Appointment of administrators under the Unit Titles ActUnder section 141 of the Unit Titles Act an owner, the body corporate or a creditor of the body corporate may apply to the High Court for the appointment of an administrator to manage the affairs of a body corporate.
But in what circumstances will the Court appoint an administrator? We review the recent cases.
In Boyce v Body Corporate 70841 the Court considered an application under section 141 relating to a mixed use building in Mt Maunganui with 40 apartments and 6 retail shops including cafes. The body corporate committee members were removed at an annual general meeting ("AGM") however no others owners were willing to stand for the committee. The body corporate's contract with a property management company was terminated at the AGM.
The High Court took into account the fact the previous committee had withheld an important report dealing with weathertightness and structural issues from the other owners, that in the absence of a committee the body corporate was effectively dysfunctional and there were potential public safety issues relating to the use of the cafes over the summer period. It decided the appointment of an administrator with the full powers of the body corporate committee was necessary.
In Tao v Strata Title Administration Ltd the Court considered an application by an owner in a 36 unit residential development in New Lynn, Auckland. The owner claimed the body corporate chairperson was not properly elected, the body corporate management company was in breach of its duties and the committee was not taking steps to maintain the property.
The Court concluded these allegations were unfounded and the body corporate was not dysfunctional. The owner disagreed with decisions of the majority of owners however there was no impropriety in the decision making process and no basis for the Court to intervene and impose an administrator in place of the properly elected representatives on the body corporate committee.
A dysfunctional body corporate in Lower Hutt will be under administration for at least 2 ½ years following the September 2016 decision in Body Corporate 68792 v Synergy Enterprises Ltd.
In March 2015 the Wellington High Court appointed an interim administrator to body corporate 68792 after a "long and troubled history of conflict" between owners which resulted in the freezing of the body corporate bank account and threats to cut off power. In July 2015 there was no foreseeable prospect of improvement and the Court appointed an administrator for a further year.
In 2016 the administrator for the body corporate reported to the Court that the owners remained polarised. The Court noted that the management of a body corporate requires a degree of goodwill and cooperation and that this would not be achievable for this body corporate without an external administrator. The administration was extended for a further 12 months until the end of June 2017.
These cases indicate the Court has a wide discretion as to whether an administrator ought to be appointed in any particular case. The factors that will be relevant to the Court's discretion are:
- The existence of any dysfunctionality or deadlock between owners
- The existence of any undemocratic or ultra vires decisions by the body corporate
- The existence of majority decisions that have been brought about by the improper influence of a third party or which unnecessarily harm the interests of a minority
Grimshaw & Co regularly acts for bodies corporate. We are experts on the Unit Titles Act and are well placed to advise your body corporate on the validity of body corporate rules, repair and maintenance obligations, section 74 schemes and provide other specialist advice. For assistance please contact Gareth Lewis on (09) 375 2376 or firstname.lastname@example.org