Fair calculation of Body Corp Levies with re-cladding issue

[marief]

Hi! I have discovered a lot of very helpful advice on this site over past weeks for which I'd like to express my gratitude. I haven't however been able to find an answer here or elsewhere for the following concern, and wonder if there is someone who can advise me on this.

When I purchased my apartment in 2003 after a marriage break-up, I had it checked by a building inspector and was told there would be no risk with the weathertightness issues that were just beginning to come to the public's attention. Although it did have cladding, the structure was mostly concrete. Early this year however it was discovered that the complex, like so many others in NZ, does have issues after all and as it is over 12 years old there are no ways of seeking any compensation. A reputable firm was employed to investigate and quotes given on the possible cost of recladding, repairs etc. There are two blocks of units which are not concrete construction and have considerable damage. There are two blocks of units similar to mine which are mostly concrete and have some damage on upper floor apartments, but less on the lower. My own apartment has no damage whatever.

I understand that we all have to pay an equal share for the repairs to general-use buidlings (gym etc.). Although alternatives were suggested by the Inspection Company i.e. that
levies could be based block by block, or upper floor by lower floor and block by block, or based on the proportional levies we already pay, I have the impression that the last suggestion will apply.
If I only have to pay based on my lower floor block - and then my share of the public use structures - the total would be upwards of about $30,000 (based on the lowest estimate - it could be much higher)
If it is based on the block but not the level, which I believe is the fairer option because the only reason the lower block is not damaged is because it was protected by an upper floor, it would be upwards of
about $50,000. But if my levy is based on my percentage of the entire complex, it will be upwards of $70,000. I will never recoup the value of this place after paying for even the lowest estimate of repairs as the building is relatively small, and I will have to use what little savings I have and find some way to raise the rest of the cost. As I am a superannuatant I am unable to raise it through employment.
But of course my circumstances have no bearing on what is the legal solution.

I know I'm only one of a large number of people whose lives have been devestated by this unexpected and wasteful expense caused by leaky buildings. Investigations I have made with the owners of
units in apartment complexes who have already been through this process indicate that the amount paid is generally based on the proportional levies system. I feel this is unfair because those of us
who ensured we purchased a concrete structure, have to pay for those who didn't take this precaution. However, it has been pointed out that although those owners didn't consider this factor, the amount they would have to pay would be so much higher if it wasn't distributed evenly amongst all owners. I have searched a number of sites and read through the rules that apply to Body Corps but cannot find any reference to levies with large cost issues such as this.

Any advice would be appreciated. Thanks

[eri]

When you buy into a BC you buy into the weakest part

For example most leaks are in the roof but everyone needs to pay for roof repairs not just the people on the top floor. In most cases they talk of the building envelope.

It may seem unfair

But it's basically the only way multiple owners in a many floored building can work

A form of socialism just like rates in the city, why should people in south auckland contribute to a 2nd harbour crossing

Or taxes, why should people in Wellington pay for the chch rebuild

If you don't like that form of shared ownership you should buy standalone buildings

[artemis]

Have you checked out www.hobanz.org.nz? It is a not-for-profit set up by John Gray, who has a wealth of experience on the subject.

There is a section on body corporates, including a 'who pays' matrix. s126 of the Unit Titles Act appears very relevant to this thread as it covers 'Work substantially for the benefit of one or more units'.

[marief]

When you buy into a BC you buy into the weakest part

For example most leaks are in the roof but everyone needs to pay for roof repairs not just the people on the top floor. In most cases they talk of the building envelope.

It may seem unfair

But it's basically the only way multiple owners in a many floored building can work

A form of socialism just like rates in the city, why should people in south auckland contribute to a 2nd harbour crossing

Or taxes, why should people in Wellington pay for the chch rebuild

If you don't like that form of shared ownership you should buy standalone buildings

Thank you for your reply. I gather you are telling me that those are the rules in all circumstances and not just what may or may not apply in our circumstances.
One of the owners of the slightly larger apartments and which is actually the worst affected, offered to do a straight swap with me because she said she always wanted a corner unit.
She may have thought she would be having to pay more because of how badly affected her unit is. I should take her up on it because it will be worth more when the work is completed!!

[eri]

i'm no expert

the link above seems an excellent source

the part artemis mentioned offers the line of attack if you feel you are being hard done by

Work substantially for the benefit of one or more units, recoverable from unit owners based on benefit, or utility interest, or relative benefit determined by Court or Tribunal

ask the BC secretary to explain to you how they are working out the split for payment and why they are working it out that way

then take that split method and explanation to a leaky home legal expert and ask them if they think it looks "unfair" enough to be worth starting legal action to get a court or tribunal to come up with a different split

[marief]

Artemis, I missed seeing your reply earlier. Thank you so much for the link. I had not come accross the HOBANZ website in my searches. It is a great source of information and just what I have been
trying to find.

Eri thank you for your advise as well. I don't know about seeking legal action though as that can prove more expensive than it's worth.

[artemis]

We'd be v interested to hear how you get on. Legal action may not be expensive if your specific case fits within the Tenancy Tribunal limits. See Part 4 of the Act. But in any case a fair bit of water needs to go under the bridge before that is contemplated. And it may well be that the Body Corp takes a case in order to get a formal decision which will bind all owners. In that case I expect all owners would be levied for the cost of the action.

