Who pays for repairs to unit property in a body corporate?

The Unit Titles Act 2010 (“UTA”) expanded the role of bodies corporate in undertaking repairs to buildings in unit title developments, primarily in response to the repairs arising from leaky buildings.

In addition to repairs to common property the Act includes a requirement that bodies corporate repair and maintain all “building elements and infrastructure that relate to or serve more than 1 unit”.

Now that bodies corporate are undertaking significant repairs to unit property the issue arises as to who pays for this work.

In the first instance bodies corporate are required to levy all owners in accordance with utility interest (section 121 of the UTA). At the conclusion of repair works bodies corporate may reapportion these costs to owners of unit property where the work is undertaken (section 138(4)), or to owners who substantially benefit from the work (section 126) or to an owner at fault (section 127).

There has been some doubt as to the way in which these reapportionment sections apply and the circumstances in which bodies corporate may reapportion repair costs to specific unit owners.

A recent High Court decision, Body Corporate 199380 v Cook, provides some guidance.

The decision concerned the Sebel Suites building in Auckland’s Viaduct Harbour. Apartment decks on first floor apartments of the building required waterproofing repairs in order to prevent leaks and damage to a restaurant below. The body corporate undertook the work and reapportioned the repair costs to the owners of the first floor apartments.

The apartment owners challenged the body corporate’s cost reapportionment on the basis the restaurant below also benefitted from the works and part of the cost should be recovered from that unit.

The High Court held a body corporate’s power to reapportion costs to a unit owner should be read in conjunction with the substantial benefit provisions. The result was that the cost of repairing the first floor decks was not payable by the first floor owners alone. This cost had to be shared with other owners who benefitted from the work including the restaurant below.

The significance of this decision is that bodies corporate will need to take care in considering the relative benefit of repair work in determining whether the costs of work to unit property should be reapportioned to specific owners.

Bodies corporate undertaking any significant repair work should consider applying to the Court for a repair scheme under section 74 of the Unit Titles Act. A scheme clarifies the basis upon which owners are to be charged for repair work from the outset and removes the need for cost reapportionments (see FAQs on section 74 schemes on Grimshaw & Co’s Body Corporate page).

Grimshaw & Co is able to advise your body corporate on compliance with the Unit Titles Act and we are specialists in repair scheme applications.

 

Grimshaw & Co