Amendments to the Unit Titles Act and Regulations: What managers need to know

The amendments to the Unit Titles Act 2010 and Unit Titles Regulations 2011 bring about many significant changes for body corporate managers.

These amendments were designed to improve the transparency and accountability of bodies corporate in their day-to-day running, ensure that potential buyers of unit titles obtain appropriate information from a vendor, establish professional standards and requirements for body corporate managers and committee members, and enhance the processes around long-term maintenance plans.

We outline below a number of manager-specific changes.

Body Corporate Managers

The amendments define a body corporate manager as a person employed or engaged to provide administrative, financial, and regulatory compliance services.

The manager’s written agreement of engagement or employment must contain certain terms, including, amongst other things, the manager’s reporting requirements to the body corporate on the performance their functions and duties, the requirement for the manager to comply with a new prescribed code of conduct, and the role of the manager at general meetings of the body corporate.

The code of conduct requires a manager to act in good faith, keep certain records, act with due care and diligence, act in the body corporate’s best interests, ensure the body corporate is informed of any significant issues, ensure they understand the Act and regulations, disclose any conflicts of interests, and ensure competitive prices for goods and services are maintained. The manager must also ensure their employees comply with the code of conduct.

When a body corporate manager discloses a conflict of interest to the body corporate committee, the disclosure is to be held in an interests register. This register must be available for inspection by members of the body corporate committee and any other persons subject to the operational rules. If the manager is engaged with two or more bodies corporate, they are required to act independently for each body corporate and not intermix any funds or records.

Record-keeping

Bodies corporate are required to keep certain records to ensure new disclosure obligations are met, usually for a period of three years. These include, for example, the information required to complete a pre-contract or pre-settlement disclosure statement, records of meeting minutes and decisions, and a register recording conflicts of interest. If the Ministry of Business, Innovation and Employment (MBIE) requests copies of these documents, a body corporate must provide those copies within 10 working days of the request.

Generally speaking, a body corporate and its committee contract managers to provide this administrative support, so it will be important that managers accurately record and store the information.

Enforcement

If MBIE believes that a body corporate or its manager is not complying with the Act or regulations, they may issue an improvement notice requiring the body corporate to fix an issue, apply to the Tenancy Tribunal for an order authorising inspection of the body corporate development, or initiate legal proceedings.

Where the Tenancy Tribunal has ordered an inspection, the body corporate is required to assist the inspector. In addition to a Tenancy-ordered inspection, an MBIE inspector can also inspect a unit title development by consent of the body corporate. An inspection requires 24 hours’ written notice to be given to the body corporate.

Where MBIE believes that there is conduct likely to cause (or has caused) a significant risk to a person’s health and safety, conduct that is a serious or persistent breach of the Act, or conduct that creates a risk of the public confidence in the administration being undermined, MBIE can initiate proceedings against the body corporate. However, the proceedings must be in the public interest and initiated within 12 months of MBIE becoming aware of the breach.

If a manager fails to disclose a conflict of interest, or fails to act independently of each body corporate if they are engaged with two or more bodies corporate, and that breach materially and negatively impacts on a unit owner or the body corporate, the manager may be liable to pay a penalty of up to $5,000.00. Various other penalties are also able to be imposed.

What now?

Body corporates and its managers should consider updating their disclosure forms, management contracts, conflicts registers, document retention policies and services, and other records to ensure they comply with the new requirements. The code of conduct for a body corporate manager will be available in Schedule 1B of the Unit Titles Regulations 2011, once the amendments formerly come into force (the Bill is awaiting an Order in Council to be issued). Failure to comply with the Act may lead to financial penalties. Please refer to our article Amendments to the Unit Titles Act and Regulations: What owners need to know for changes relevant to owners of unit title properties.