What is a Body Corporate
Collectively, all the unit owners in a unit title complex make up the Body Corporate and every new unit owner automatically becomes a member of the Body Corporate.
A Body Corporate is statuary requirement automatically created when a unit title complex is created. This is usually done by the developer and is recorded on the title. A Body Corporate does not need to do anything else to register its existence. Every unit title complex must have a Body Corporate, whether or not it is functional and must follow some set statutory obligations.
The Body Corporate is responsible for a range of management, financial, insurances, maintenance, health and safety and administrative matters relating to the common property and the complex.
Body Corporate’s have a continuous succession, meaning they have their own identity and continue to exist despite changes in membership. When a unit owner sells, they are no longer a member of the Body Corporate, and the new unit owner becomes a member of the Body Corporate.
If there are nine or less principal units you may form a Body Corporate committee, if there are ten or more principal units you must form a Body Corporate committee, unless the Body Corporate decides not to by special resolution.
Professionals, such as building managers and Body Corporate managers, are not members of the Body Corporate, but they can be engaged to carry out some of the Body Corporate's responsibilities on its behalf.
The Body Corporate is automatically created when a unit plan is deposited with LINZ and exists only for the purposes set out in the Unit Titles Act 2010. The name of the Body Corporate is formed using the words ‘Body Corporate Number’ and the registered number of the unit plan (for example Body Corporate Number 123456).
What does the Body Corporate do
The Body Corporate has a number of responsibilities and powers, which are outlined in section 84 of the Unit Titles Act 2010. It is responsible for a range of management, financial, maintenance, health and safety, and administrative functions relating to the common property and to the complex as a whole. These functions mainly relate to the areas all unit owners have a shared interest in such as money, land and other property, which is why all unit owners are members of the Body Corporate.
The Act sets out some key responsibilities and powers of the Body Corporate, including:
- Owning the common property
- Managing, maintaining and repairing the common property
- Establishing and maintaining a long-term maintenance plan
- Keeping and maintaining a register of all unit owners
- Calling general meetings of the Body Corporate
- Keeping accurate financial statements of common funds
- Levying contributions on owners to fund the operation of the Body Corporate
- Providing documents to unit owners, such as financial statements, meeting minutes and insurance details
- Complying with the Body Corporate operational rules
A Body Corporate can delegate some of its responsibilities and powers to a Body Corporate committee, particularly duties that relate to the administration and management of the complex. The Body Corporate committee must report regularly to the Body Corporate on its activities. The committee is a subset of the Body Corporate and is elected by the Body Corporate.
Body Corporate meeting requirements
The Body Corporate must hold meetings at least annually. These meetings are an opportunity for unit owners to exercise their collective property rights. The Body Corporate will discuss issues of joint concern and unit owners will vote on a range of matters affecting the complex. Meetings of the Body Corporate are either annual general meetings or extraordinary general meetings.
Annual General Meeting (AGM)
An AGM must be held once every calendar year, and not later than 15 months after the previous AGM. The chairperson must call the AGM in accordance with the Regulations. Possible topics for an AGM:
- Financial statements for the year
- Maintenance of common property
- Other expenditure
- Service contracts
Extraordinary General Meeting (EGM)
A Body Corporate can also hold an EGM. An EGM can be held at any time throughout the year to consider any matter relating to the unit title complex. For example, if urgent repairs are necessary, the Body Corporate chairperson or committee might need to get agreement from the Body Corporate.
A motion may be decided on at either an AGM or an EGM of the Body Corporate by one of two types of resolution, an ordinary resolution or a special resolution. Resolutions can also be made without a general meeting. All resolutions must be recorded in writing.
Under the Act, a special resolution is required for decisions made by the Body Corporate which might have significant consequences for the unit owners, for example, imposing levies on the unit owners, borrowing money or selling part of the common property. For a special resolution to pass, 75% of the eligible voters who vote on the resolution must vote in favour of the resolution.
