Rethinking who pays for maintenance after the Oceanside T2 judgements

When it comes to repairs, it is the body corporate that should pay, or the individual owners?

Answer: It depends. We all know that. It depends on a lot of things but we also know that if you leave it to the law, the law decides.  

As an example, there are three sections in the Unit Titles Act 2010 (UTA) that tell us who pays. They are Section 126, 127 and 138. I'm not going to list them here because I expect that if you've read this far, you will know each of those sections quite well. Most of you have also probably used those sections many times to determine who is going to pay because they are fairly clear. Right?

Maybe not. If we look at the case law directory we will see that there have been many cases where the body corporate and a handful of owners have disagreed and asked the courts to make the decision.

The latest is the case known as Oceanside Apartments T2.

The Oceanside Apartments T2 case

This is my summary of this case.

Tower 2 of Oceanside Apartments in Mount Maunganui is across the road from the beach. It has commercial units on the ground floor that cover a larger footprint than the tower above, allowing for the first floor units to have extended balconies that are much bigger than those on the rest of the units.

These balconies leaked down into the commercial units (as they do). Based on their understanding of the UTA the body corporate expected the owners of those units would be required to pay for most of the cost of the repairs.

In 2017 the High Court decided that the body corporate was wrong and that it was the body corporate itself that should pay for those repairs. In 2018, the appeal court agreed.

The full case is attached below as a pdf and I encourage you to read it. Typically it's not an easy read, but I have listed a few bullet points below, that as I understand, are the legal interpretations, both judges used. (Summarised a bit so that it emphasises the difference between what I expect most have thought and what the judges decided.  I've also added some of my own explanations.  Read page 8 of the case for the verbatim statements).  

In relation to Section 126 the original judge and the appeal court found that;

  1. The weathertightness of the entire building is interlinked and indivisible so (in this case) the repairs affected all units.  Meaning that even though the balconies were unique to the first floor units, they formed part of the weatherskin and were therefore everyone's responsibility.

  2. Although the first-floor units owned the membrane and the tiles, the concrete floor slab itself is owned by the ground-floor units or by the Body Corporate as common property.  They left that a dollar each way but the main point was that it wasn't the unit that owned it.

  3. Each of the unit owners bought into the building as a whole, not just their individual units.  There are several references in the case to "the building as a whole" and "the body corporate as a whole".  It even refers to Section 3 (d) the Purpose of the Act.  Which states that the Act is "to  protect the integrity of the development as a whole".

  4. If any part of a building is not weathertight, then that adversely affects the saleability and value of all units, regardless of whether they themselves are in fact leaky.  They are all in it together and all should pay to make sure their investment is protected.

  5. The first-floor units, in any event, will pay proportionally more than almost all other unit owners based on their unit entitlements which take into account the floor area of their extensive decks.

What does this case mean for those of us who have to interpret who pays?

What does that mean for decision makers?

In similar situations, this case will make decision making easier. But with others it doesn't help at all and might even makes things harder. Because we know that every unit title development is different and every decision relating to repairs to some units but not others, is also different.

Let's use some examples. Let use roofs because every development has one and there are many different ways that roofs have been formed.

  1. We know from case law (Body Corporate v Chang and probably others including Oceanside T2) that maintenance on the roof over a high rise is paid for by the body corporate.  So in the case of the roof over a high rise, the body corporate pays. 

  2. We can also be confident that the roofs above stand-alone villas in a village development will be left to each owner to maintain - unless the body corporate decides otherwise (see more on this later).  So left to the law, in the case of a village with stand alone units, maintaining the roofs will be the responsibility of each of the owners.

  3. But what something in between?  When does the roof stop being part of the weather protection relating to all units? Or affect the value of all units?  Perhaps a row of townhouses where the roof above each unit is clearly defined by a fire wall and parapet.  What about when there are two blocks of townhouses each with a single roof?  Do all owners pay for the maintenance of the roofs on both blocks or only their own?  There are also many examples of these types of differences in commercial developments where the distinction could be a matter of interpretation.  But one thing is for sure.  We don't want to have to go to the high court each time to find out who is going to pay.  We have to have some other way of making sure everybody is in agreement.

All balconies are not made equal

Another problem we have is that all balconies are not equal. The Oceanside case helps because it refers to balconies being a "building element" and that the body corporate is required to maintain building elements. We also now know that the body corporate pays even if the balconies are different sizes and perhaps even if some but not all units have balconies.

