirement for medium and large unit title developments to review their LTMP every three years – ensuring building condition and maintenance data is kept current.
Under section 157D(5), it also states that ‘if the body corporate becomes aware of any matter that may have a material impact on the long term maintenance plan, it must review the plan in accordance with this section as soon as practicable’. For example, if a seismic or weathertightness assessment has been completed which recommends additional repairs not already included in the plan, the LTMP would have to be reviewed at that time and the additional works incorporated. This requirement again ensures relevant data is included and the LTMP is current.
iii) Requirement for Professional Peer Review
Another new requirement proposed under section 157D(6)(7)(8) is for LTMPs to be peer reviewed by either a chartered (MRICS/FRICS) or registered (MNZIBS) building surveyor or IPENZ registered engineer. Peer reviewers are required to provide a written statement that ‘in the reviewer’s opinion, having made all reasonable investigations, (the LTMP) is as accurate and complete as possible and identifies any defects in or repairs required to the unit title development.’
While the requirement of an independent, professional peer reviewer is welcome, it does require a number of hefty obligations from the reviewer before they can be comfortable issuing such a statement. For example, as a minimum, a thorough site investigation and document review should be carried out. This may mean checking maintenance records, council LIM reports and previous LTMP reports, and could lead to the peer review process being quite time consuming and therefore costly. The best advice is to approach a qualified professional to develop the LTMP in the first instance, therefore avoiding the prospect of expensive peer review fees.
The Potential Impact
Overall, the proposed changes to the UTA show that the government wants to improve the quality of LTMP reporting and focus body corporates on getting good advice from property professionals at the outset.
In our experience, the quality of information provided in current LTMPs in New Zealand varies greatly. There are a number of providers in the market who are not construction professionals and therefore cannot provide informed, expert advice around the condition of buildings and their associated risk. Many of the long term maintenance plans we see are lacking in detailed information on the building’s current condition and fail to identify any construction related issues. As you can imagine, this can have considerable bearing on LTMP funding provisions.
What comes through strongly in the proposed changes is that the government is keen to have LTMPs produced, or at least peer reviewed, by professional building surveyors or engineers. With an innate understanding of buildings and the implications of good (and bad) maintenance, these experts can use their expertise to provide informed advice to owners and prospective buyers of body corporate properties.
The proposed changes also place an obligation on body corporates to seek professional advice regarding their long term maintenance obligations. While this may cost owners a little more in the short term, getting a professional report will ensure unit title developments are better maintained, thus preserving what is, for many, their most valuable asset. All in all, it seems the changes proposed under the Unit Titles Amendment Bill are sensible, and will hopefully drive an improvement in the quality of such properties available to New Zealanders.
For more than 30 years, Prendos has been an industry leader in providing professional property advice to body corporates. Our chartered and registered building surveyors deliver detailed LTMPs and peer-review existing plans for properties of all sizes, right across the country – offering solid, reputable advice you can trust.