An ordinary resolution is used for all other decisions made by a Body Corporate at a general meeting, such as changes to the complex’s operational rules. For an ordinary resolution to pass, a majority of the eligible voters who vote on the resolution must vote in favour of the resolution.
Resolutions without a General Meeting
A resolution can be passed without a general meeting if it is signed by at least 50% of eligible voters for an ordinary resolution, or at least 75% of eligible voters for a special resolution. Notice of the resolution must be given to all eligible voters.
Before a general meeting of the Body Corporate can proceed, the members of the Body Corporate must make a quorum made up of at least 25% of eligible voters. Unless the complex only has one owner, a quorum must always be at least two members of the Body Corporate.
If a quorum is not reached, the meeting can proceed if the postal votes plus the people present at the meeting make up 25% of the voting power of the principal units.
Further provisions relating to quorums are set out in the Unit Titles Regulations 2011.
If a unit owner is not attending the meeting, they can be represented by another person, or vote by post.
To be eligible to vote on resolutions, a voter must be aged 16 years or older, and be:
- Recorded on the Body Corporate’s register as the owner of a principal unit or the owner’s authorised representative, or
- The nominee (for a company) or proxy of that registered owner or their representative; or
- A subsidiary Body Corporate representative
A voter will not be entitled to vote if the Body Corporate levies for their unit are due and haven’t been paid.
What elections are needed?
Your Body Corporate must hold elections at each Annual General Meeting (AGM) for the following positions:
Body Corporate Chairperson
Because the Body Corporate chairperson's term in office ends at the close of each AGM (unless they resign or are removed earlier), the Body Corporate must elect a chairperson by ordinary resolution at every annual general meeting. Even if your Body Corporate already has a chairperson, the members must elect a new one or re-elect the current one.
Body Corporate Committee Members
If your Body Corporate has a committee, the committee members' terms of office will also end at the close each AGM. As with the Body Corporate chairperson, even if your Body Corporate already has committee members, you must elect new ones or re-elect the current ones.
Election of a Subsidiary Body Corporate Representative
If your Body Corporate is a subsidiary Body Corporate, elections must also be held at the AGM for a subsidiary Body Corporate representative. The subsidiary Body Corporate representative's term in office is the same as the chairperson's, ending at the close of each AGM. Even if your Body Corporate already has a subsidiary Body Corporate representative, you must elect a new one or re-elect the current one.
What are the responsibilities of a Body Corporate Chairperson?
The chairperson must:
- Maintain the register of unit owners
Prepare and issue the agenda for each general meeting
- Chair each general meeting - unless it is agreed at the start of a general meeting that another person will chair that meeting
- Prepare minutes of each general meeting
- Record resolutions voted on and whether they were passed
- Prepare and issue notices of resolutions to be passed without a general meeting
- Keep financial accounts and records
- Submit the Body Corporate's financial statements to an independent auditor
- Receive reports from the Body Corporate committee and distribute them to unit owners
- Sign documents on behalf of the Body Corporate
- Notify the Body Corporate committee of any delegation of a duty or power by the Body Corporate to the Body Corporate committee
- Undertake any other duties relating to the administration of the Body Corporate that the Body Corporate has decided by ordinary resolution to confer on the chairperson.
The Body Corporate could delegate some or all of these tasks to the Body Corporate committee, if there is one.
A professional Body Corporate manager can be engaged to do some or all of these tasks. It is important for it to be clear in the contract what exactly the professional Body Corporate manager is contracted to do.
What is a Unit Title
Unit titles are the most widely used form of multi-unit property ownership. New Zealand has over 18,000 unit title complexes. 12,650 of these are residential complexes, comprising more than 90,000 units. Unit title complexes are typically apartment blocks, units, townhouses, office blocks and industrial or retail complexes.
In a unit title complex, owners own a defined part of the building, such as an apartment or unit, and may also have shared ownership in common areas such as lifts, lobbies or driveways. Collectively, all the unit owners in a unit title complex make up the Body Corporate. The Body Corporate is responsible for a range of management, financial and administrative matters relating to the common property and to the building as a whole.
