Commentary on Unit Titles Bill (Second Draft) [Sept 2009]

Commentary on Unit Titles Bill (Second Draft)

As mentioned in our recent update, the Bill is due for a second reading. This could happen at any time depending on the schedule of Parliament and relative priority. According to the government website the Bill's ranking is only at No. 23.

Disclosure

In the 1972 Act the only disclosure provided was in the Section 36 Certificates issued by the Body Corporate Secretary after the agreement becomes unconditional. The provisions in the Bill which remain largely unchanged from the first draft provide for pre-contractual disclosure, post-contractual disclosure and pre-settlement disclosure by the seller. Therefore agents will need to ensure that they have information available to provide prospective purchasers. The information required will be set out in the regulations.

The pre-settlement disclosure must be certified as correct by the Body Corporate. Under the Bill the Body Corporate may withhold their Certificate if the unit owner has not paid debts due to the Body Corporate.

The buyer also has the ability to make requests for additional disclosure which may arise from due diligence or information previously provided. Furthermore if the seller becomes aware of changes and circumstances which makes the information provided inaccurate then they must give notice to the buyer of these changes. If the seller does not provide the appropriate disclosure then the buyer may delay settlement or in fact cancel the agreement. The Bill prohibits contracting out of these provisions.

The provision of information may be undertaken by the Body Corporate Secretary but the indicative content of regulations published by the Department of Building and Housing in March 2009 suggest is may be the duty of the chairman who will have a much more pivotal role in the new legislation.

Voting

In an attempt to ensure that the "majority rules" the threshold for passing resolutions has been lowered. Other than requiring the consent of all owners in the relatively unchanged lease provisions, unanimous consent is no longer required for any resolution.

A quorum is now 25% of principal unit owners compared with one third. An ordinary resolution will pass with a majority of votes and a special resolution will pass with 75% of votes. Accordingly, you could technically pass a special resolution if 25 out of 100 unit owners attend the meeting or vote by proxy and 19 voters vote in favour of the resolution.

Any member of the minority still has the right to apply to the court for relief and the relevant section remains largely unchanged from the 1972 Act. The majority can also apply for relief however compared with the 80% majority required in the 1972 Act this threshold has now been reduced to 65%.

Disputes

The Bill introduces a new approach to disputes and there is little difference between the first and second drafts of the Bill in relation to these provisions. Where the matter in dispute is up to $50,000 the Tenancy Tribunal (under the Residential Tenancies Act 1986) will hear the dispute. The District Court has jurisdiction to hear matters over $50,000 and up to $200,000. The High Court will hear disputes over $200,000.

Time will tell as to how well the experience and skills of the Tenancy Tribunal will match the challenges of unit title disputes. Interestingly, the Tribunal is excluded from hearing disputes relating to insurance and both the Tribunal and the District Court are prohibited from hearing title disputes including redevelopments, unit plan cancellations and conversions. It is not possible to contract out of any of the dispute provisions in the Bill.

Practice Tip - Levy payments and voting at meetings

Under the current Unit Titles Act 1972, rule 28 of the Second Schedule states that "all amounts due and payable under the Act to the Body Corporate in respect of the unit exercising a vote must have been paid". Most Bodies Corporate levy their members on an annual basis but we have come across Body Corporate rules amended to enable members to be levied on a monthly basis. Either way no unit owner can vote unless all levies due as at the date of the meeting have been paid. This applies to ordinary and special resolutions but not unanimous resolutions.

The use of the words "all amounts" in rule 28 refers to all types of levies. Nowhere in the Act does it state that rule 28 applies to one type of levy and not to another. For example "all amounts" would include ordinary Body Corporate levies and maintenance refurbishment levies.

It pays to carefully check any amended Body Corporate rules to determine when levies are due for payment. This will enable you to correctly determine whether a unit owner can vote.

If you or your Body Corporate clients require legal advice on the impact of the Unit Titles Bill or any other unit title or Body Corporate matters, feel free to contact our team on (09) 356 8243 or;

Liza Irvine (.(JavaScript must be enabled to view this email address))
Tim Jones (.(JavaScript must be enabled to view this email address))
Paul McKendrick (.(JavaScript must be enabled to view this email address))

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