But when is a balcony a deck?  A deck on the ground on a unit is clearly the responsibility of the owner.  But what if it's on the first floor? The Building Code (Code) makes no distinction referring to "Balconies and Decks" as being the same thing but the Code does refer to "open timber decks" and it clearly refers to structures that have open timber slats that water can run through. Many of the problems with decks comes from where they are connected to the building. Can we assume that these connection points do form part of the weathertightness of at least that unit?

And what if the balustrade needs replacing? That has nothing to do with weathertightness. Who has to pay for that?  A balcony isn't much use without a balustrade so can we assume that a balustrade is an intergral part of a balcony and is therefore part of the building element - and the body corporate pays?

We could get legal advice every time we aren't sure

Getting an opinion every time we weren't sure would - for a fee - remove us from making the decision ourselves, perhaps along with any liability that might come from making that decision. Whether or not the opinion would be correct is debatable. After all in every case that goes to court, each side had an opinion that at least said "they have a case". And we know that usually in our form of English adversarial law, 50% of the time, the advice is at least partly wrong.

I know a body corporate manager who recently made the mistake of getting two opinions from two separate and well respected law firms, that specialise in the UTA. And yes, you guessed it. He got two different and completely conflicting opinions.

It appears that what we are having to consider is so open for interpretation that even the experts don't always agree.

Have the body corporate decide in advance

There is one thing we can do. When there may be some doubt, or there is likely to be differences of interpretation, we could have the body corporate make a decision in regard to what it wants to do and pass a resolution to put it into practice. 

As an example, the body corporate could resolve something like this.  "The body corporate will manage and pay for the maintenance of all roofs in the development".

Thereafter, any owner who wanted to challenge the body corporate in court would not only have to prove that the repairs should have been paid for by the owners concerned but also that the body corporate was not entitled to make that decision.

But there is now already a case that suggests that the body corporate is indeed entitled to make that decision.  See the Body Corporate v Stent case.

Body Corporate v Stent

The Oceanside appeal case refers to the Body corporate v Stent case (attached below as a pdf) in clause 212 on page 53 the judge makes the following observation.

“To carry out works [the Body Corporate is required to do] the body corporate will use its funds derived from levies paid by all owners. It may then look to owners under ss 126, 127 and 138(4). Whether it does so is for it to decide. It may, but cannot be required to, make claims under these sections.” (Emphasis added.)  

In other words, the body corporate can decide if it wants to use its funds to pay for maintenance that otherwise might have (or thought to have) been able to be recovered from unit owners. 

Have the body corporate decide

If the high court has made the statement that the body corporate can decide whether or not it will recover the cost from owners and nobody, meaning owners, can insist they do it, this appears to be a good option of creating clarity among owners.

Put it in the long-term maintenance plan

At Plan Heaven, we've been putting these statements in our LTMP's for years. It's usually pretty clear when we go on site when it would make sense for the body corporate to take over all of the maintenance of some elements and where there may be differences of opinion. The most common of these relate to the roofs, balconies, doors and windows and fences.

We especially include these when the development is new and it will be many years before the owners will have any significant expense.  There is likely to be no disagreement among owners at that time and thereafter if any workmanship or weathertightness issue comes up on one or more units, the body corporate just gets on and deals with it and nobody would be expected to challenge the decision.

As planners, we have to make these distinctions anyway because we have to create a funding table that accounts for work paid for by the body corporate. So we need to know who is going to pay for all work. To make it easier for everyone, including ourselves, we include statements saying who is going to pay, then schedule all work paid for by the body corporate to be paid for out of the fund.

We include these proposed resolutions in the first draft and of course the body corporate is entitled to remove them if they don't want to do that. But so far, everyone seems to be OK with what we have included for them.

My disclaimer

This is where I need to add my disclaimer. I'm not qualified in law so please don't accept anything I say in this document - or even the whole website - as constituting legal advice.

But the fact that I'm not qualified in law shouldn't matter because (my understanding of) the principle of New Zealand legislation is that any lay person with reasonable intelligence and an interest in any particular Act or Regulation, should be able to interpret it.  

As it should be with the UTA. Anyone who is elected to the committee of a body corporate and their body corporate managers should be able to pick up the Act and generally understand what is required. Body corporate manager's in particular should be able to read the legislation, try to interpret it and then give advice to their clients on the basis of the best understanding that they have. Noting also that they are not qualified in law.

As already mentioned. We don't want to have to pay for a legal opinion every time the body corporate has to make a decision and we certainly don't want to leave it to the courts to decide.

Any and all feedback is welcome

Feedback on all articles on this website is encouraged and especially this one. This is probably the most complicated issue we all have to deal with and sharing thoughts is one way we can help each other.

End

Last updated by John Bradley 7 Feb 2019

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