National MPs Judith Collins and Nikki Kaye propose law strengthening in $50b apartment sector

Reform of the Unit Titles Act, which controls apartments, is proposed.

Two Opposition MPs are proposing long-awaited changes to the law governing the $50 billion apartment sector, drafting an overhaul which they hope the Government will support.

Nikki Kaye, Auckland Central MP, and Judith Collins, National's housing and urban development spokeswoman, have produced draft legislation to amend the Unit Titles Act which governs the management and running of thousands of apartments.

They aim to strike a balance between the benefits of more compliance requirements and any potential costs.

A statement said the MPs saw the opportunity to strengthen the existing regime in areas such as pre-contract disclosure, record keeping of body corporates, better management of conflicts of interests and proxy votes.

"The driver for this change has been concerns around a lack of transparency and inadequate long-term maintenance plans, and a clearer understanding of the role of a body corporate manager," Collins said.

The apartment sector is thought to be worth at least $50b. Under-investment in long-term maintenance plans could result in large unexpected bills for homeowners if defects occur, or sharp rises in body corporate fees, the MPs said.

"Places like Auckland have seen a huge increase in unit titles. The number of multi-unit housing developments in Auckland increased from just over 15 per cent of new houses in 2010 to over 40 per cent in 2017," the statement said.

Phil Twyford, now Housing Minister, supported the push for change in Kaye's 'apartment blues' report when he was in Opposition.

Collins and Kaye said refined governance, management and planning structure would lead to more quality housing through improved long-term maintenance plans and boost the confidence of first-time buyers.

Kaye worked for years with property and legal experts and produced a report for the last National government.

A discussion paper was subsequently released which formed the basis of the law change.

Areas to be reformed are:

• Improving the information disclosure regime to prospective buyers of units;
• Strengthening the governance arrangements of the body corporate, the entity responsible for the management and operation of a unit title complex;
• Increasing the professionalism and standards of body corporate managers;

• Ensuring that planning and funding of long-term maintenance projects was adequate and proportionate to the size of the complex concerned;

• Providing the ability to opt out of some requirements for smaller buildings such as requirements around long term maintenance plans;
• Reducing proxy farming by setting a maximum of proxy votes at 5 per cent;

• Clarifying requirements around the existing 25 per cent quorum for general meetings;

• Enabling the flexibility to apportion utility costs based on use.

Joanna Pidgeon, Auckland District Law Society president, said her organisation supported the MPs.

"This reform has been led by key players in the industry forming the working group proposing changes which has led to the proposed Bill. We see the problems with disclosure and poor governance for purchasers and owners every day," she said.

"With the greater intensification of cities such as Auckland it is essential that our legislation is amended to address these key concerns to improve transparency and effectiveness of bodies corporate without delay."

Lyn Gillingham, Auckland branch chairwoman and national president of the body Corporate Chairs Group, also supports the need for reform.

"We are frequently contacted by members who struggle with outcomes created through some of the loopholes in governance matters that are possible under the present legislative structure," she said.

"Greater certainty is required to enable the huge growth in multi-owned developments to proceed smoothly – a failure to close the loopholes will see future generations reluctant to adopt this important lifestyle residential choice."