A unit title is a form of property ownership of a specific part of a residential or commercial building. For example, an apartment, townhouse, standalone house, factory, shopping mall, or office. Often unit titles have shared common areas, which can include driveways, parks, lifts, lobbies, swimming pools, and gyms etc.

A body corporate is the legal entity that is made up of all the unit title property owners. When you purchase real estate that is a unit title, you automatically become part of the body corporate. As a body corporate member, you can vote on resolutions such as budget, insurance and maintenance etc.

Body corporates are governed by the Unit Titles Act 2010 and the Unit Titles Regulations 2011. These instruments provide the legal framework for the ownership and management of unit titles. The Act covers many including:

• the creation and ownership of unit titles

• body corporate governance

• the rights and obligations of unit title owners

• disclosures between buyers and sellers of unit titles dispute resolution

• a range of technical title and survey matters

An AGM is when owners meet to vote on how the body corporate should operate for the year. This is the meeting where the body members vote on a chairman, finances, insurance policies, budget, maintenance contracts and construction projects for the following financial year.

This EGMs can be called to resolve urgent matters. For example, a leaking roof that may need to be replaced or repaired.

Body corporates can establish committees to complete delegated tasks. For example, approving maintenance contracts on common areas, managing contractors, drafting budgets, and the hiring of a body corporate management company. Committees must complete a meeting once year.

Operational rules govern how body corporates operate on a day-to-day basis. For example, the rules may govern parking, rubbish collection, noise control and visitors etc. All body corporates must operate either on the New Zealand standard rules or on registered rules.

Schedule 1 of the Unit Titles Act Regulations 2011 details the standard rules for all body corporates, unless the body corporates registers its own rules. To register rules a body corporate liaise with a lawyer to amend the operational rules, which is then registered with Land Information New Zealand.

All body corporates must establish and maintain an operating account to pay creditors, managers and insurance etc. Body corporates may also elect to have additional separate bank accounts which could include a contingency fund, long-term maintenance fund and a continuous fund.

A proposed budget is prepared annually for the body corporate to consider expenses for the year. The proposed budget could include insurance levies, upcoming maintenance, management fees, long-term maintenance fund, insurance plan, or a contingency fund etc.

During the AGM, the proposed budget could be approved as is or modified, then voted on to be the finalised approved budget.

A levy schedule is the amount that each body corporate owners pays towards the approved budget for the financial year, according to their ownership percentage.

There may be instances where a separate levy is created to cover for expenses that is not covered on the financial year budget.

Under Section 116 of the Unit Titles Act 2010 requires all body all body corporates to have a long-term maintenance plan (LTMP). The LTMP is a guide that details upcoming and future maintenance and construction projects, along with estimated costs. During the AGM, the body corporate will agree on whether to collect funds to go towards the LTMP.

Body corporates under 10-units must have a 10-year comprehensive LTMP. Body Corporates over 10-units must have a 30-year comprehensive LTMP.

Body Corporates can create their own LTMP. However, it is highly recommend to hire a professional builder or building surveyor to create the LTMP. This is to ensure that the estimated costs are more accurate.

A pre-contract disclosure statement details the body corporate financials and accompanying documents such as:

• agendas

• minutes

• the registered plan

• insurance policies

• maintenance contracts

• estimates for major construction projects

• the LTMP

Vendors must provide a pre-contract disclosure statement before any sale is agreed.

If a vendor and purchaser have entered into an agreement for the sale and purchase of a unit title property, the vendor must provide a pre-settlement disclosure statement. This must detail the current body corporate levies, financials, maintenance and insurance policies etc.

Incorporated societies may be created to manage common infrastructure such as driveways, stormwater systems, parks and pools etc. For example, land development could have 10-seperate freehold title owners. If there is a stormwater system underneath the shared driveway, the council could ask the land developer to create an incorporated society to manage this common infrastructure.

Each incorporated society must have a constitution which governs how the society will operate. Owners are often referred to as members and levies are subscriptions. Incorporated societies operate similar to a body corporate where they must complete AGMs to vote on a chairman, insurance policies and maintenance etc. Additionally, they may elect to have EGMs and committees.

Unlike body corporates, incorporated societies must file annual financial returns with the New Zealand Companies Office.

There is a key difference in ownership between incorporated societies and body corporates. In most body corporates, individual owners own their unit’s interior (stratum title), while the underlying land and common property are collective owned and managed by the body corporate. In contrast, incorporated societies typically operate where each member owns their own unit and the land beneath it (usually freehold), alongside a shared interest in communal areas managed by the society.