More and more people are choosing to live in apartments. But purchasing a property on a unit title comes with greater risks than buying a freehold property, due to the shared ownership model. But thanks to new body corporate (body corp) legislation, there’s now more transparency for apartment buyers.
The country is in the middle of a building boom. To the end of May 2022, the number of new dwellings consented was 51,015, up 17% from the year ended May 2021. And many of those new homes were apartments, which come under a unit title.
For example, in Auckland there were 8698 new dwellings consented in the first five months of this year. But only 2205 (25%) were houses. The other 6493 (75%) were apartments, units and townhouses.
What is a unit title?
Unit titles cover apartment buildings. As a resident in a unit title property, you own a defined part of the building, your apartment, and share ownership of common areas: lifts, lobbies, gardens and driveways.
Under the Unit Titles Act, all unit titled properties, no matter the size of the development, fall under the same rules concerning building maintenance, organising insurance and the upkeep of the communal areas.
If there are fewer than nine units, residents have to organise this loosely among themselves. But if there are ten or more units in the complex, there has to be a body corporate committee, which must adhere to strict rules concerning its governance.
Units & apartments: the body corporate
Bodies corp have been known to become war zones, especially when faced with leaky buildings and the need for costly remedial work. If some residents are happy to pay, while others object, it can be hard to reach a compromise.
And an apartment building with a poorly run body corp can cause big headaches for residents, vendors and prospective buyers. If there are no long-term maintenance plans, financial audits or well-kept minutes of body corp meetings, it can be impossible to get a clear picture of an apartment block’s structural and financial wellbeing.
That’s why the new legislation that strengthens the professional governance and management requirements for bodies corporate is so welcome. It provides increased transparency for apartment buyers and sellers, alike.
The new legislation:
- Provides unit buyers clearer information, especially about water-tightness and body corp issues
- Strengthens the governance arrangements of bodies corporate, meaning they have to keep better records
- Increases the professionalism and standards of body corporate managers
- Ensures the adequate planning and funding of long-term, 30-year maintenance projects
Most importantly it allows apartment buyers to delay or cancel their purchase contracts if they don’t get enough information about the apartment they’re buying.
Body corporate: disclosure statements
When selling an apartment, a vendor must provide a disclosure statement, detailing relevant information about their property and the building’s body corp. The new legislation improves the information that a prospective buyer receives on this statement.
A disclosure statement must include:
- Any weathertightness issues, remediated or not remediated
- Earthquake prone issues and other land defects that need fixing
- Body corp audit and financial statements for the previous three years
- Notices and minutes of all body corp meetings for the previous three years
- Costs and details of any upcoming work in the next year
- Insurer details
When purchasing an apartment, in addition to having the unit’s disclosure statement checked out by a legal professional, it’s also a good idea to do your own homework.
Talk to residents, check maintenance plans and go back over all the old minutes from the body corp meetings to check for outstanding issues. And if you’ve any doubts or questions, ask for more information. Because with the law on your side, if the relevant information isn’t forthcoming, there is now more scope for cancelling the deal before you make a purchase you could quickly regret.
→ Related article: Home Insurance for Units & Apartments: What to Consider
First home buyer: compare home loans with Canstar
If you’re in the process of securing finance, you’ll need to shop around to get the best deal. Which is where Canstar can help.
The table below displays some of the 2-year fixed-rate home loans on our database (some may have links to lenders’ websites) that are available for first home buyers. This table is sorted by Star Rating (highest to lowest), followed by company name (alphabetical). Products shown are principal and interest home loans available for a loan amount of $500K in Auckland. Before committing to a particular home loan product, check upfront with your lender and read the applicable loan documentation to confirm whether the terms of the loan meet your needs and repayment capacity. Use Canstar’s home loan selector to view a wider range of home loan products. Canstar may earn a fee for referrals.
About the author of this page
This report was written by Canstar’s Editor, Bruce Pitchers. Bruce began his career writing about pop culture, and spent a decade in sports journalism. More recently, he’s applied his editing and writing skills to the world of finance and property. Prior to Canstar, he worked as a freelancer, including for The Australian Financial Review, the NZ Financial Markets Authority, and for real estate companies on both sides of the Tasman.
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