It’s taken six years and several MPs, but a legislative push to reduce the risks of buying an apartment is about to come to fruition, Sam Sachdeva reports
More than ever, Kiwis are looking beyond standalone houses when it comes to the place they call home.
After a downward trend in the 2000s exacerbated by the GFC, the number of consents for multi-unit homes continues to reach new highs (influenced by inflated prices and climate concerns).
Nearly 22,000 – or 46 percent of all housing consents – were granted for such homes in the year to September 2021, compared with just under 2600, or 19 percent of all consents, a decade earlier.
But that spike in demand has drawn increasing attention to the poor state of the law that governs how the joint assets (but sometimes competing interests) within “unit title developments” are managed.
National Party deputy leader Nicola Willis says concerns about an insufficiently robust disclosure regime have acted as a barrier to some who might otherwise have looked to apartment living.
“We have to clean that up, because I want people to feel confident about choosing apartment-style living.”
– Nicola Willis, National Party
“People say to me, ‘My first house, I’m not going to buy an apartment, because I’m too worried that there might be something wrong with the building that I don’t find out about until after I’ve purchased it’, and so we have to clean that up, because I want people to feel confident about choosing apartment-style living.”
Willis says difficulties in working with other unit owners on complex structural issues, and disputes with body corporate committees lacking suitable expertise to oversee the building, are among the other real-world issues with what might seem a relatively technical regime.
Those are just some of the problems a member’s bill in her name is seeking to address, by (among other things) introducing measures to improve the governance of body corporate committees, give potential buyers better access to information, and requiring more rigorous plans for long-term maintenance.
The current Unit Titles Act isn’t actually that old: in 2010, the National government replaced the original 1972 legislation with a rewrite that the housing minister Phil Heatley said was needed to meet the more diverse needs of new developments.
But in late 2012, the Ministry of Business, Innovation and Employment was forced to carry out a review after lawyers outlined a range of concerns with errors in the act and “poor drafting”.
With little meaningful action to change the law, Auckland Central MP and Cabinet minister Nikki Kaye in 2016 launched a public campaign with an eye towards reform.
When National fell out of power in 2017, Kaye turned those efforts towards a member’s bill alongside the party’s then-housing spokeswoman Judith Collins. The bill was drawn from the ballot in mid-2020, but when Kaye herself left office it was Willis who took on responsibility for the law change.
“Ever since the act was passed, there has been concern and that has only increased over the intervening years with leaky buildings and conflicts of interest,” says Joanna Pidgeon, director of law firm Pidgeon Judd and chair of the Unit Title Working Group set up in 2016 to advocate for change.
Pidgeon says the current law does not adequately deal with complex mixed-use developments, while the disclosure requirements give little time for prospective buyers to scrutinise information about a property before the final settlement date.
“It’s not just, what is the purchase price, it’s, what is the ongoing cost of ownership and what sort of maintenance, repair, reinstatement costs am I likely to face?”
While Willis’ bill has secured unanimous support through its first and second readings, there have been some significant changes to it (perhaps unsurprisingly, given her description of it as “the most complicated piece of legislation I’ve seen as a member’s bill during my time in Parliament”).
“For me, information is power.”
– Joanna Pidgeon, Unit Title Working Group
Parliament’s finance and expenditure committee recommended removing the requirement for bodies corporate to have a long-term maintenance fund, while also reducing the burden of the 30-year timeframe for such plans by requiring detailed cost estimates for the first 10 years but only “high-level projections” for the following 20.
Willis says she is largely happy with the changes, praising both officials and members of the committee for striking a balance between creating higher standards and keeping the regime manageable – but there are a few areas of contention which remain.
One is the issue of “proxy farming”, where a person may collect a large number of proxy votes from absent owners then vote against those owners’ interests.
The committee recommended removing a clause to limit the number of proxies one person could hold, saying there was insufficient evidence of farming to justify such a restriction, but Willis has indicated she will propose a compromise solution while the Green Party’s Auckland Central MP Chlöe Swarbrick has been pushing to reintroduce the rule.
“I want to be clear, this isn’t an issue that I think is do or die for the bill, but I do think it’s an area that those who have been affected by it really do have significant concern about,” Willis says.
Pidgeon likewise believes the bill must pass regardless of some disappointments, but says there is still a lack of clarity in the amended wording about how the sellers of a unit can deal with delayed pre-contract disclosures close to the settlement date.
Willis says further tweaks and reforms will be needed in the years to come, while Pidgeon will be focusing on whether and how MBIE uses its enforcement powers related to breaches when the changes pass into law (as seems almost certain given the unanimous support to date).
But the hope is that even incremental improvements in transparency right now will go some way towards convincing wavering Kiwis that the benefits of an apartment can outweigh the risks.
As Pidgeon says: “For me, information is power.”