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 matters 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. Owners will vote on a chairman, finances, insurance policies, budget, maintenance contracts and construction projects for the following financial year.

EGMs can be called to resolve urgent matters at any time during the year. 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, managing contractors, drafting budgets, and the hiring of a body corporate management company. Committees must complete a meeting once year and provide the body corporate with the minutes.

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 a body corporate registers its own rules. To register rules a body corporate should 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, and managers. Body corporates may also elect to have additional separate bank accounts, which could include a contingency fund, a long-term maintenance fund and a capital improvement fund.

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

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

A levy schedule is the amount that each body corporate owners pay towards the approved budget for the financial year, which is based off their ownership percentage.

There may be instances where separate levies are created to cover for expenses that are not already covered in the financial year budget.

Under Section 116 of the Unit Titles Act 2010 requires that all body corporates 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.

Recent changes in the Unit Titles Act 2010 requires body corporates to engage in the services of a professional builder or building surveyor to create the LTMP. The body corporate should make sure that the professional has a deep understanding of structural degradation, compliance, and accurate financial forecasting for major assets like roofs, cladding, and lifts, etc.

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, a land development could have 10-seperate freehold title owners that has 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 referred to as 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 their annual financial returns with the New Zealand Companies Office.

There is a key difference in ownership between incorporated societies and body corporates. With 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.