Unit titles and body corporates explained
The idea of being part of a body corporate need not strike fear into investors’ hearts
It’s common for the first question from potential buyers of commercial property to be, “Is this a body corporate?” Followed by, “if it is, then I’m not interested”. However, it is not surprising that in most cases, those asking the question have little understanding of either a unit title or a body corporate.
A unit title allows for individual ownership on a site that has multiple buildings.
It provides for owner occupiers or investors to purchase at a level that would most likely be unaffordable if the requirement was to fund the purchase of an entire development.
Body corporates seem to come under a fair amount of criticism at times, and often unfairly. A body corporate is not a faceless entity that dictates to the owners, as some seem to believe. It is made up of the owners, and anyone buying a unit title property automatically becomes part of the body corporate.
In the main, body corporates are administered by professionals with a thorough knowledge of the Unit Titles Act 2010 who are experienced in managing the processes and reporting requirements.
Administrators do not make the decisions, they merely enact and advise on them. Often when people complain about the actions of a body corporate, they do so with a degree of naivety, and usually because they have chosen not to participate. The owners of the units have the opportunity to vote on various matters and if they are unhappy, they have the ability to raise their issues and offer alternatives and solutions.
Body corporates operate within an established rule structure, and these are in place fundamentally to protect the position of the owner’s investment.
Whether to limit the types of activities or to minimise the impact of similar businesses in the same development, the rules are there for the benefit of the owners. It also works to maintain the overall standard and appearance of the development.
In most cases, an owner cannot simply decide to paint the outside of their unit in a style that would be detrimental to the rest. Often signage must be uniform, again maintaining a consistency and professionalism for the benefit of all.
Owning any commercial property requires a degree of management and of course ongoing maintenance, and included in most body corporate levies is an amount that is put aside for future maintenance.
While this may seem an unnecessary expense at the time, it is smart planning as at some stage, the buildings, common areas or both will need maintenance and repairs.
There are numerous instances where a maintenance fund has not been supported and, subsequently, when repairs are required it is problematic to raise the amounts required from owners. The maintenance levy is simply pre-paying and planning for the maintenance that will be required.
Another requirement is that the buildings are insured under one policy, which often provides for better value for the owners.
All the costs incurred by the body corporate are proportioned relative to the entitlements of each unit of the overall property. This includes insurance and grounds maintenance.
In summary, unit titles are an established sector of property ownership in New Zealand, offering the opportunity to many to become involved in property ownership in situations they may otherwise not be able to participate.
Understanding and engaging in the body corporate should be fundamental in owing a unit title property.