Hi Alex,

 

Thank you for your email below.

 

We have reviewed the Body Corporate Rules and generally we see no issue with the draft Rules you have provided apart from some minor points as per our comments below.

 

Please also see my other comments in blue below regarding the other matters you have raised.

 

Review of Body Corporate Rules:

 

The only rule that we can see as possibly being problematic is that requiring attendance at meetings. Apart from that, there are a few corrections all as noted below.

 

Review of Body Corporate Rules against the Unit Titles Act 2010 (“Act”):

 

Rule 3 - Principles of Occupation – Cohousing community group attendance, requiring the attendance of owners or occupiers at group decision making meetings.

 

Issue 1: Are these in effect ‘body corporate meetings’, to be assessed against those relevant sections of the Act?

 

Issue 2: Does compulsory attendance go beyond the powers conferred by the Act.

 

Section 106 (2) of the Act provides that additions to the body corporate operational rules cannot confer on the Body Corporate (BC) any powers that are not incidental to those conferred under the Act…. Phraseology which is open to interpretation.

 

BC powers are listed in s 84 of the Act. In relation to BC meetings, under s 90 the only power conferred is the power of the chairperson to call a meeting. Arguably requiring attendance goes beyond the kind of powers conferred by the Act.

 

If included in the rules it is possible that this rule may not be enforceable. Just something to be aware of but on balance Rule 3 can remain as is.

 

 

Rule 3 -  Principles of Occupation – Commons Development fund, requiring vendors to contribute 5% on sale to the Commons Development Fund.

 

Section 121 (b) of the Act states that contributions to be levied on unit owners in the case of any capital improvement fund, are to be calculated in proportion to each unit owner’s ownership interest.

 

The Act obviously envisions each owner paying their proportionate share, which would not be the case for those owners who do not sell. It would be difficult to evidence so is not likely to be a problematic rule.

 

Other points of note:

 

             Rule 17 (b) requires the repair of leaks ‘as soon as possible’. It may be better to say ‘as soon as reasonably possible’.

 

Rule 21 – requires that firearms ‘should’ be stored off site. You may consider a change in wording if you intend this to be more than mere guidance. Replace “should” with “must”.

 

Rule 24 – refers to a section when it should refer to a clause (i.e. of a regulation).

 

Rule 25 – the rules don’t provide for the appointment of the mediation and dispute resolution team.

 

Rule 26(f) – should refer to cl 11 not s 11, and ‘regulations’ not ‘resolutions’.

 

Rule 28 – requires breaches to be rectified in a reasonable time, or no later than 7 days after notice. 7 days may in itself not be reasonable?

 

Regards

Simon

 

 

 

Hi Simon,

A reminder to let me know if our adopted BC rules are legally appropriate?

Also we have another issue, that (some at least) banks wont give us an indication of whether they would likely lend before they have seen the title.  Kiwibank are explicitly saying the 5% capital gain on resale and the covenant requiring participation in cohousing are problematic.

I presume the reference to 5% capital gain is in fact to Rule 3 (Commons Development Fund). It is possible that some banks may not be happy with that requirement on resale and therefore you may want to revisit that requirement but my recall is that this provision was important to you all. The reason that a bank may not be agreeable with this is that say on a resale of $700,000 5% of that is $35,000 which depending on what equity a purchaser has this could reduce the loan to value ratio a bank might be working on for that particular purchaser. I guess it is going to depend on each bank and each purchasers situation. Generally there should be more than enough equity ( given the currently rapidly increasing prices in Dunedin) for that not to be a problem for most purchasers and their banks.

I think we already have all the covenants drafted and information that will go into the titles?  Is there a way we can gather this information and show the banks a draft of what title will be like?  So we can find out if these things are going to be problematic and work on them now and not just prior to settlement date?

Until the new titles issue we can’t provide a copy of what the title will look like but the banks can be provided with a copy of the surveyors unit title plan which lists all the new titles, unit numbers and accessory units and easements (as per the attached received from the surveyors).

Our wider group meets on Thursday evening and it would be good to be able to reassure people about those matters before then.