Buying an apartment is like buying no other form of property.
As a unit titled property, it means sharing ownership of the building and land outside your private unit.
In business terms, you're not a homeowner but a shareholder. Your return isn't money, it is quality of life,'' says Paul Winstanley, co-author of The Body Corporate Book: All you need to know, with his wife, Stella.
Control lies in the hands of the body corporate: a legal entity comprising the property's unit titleholders. Unit titled properties, from commercial, such as retail shops, to terraced housing to apartment blocks, have body corporates.
But most unit title owners have only a hazy notion of their body corporate's function.
It is a relatively new concept, provided for under the Unit Titles Act 1972. Comparatively few New Zealanders are unit title holders and even fewer take the time to understand their legal rights and obligations.
The body corporate is similar to a company, says Michael Chapman-Smith, founder of Strata Title Administration, a body corporate management company. Chapman-Smith emphasises the legal angle. Most unit title holders in apartment complexes expect a carefree lifestyle. Admittedly, there are no lawns to mow but the building's finances and infrastructure still need attention.
A common misconception is that the body corporate is responsible for the inside of an apartment, Chapman-Smith says. Not so.
In general, its function is to obtain insurance for the property, maintain common areas and administer the finances.
It does not fix your leaky toilet or silence the neighbour's barking dog. It can, however, step in if the leak damages the downstairs apartment or if the dog is forbidden by the building’s rules.
Because all owners have a vote, absentee owners can be a problem because a quorum is needed to take action at the annual general meeting.
Absentee owners are often investors who buy units seeking rental income.
Non-participating owners mean a few active players can impose their agenda on the entire complex.
A well-run body corporate will have sinking funds to handle disasters like a leaky building, and an asset management plan.
In larger buildings with many owners, the body corporate will delegate much of its authority to an owners' committee.
In turn, this committee often depends on the body corporate secretary’s expertise.
The secretary is critical to a smoothly functioning body corporate. He, she can be an owner or a professional hired by the body corporate.
It bears repeating that the secretary is an employee because a major source of conflict is secretaries who take too much authority upon themselves.
'If he says `I've done this and spent this much money', that's when to be concerned,' Paul Winstanley says.
Also be wary if the secretary gathers proxies to support his/her proposals, instead of acceding to the will of the body corporate.
The secretary who recommends an action based on his/her expertise is better, Paul Winstanley says. A secretary who doesn't consult with the body corporate or owners' committee is not doing a good job.
There is no standard of licensing or code of conduct for body corporate managers. This means a wide variety of expertise in management companies, Chapman-Smith says.
Active owners' committees or body corporates need to keep in constant touch with secretaries or management companies to ensure they are doing their job.
Find out if the secretary is getting the requisite three quotes for insurance or if work is being redone because it was, done on the cheap the first time.
Because the secretary is s not a member of the body corporate he she doesn't have a vested interest in its issues. But if the secretary is a unit title owner he, she will have an agenda, just like any other owner.
When the building is under construction, the developer is the body corporate. He can write the rules and appoint a body corporate secretary.
Some developers appoint secretaries on long-term contracts. This means the body corporate can get stuck with a poor secretary or management company for the length of the contract.
Also, the developer’s goal is to sell units.
With a new development, the body corporate can be a marketing tool, says the Regional Growth Forum's 2003 report Bodies Corporare Intensive Housing in Auckland. Low fees can be attractive, but the trade-off is fewer services or unrealistically low fees.
As one developer noted in the report: 'A lot of naughty developers around town exclude it [the maintenance fund] from their marketing budget, making the body corporate costs look smaller.'
No rules are hard and fast. Every building and every body corporate will be different. Chapman-Smith warns.
Even buildings by the same developer will have slightly different rules as they are adapted from space to space.
'You need to look- at the whole space. Do you like the building, the people and way it is run? If you don’t: like the way it‘s run you'll get frustrated,' Stella Winstanley says. 'It's a collective and you’re only one vote'.
To forestall problems find out about the flow of information. When the owners’ Committee meets, are the minutes published within two weeks? Are there good lines of communication among the committee, secretary and the building manager?
Buying an apartment means buying into the body corporate rules as well.
For a happy ending, temper the emotion of buying a home with the practicality of knowing the body corporate rules. Otherwise the pitfalls are deep and nasty.
The time it takes to get and read (a step, curiously, many people skip) the body corporate rules could save years of grief.
For example, someone who runs a business from home shouldn’t buy an apartment in a building that forbids home businesses.
And don’t think you can run your home business unnoticed.
An irate neighbour will undoubtedly dob you in. Violating the body corporate rules can be expensive if you land in court. Nor will your neighbours appreciate you forcing them to spend their body corporate fees on a court case to remedy our rule-breaking.
Once body corporate rules are written, they're extremely hard to change.
The basic rules are set out in the Unit Titles Act but they are adapted to fit each building and offer little protection for the buyer.
The Act's Second Schedule sets out rules that can be amended only by unanimous resolution. These outline the duties of an owner the powers and duties of the body corporate and owners' committee The Third Schedule sets out rules that can be amended by a majority resolution of the body corporate. These outline what can be described as 'good neighbour rules, such as requiring neighbours to keep the noise down.
While many rules are already in place some can be created at the committee's discretion. This sounds attractive but in reality is impractical because residents are less likely to abide by these rules. It is better to have a hard-and-fast written rule than put the burden on the committee, Stella Winstanley says.
The composition of the owners' committee is key to the smooth functioning of the building.
If the committee mix is bad, there's not much the owners can do until the next elections.
The body corporate committee meets when the owners get home from putting in a full day's work.
They are ready to kick back and be social. The body corporate secretary arrives and is ready to work. The more professional the committee is. The more smoothly the meeting will go, and the better for the entire apartment complex Paul Winstanley says.
Committee members, as owners, have their own agendas.
The issues - and incomes - of the people living on the top floor differ from those on the ground floor. Those in the penthouse are concerned about the lifts while those on the lower floors are concerned about the gardens.
Varying incomes in the building are an issue as well. The wealthiest might be more than willing to spend $30,000 from the building fund to redecorate the lobby while the absentee owner who bought an apartment as an investment wants to minimize his expenses.
Ensuring diversity on the committee means all incomes and issues are represented. Stella Winstanley says.
Body corporate tees widely usually starting around $1200 annually, and rising with the value of the unit.
When a person pays $10,000 a year in fees, it's less about housing and more about being a customer. He expects services for such large fees. Stella says. Often includes a salary for a building manager, pool or gym.
A building manager smooths day-to-day running of the building and encourages compliance with body corporate rules. Larger or more prestigious buildings often have an on-site manager.
Tenants are even less likely than owners to be aware of and follow - body corporate rules. It is the responsibility of owners, or their letting agents, to inform tenants of the rules.
Real estate agents often boast of the number of owner-occupiers as a selling point in a unit-titled property.
While at least 45,000 people are estimated to be living in unit title properties in the Auckland region, most body corporates are small, comprising fewer than 20 owners.Need help or
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