Where unit titles are concerned, the courts are drowning (so to speak) in leaky home cases. These cases crop up because the repairs are often (a) expensive and (b) required across common property and within individual units, which means working out who should pay can be complicated and contentious. The question for a body corporate is how to apportion costs fairly, in a way that is within its powers and keeps the aesthetics and integrity of the building intact. There are often choices available to bodies corporate when deciding who should pay. With this in mind, here are a few starting points to consider.
Where is the damage
The location of the damage affects whether a body corporate has the right to repair it. Section 138(1) of the Unit Titles Act 2010 gives a body corporate the power to make repairs to common property, assets designed for use in connection with the common property, and any infrastructure and building elements that relate to or serve more than one unit. For example, a leaky deck that drips into the unit below.
Levying for the repairs
Money can be levied to pay for certain repairs. Section 121 gives a body corporate the power to determine the total sum to be levied from time to time. For money going to the body corporate operating account, long-term maintenance account or any contingency fund, the levy will be raised in accordance with each unit owner’s utility interest.
Reallocating the costs – sections 138(4) and 126
Once the levy money has been raised and the repairs paid for, the body corporate can decide whether to reallocate the costs per sections 138(4) or 126. All unit owners must pay the levies for the repairs to begin with, even if the costs may be recouped later using sections 138(4) or 126.
Section 138(4) allows a body corporate to reclaim the costs of repairs of building elements and infrastructure contained in a principal unit from the owner of that unit.
Section 126 allows a body corporate to recover costs of repairs (and other authorised work) that are substantially for the benefit of one or several units, or that benefits one unit substantially more than it benefits others. Broadly speaking, these costs are recoverable from the owner(s) that benefit.
A body corporate may be in a position where both these sections apply. Take our earlier example, where water drips through a deck into the unit below. In this scenario, the cost of repairs could be recouped entirely from the owner of the deck per section 138(4). Or, per section 126, the cost could be divided between the deck owner and the unit owner that benefits from no longer having a drip. Of course, a body corporate may not wish to reallocate the costs at all.
There is benefit in having some flexibility to decide who pays. In saying that, bodies corporate are set up for the proprietors’ mutual benefit and can be held to account by looking at whether they are acting in the best interests of members generally. So when deciding, bodies corporate should balance the concerns of each individual unit owner with those of the wider development with care and caution. Each decision will of course turn on the particular circumstances at hand, and so you should be seeking specific legal advice when making a decision about cost apportionment, especially if there is discord amongst owners about what is fair.
If you have any questions about these matters, please contact Matthew Whimp from our Wellington office – email matthew.whimp@morrisonkent.com, phone (04) 495 8909.