Unit Titles Act 2010
An Act created to facilitate the subdivision of land into units that are to be owned by individual proprietors, and common property that is to be owned by all the unit proprietors as tenants in common, and to provide for the use and management of the units and common property
Unit Titles Regulations 2011
Unit Titles Act 2010 - Regulations - The unabridged full version of the supporting regulations for the Unit Titles Act 2010
Guide to Unit Title Complexes - A quick downloadable guide to the Unit Titles Act 2010 for owners of Unit Title properties
Operational Rules for Body Corporates - A downloadable guide to Operational Rules under the new Unit Titles Act 2010.
Getting a Body Corporate up and running
If you are in a new complex, there are some things you need to know to get the Body Corporate up and running:
- The Body Corporate must have its first annual general meeting as soon as possible and not more than 6 months after the date the unit plan was deposited or the first unit was sold
- At the first AGM the Body Corporate needs to elect a chairperson and decide if they need a Body Corporate committee
- When developer has sold enough units that they no longer have control over the complex, they must give the Body Corporate notice of that fact and call a meeting. At that meeting, the developer must provide the Body Corporate with a turn-over disclosure statement and disclose any interest they have in contracts made by the Body Corporate.
If you are in an established complex but the Body Corporate is not operational or performing the functions required by the Act you could:
- Talk to the other unit owners and ask how they think the Body Corporate should be run
- Talk to other people you know who are members of a Body Corporate in another complex
- Establish an annual social event to discuss any Body Corporate matters; such as property maintenance, insurance or finances
- Engage a professional Body Corporate manager
Professional managers are not members of the Body Corporate, they are contracted to provide specific services. They will do the administrative tasks on behalf of the Body Corporate, such as, preparing financial statements, collecting levies and organising meetings.
Some larger complexes will have a building manager. The role of building managers will vary, they may be responsible for organising repairs and maintenance of the building or, for larger complexes, running the serviced apartments. The Body Corporate is usually responsible for paying the building manager.
Long-term Maintenance Plan
The Body Corporate must establish and maintain a long-term maintenance fund, unless the Body Corporate decides not to by special resolution. This fund can only be used for expenditure that relates to the long-term maintenance plan. The Body Corporate must approve any spending on a single maintenance item if the spending exceeds the budgeted amount in the long-term maintenance plan by more than 10%.
Some Body Corporate’s will engage a specialist who will create and update the plan regularly and provide advice on how much should be put aside for future maintenance. The Body Corporate levy may include an amount to cover the costs of repair and maintenance.
The purpose of the long-term maintenance plan is to:
- Identify future maintenance requirements and estimate the cost of future maintenance
- Provide a basis for levying contributions on unit owners
- Support the establishment and management of a long-term maintenance fund
The plan must contain some minimum requirements, which are set out in the Unit Titles Regulations 2011.
The Body Corporate has a number of financial responsibilities and powers under the Unit Titles Act 2010. These include:
- Levying contributions to cover general administration, maintenance and insurance
- Levying contributions for any of the funds that the Body Corporate may have
- Borrowing money
- Investing money
- Recovering money owed
- Charging penalty interest
- Paying the Body Corporate’s expenses
- Keeping financial records
- Preparing annual financial statements
The Body Corporate must keep accounting records, which detail all the financial transactions of the Body Corporate, and use these records to prepare a financial statement. The most recent financial statements must be sent with the notice calling the AGM.
The form and minimum content of financial statements are prescribed in the Unit Titles Regulations 2011.
The Body Corporate must submit its financial statements to an independent auditor or accountant within 2 months of the end of the financial year.
The Body Corporate may decide by special resolution at its AGM not to submit its accounts to an independent auditor or accountant for a particular year. However, the Body Corporate must still keep full accounting records and statements and also attach those to the notice of annual general meeting each year.
