Buying an Apartment in Auckland Part One: Body Corporates

…or anywhere else in New Zealand really, but Auckland is a better search engine keyword for the title than New Zealand.

The genesis of this post is a conversation I had with Diana Clement,  a freelance journalist specialising in personal finance and property investing articles.  We went through a whole heap of issues in a largely unstructured conversation, so this is going to be somewhat stream of conciousness over a number of posts.  Nevertheless, it may be helpful to people.

Task number one: Always have a read of the Body Corporate Rules. A careful one. Including any changes, and you may have to look at the Unit Titles Act 2010 or its predecessor the Unit Titles Act 1972 and their regulations, which will make you unhappy unless you are a professional statute reader.  Just think of it as personal growth.

There can be all sorts of onerous provisions about things you haven’t thought of.  Is your pet allowed?  Can you put washing on a frame on the balcony?  Are you allowed aerials on the roof (common property)?  Are you restricted in curtain/blind colours?  Are there restrictions on guest visiting hours?  Can the maintenance people barge into your flat any time of the day or night?  Does your responsibility for repairs to the roof or to services increase the higher up in the building you are?  Are you required to have your windows and external unit surfaces cleaned regularly, instead of this being organised by the body corporate? The smaller the number of apartments, and particularly if they are standalone, the more likely you are to find tasks devolve on the owners rather than the body corporate as a whole.

Does the Body Corporate have a professional secretary?  This can be good thing, but do note the costs, especially with smaller buildings where the owners could and really should form a committee to do it themselves.  There does, however, come a point where professional help is required – but on contractual terms that suit the owners.

Was the secretary/manager appointed by the developer, or did they purchase a management contract put into place by the developer?  These types of contracts are usually stacked sky high with provisions favouring the manager and passing cost on to the owners, for example the exclusive right to control leasing within the building, or a guaranteed series of rises in management fee coupled with a long term, plenty of renewals at the manager’s option, and an enormous termination fee.  Such contracts can sometimes be successfully challenged, but why buy yourself the fight?  Best to avoid.

Does the developer still own enough units that they control the body corporate?  That can be no fun at all and is best avoided.  One of the pitfalls of buying off the plans.

How often are the levies and when?  Make sure they aren’t going to arrive at an inopportune moment, such as early January….always a bad time for business owners.  Conversely, assuming you yourself are a good payer, what are the provisions for enforcing payment from those that don’t pay?  Is the body corporate reasonably ruthless on collection so that you personally don’t end up subsidising defaulters?  Are there a lot of levy defaulters?  Ask the agent/secretary.

What is the long term maintenance plan?  How much is the sinking fund?  What major items have been paid from it over the past few years?  What major items are proposed to be paid and is there expected to be enough in the fund to cover it when the time comes?  If the lift, for example, requires replacement in the near future, you need to have taken account of this in your purchase price.

Is there an Owner’s Association that runs and controls the common areas?  These are fairly rare….more usual for things like resorts, but you can run across them anywhere from time to time.  Although they are not necessarily designed to do so (being usually perfectly legit), they hive costs off from the Body Corporate itself, so the body corp costs can look artificially low if you aren’t also being given the budget for the association at the same time.

Is there a maintenance person/manager on site?  Did you actually want a professional body corp seretary?  If you’re a busy person, you may be happy to have one, rather than going to the trouble of dealing with body corporate matters….especially with the likes of long term maintenance plans, sinking funds, and chasing other people for levies.

Exactly what facilities are you going to make use of?  Having a gym and a lap pool sounds  great in theory, but you’re 78 with an arthritic hip and a fear of water.  Are you just going to be paying for other people to enjoy the facilities?

That is probably enough to be going on with.  It isn’t intended to be exhaustive and I may add some more points in other posts.


About Ivan McIntosh

I am a partner of Carter Atmore Law...residing in City Road just off the busy thoroughfare of Symonds Street, Auckland, New Zealand....where we are specialist business & property development lawyers, working for both local and international clients. Proud husband to Joanna, and dad to two sons. Passionate rugby supporter. Email: Ph: 64 9 921 5026
This entry was posted in Commercial Property, Property Law, Residential property, Unit Titles and tagged , , , , , , . Bookmark the permalink.

One Response to Buying an Apartment in Auckland Part One: Body Corporates

  1. Wow, incredible blog layout! How long have you been blogging for? you make blogging look easy. The overall look of your site is excellent, as well as the content!

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s