The Government this year announced a plan to increase the numbers of electric vehicles (EVs) in New Zealand to 64,000 by 2021. Currently there are nearly 6,000, and the numbers are increasing exponentially. The transition to electric vehicles is coming. But there are a few practical barriers in the way to EV ownership. One glaring requirement is that you have to be able to charge your EV. For most home owners, this is not a challenge so long as you have a garage and a plug. But for those living in unit title developments it can be more difficult as your car park may not have an electricity supply.
We have recently encountered this scenario, and have found that there are some key legal challenges to doing the infrastructure upgrade that will often be required to deliver increased electricity supply to car parks. This article sign-posts some of these.
Unit title developments vary in the way ownership of units is structured. Consideration will need to be given to who owns what. For instance, are car parks accessory units, principal units or even part of common property? What about the driveway area? Think about which units the wiring will need to go through. The ownership arrangements will affect who is responsible for certain parts of the installation.
Who is likely to be responsible?
Throughout the Unit Titles Act 2010 (“the Act”), the body corporate is tasked with doing infrastructure related works. Also because this upgrade will likely benefit a number of units, the body corporate will likely have a role to play in setting up the infrastructure installation.
Sharing the costs
The body corporate can probably use a ‘capital improvement fund’ to pay for the EV capacity upgrade. This is an optional fund that a body corporate can vote into existence by ordinary resolution. To finance the fund, money must be levied from all unit owners in proportion to their ownership interest. This fund is relevant because the upgrade does not fit under a routine maintenance cost or a day-to-day expense. Note however that once the work is within an individually owned unit, then costs should fall to the unit owner and not to the collective kitty of the capital improvement fund.
One feature of the capital improvement fund is that it is a blunt instrument – everyone pays no matter if they have a car park or intend to buy an EV. Section 126 provides a mechanism to allocate costs if some benefit more than others for authorised works.
One possible complication is the relationship (or lack thereof) between sections 126 and 131. Section 131 is about surplus funds held by the body corporate. It contains certain rules for handing back those surplus funds to unit owners. There is an issue of fairness if the sections are viewed as operating together. Funds would initially be levied from unit owners for the capital improvement fund, and then used to pay for the works. Once the works are done and paid for, the costs would be recouped from those who benefit per section 126. But now are these funds considered surplus? If so, they would fall to section 131 and can only be distributed back to unit owners in the proportions that they were levied. Because those who benefit are also levied, they would receive a chunk of their money back. This means that they would not pay their fair portion (i.e. the whole cost of installing EV infrastructure), and those who don’t benefit would still be subsidising others’ EV/ car park ownership.
One alternative to consider, rather than paying out per section 131, is to retain the funds. This is practical for a maintenance cost because the money can just be kept for another repair down the line. But if the capital improvement fund was created especially for this EV upgrade, then it is pointless to keep the surplus money in this fund; its purpose is over and those who didn’t benefit have lost their levy money.
The better view is that there is no overlap between sections 126 and 131. Section 126 is designed to facilitate fairer outcomes where there is unequal benefit. Therefore, it makes sense for that section to standalone in order to achieve that fairer apportionment. For our car park owners this means paying the upgrade costs per section 126, and everyone else getting the money back that they initially paid into the capital improvement fund. On this interpretation, the debt is passed through the body corporate to on-pay to those who didn’t benefit. But this delicate divvying is certainly something to carefully consider in each case.
Metering the flow
Unit owners already pay for their own electricity use from their meter, as is required by section 125 of the Act. But this just applies to principal units. If the car park is in an accessory unit, then the Act doesn’t make payment of metered fees to that unit compulsory. The body corporate will have to come to their own agreements about payment for the electricity flowing to EVs in accessory units. Likely along the lines that these owners will need to set up a meter and pay the costs of all the electricity they use in order to connect into the infrastructure.
Property rights to do the work
It is essential that there is a right to install the electrical wiring in the first place. Under section 73 of the Act, there are incidental rights for the passage of electricity to units, so long as it’s reasonably necessary for the use and enjoyment of that unit. This may mean there’s a right to have electricity pass to a unit where it is for the charging of an EV. If so, then easements will not be required.
But clearly there are a number of factors to think about if you are looking to make your unit title development more EV friendly. The Act is not totally helpful in this situation, as although there is a capital improvement fund option, the apportionment of the costs to those that benefit it not particularly clear. This predicament will only occur more frequently in future as the numbers of EVs continue to increase, as does the density of our cities, with more apartment dwellers to match.
If you have any questions about these matters, please contact Matthew Whimp from our Wellington office on Matthew.Whimp@morrisonkent.com or (04) 495 8909.