The Body Corporate must establish an operating account. The operating account is used to meet operational expenses that relate to:
- Managing and governing the complex
- Providing services and amenities for the benefit of the complex, such as centrally metered water
- Statutory or regulatory compliance costs
- Ground rental or licence fees relating to the underlying land
- Maintenance costs for the complex incurred at least once a year, such as garden or pool maintenance
The Unit Titles Regulations 2011 contains some restrictions on unbudgeted spending from the operating account.
The Unit Titles Act 2010 allows the Body Corporate to establish and maintain the following funds, in addition to the operating account, if it decides they are necessary:
- a long term maintenance fund
- one or more contingency funds
- a capital improvement fund
The operating account and these funds can either be set up as separate bank accounts or as a single bank account, providing each fund is kept entirely separate and is able to be identified.
The Body Corporate may establish and maintain one or more contingency fund to provide for unbudgeted expenditure.
Capital improvement fund
The Body Corporate may also establish and maintain a capital improvement fund, for expenditure that adds to or upgrades the unit title complex, if this is not already provided for in the long-term maintenance plan.
From time to time, the Body Corporate will determine the contributions payable by unit owners. The contributions are used to maintain the various funds of the Body Corporate and to fund the operating account from which the Body Corporate’s general expenses are paid.
The Body Corporate will determine the date on which fees must be paid and may charge interest on any unpaid amounts.
An owner’s contribution to the amount levied by the Body Corporate is determined by either utility interest or ownership interest.
For the operating account, the long-term maintenance fund and the optional contingency fund, each owner contributes according to their utility interest.
For the optional capital improvement fund, each owner contributes according to their ownership interest
Ownership interest and utility interest
Ownership interest is a number that reflects the relative value of each unit to the other units in the complex. It must be set by a registered valuer.
Ownership interest is used to determine a range of matters including:
- The unit owner’s beneficial interest in the common property
- The extent of each owner’s liability if the Body Corporate is sued or sues someone else
- The unit owner’s share in the underlying land if the unit plan is cancelled
By default, the utility interest of a unit is the same as the ownership interest. The Body Corporate can decide to change the calculation of the utility interest from the relative values of the units to a different method of calculation. For example, the Body Corporate could decide it is fairer for all unit owners to contribute an equal amount and change their utility interests accordingly.
The utility interest is used to calculate the amount each owner contributes to the operating, long-term maintenance and contingency funds held by the Body Corporate, and other related matters.
The Body Corporate is responsible for insuring all buildings and improvements to their full insurable value. If, however, the complex is made up of stand-alone units, the Body Corporate may decide by special resolution that unit owners are responsible for insuring the buildings and improvements within their own unit. The Body Corporate will remain responsible for insuring the common property.
If the land and buildings cannot be insured for full replacement cover, for example if the buildings are heritage buildings, the Body Corporate may take out indemnity cover.
Accessory Unit – a unit designed for use with any principal unit, including a garage, parking space, or storage space
Body Corporate – an entity made up of all the unit owners in a unit title complex
Common Property – land and facilities in a unit title complex, which are not contained in a principal unit or accessory unit, and are shared by the unit owners
Eligible voter – a person who is over the age of 16 years and:
- Whose name is on the register of owners of principal units as the owner or representative of the owners of that unit; or
- Who is the nominee of a company the name of which is on the register of owners of principal units as the representative of the owner; or
- Who is a subsidiary Body Corporate representative
Ownership Interest – the interest assigned to a unit by a registered valuer based on the relative value of the unit in relation to each of the other units
Principal Unit – a unit designed for use as a place of residence or business or for any other use, and that is identified on a unit plan as a principal unit
Unit Plan – the plan of a unit title complex that has been (or will be) deposited with Land Information New Zealand on subdivision
Unit Title Complex – an area of land and buildings that has been subdivided into two or more units, such as apartments, and often includes common property shared by the unit owners
Utility Interest – an interest used to calculate a unit’s contribution to the operating account and long-term maintenance account