Suggest as eri said have a talk to the body corp secretary. Perhaps consider asking to be co-opted onto the committee pro tem so you are involved in the decisions, or at least keep a close eye on meetings and minutes. Likely to be v interesting and a great learning experience.

PS I'd have to wonder if the neighbour interested in a swap has been looking up s126 of the Act!
PPS I thought your original post was well thought through and written. You'd be an asset to the committee.

[Keithw]

It will depend on the other owners.
Let me tell you how it worked out for me in two different blocks.
In the first we took the legal route to put in place what was at the time a Section 48 Scheme, now a section 72 i think.
This defines exactly how the costs will be spread and gives the Body corp the authority to repair all units and common property as one.
Its actually an application to the High Court to put in place a scheme that is binding on everyone, since very seldom will you get everyone to agree.
As such, you / the owners are the ones who decide what it is you want in the scheme. Even though the lawyers will have their own default scheme, & the BC secretary will also no doubt want clauses favouring it, it is the owners that define its content. If everyone can't agree on the content you will end up arguing it in Court. This can be very expensive for the BC ($60k+) & also you if you choose to use a lawyer to defend your rights. However as an owner, you are entitled to stand up in Court yourself to defend your rights. this will cost you nothing but still cost the BC its lawyers fees.
In our case, after getting some changes to the scheme, particularly in relation to Joint & Several clauses, the scheme was settled by the Court.
It specified that common property repair costs would be shared according to unit entitlement proportions, while repairs to private property would be assessed on a unit by unit basis, to reflect the actual cost of repair of each unit.
In the end, after spending $5 Mil in repairing a 30 unit complex, the assessment never happened & costs were simply shared on a unit entitlement basis. Never found out the real reason but certainly there was going to be a lot of money involved in getting quantity surveyors to try to break up the costs.
We were probably a little fortunate in that we were able to get about 70% of the costs from a settlement with Council, builders, building inspectors & property inspectors.

In the second case with a 12 unit complex, we managed to get agreement amongst owners. Still filed the section 48/72, but it was not opposed in the Court so cost a whole lot less, still about 20k I think.
The costs were simply shared on the unit entitlement proportion. Again, a partial payment from Council helped, but in each case the out of pocket cost were in excess of $70k, so I think your hope of doing yours for $30k is wishful thinking.
You have to add in all the legal costs related to having the BC do repairs to private property & ensuring that everyone is compelled to pay their share.
Section 126 goes part way towards this but does not fully deal with the complexity involved. I think mainly because s126 only applies to where the BC pays for something then tries to claim it back from the affected owner. Whereas before it can start leaky repairs, the BC must have the funds in hand, therefore must be able to levy before the work takes place.

[Keithw]

Just as an after thought, you currently assume that your unit is not affected, on what is this based ?
You can't actually tell until you strip off the cladding & look inside.
On one of my units there were no external signs, but inside the timber was rotting away.
Another owner made the same assertion as yourself way back in the beginning & tried to get excluded from the repair costs.
It turned out that his unit was one of the worst, it just wasn't visible until the cladding was removed.

Also even though you are beyond the 10 year point for claiming from the Council, you can always attempt to sue your property inspector, if they are still in business. Or even the previous owner, if they can be shown to have reasonably known about potential leaky problems at the time they sold to you. This is where BC minutes become so important, & that includes Committee minutes too.

[marief]

We'd be v interested to hear how you get on. Legal action may not be expensive if your specific case fits within the Tenancy Tribunal limits. See Part 4 of the Act. But in any case a fair bit of water needs to go under the bridge before that is contemplated. And it may well be that the Body Corp takes a case in order to get a formal decision which will bind all owners. In that case I expect all owners would be levied for the cost of the action.

Suggest as eri said have a talk to the body corp secretary. Perhaps consider asking to be co-opted onto the committee pro tem so you are involved in the decisions, or at least keep a close eye on meetings and minutes. Likely to be v interesting and a great learning experience.

PS I'd have to wonder if the neighbour interested in a swap has been looking up s126 of the Act!
PPS I thought your original post was well thought through and written. You'd be an asset to the committee.

Thank you for your interest and comments. At our last meeting I pressed for more members to be appointed to the Committee - or at least a sub-committee for the work ahead of us and it did result in a large number putting their names forward. From these, 4 with relevant experience were chosen by the current committee members (construction, engineering and architectural connections). Because of the information I provided throughout the meeting based on the research I did regarding the Companies from which we were to choose at that particular meeting, some owners suggested I should be included but the final decision was made by the Committee. I was pleased that at least we had increased the numbers.

[marief]

Just as an after thought, you currently assume that your unit is not affected, on what is this based ?
You can't actually tell until you strip off the cladding & look inside.
On one of my units there were no external signs, but inside the timber was rotting away.
Another owner made the same assertion as yourself way back in the beginning & tried to get excluded from the repair costs.
It turned out that his unit was one of the worst, it just wasn't visible until the cladding was removed.

Also even though you are beyond the 10 year point for claiming from the Council, you can always attempt to sue your property inspector, if they are still in business. Or even the previous owner, if they can be shown to have reasonably known about potential leaky problems at the time they sold to you. This is where BC minutes become so important, & that includes Committee minutes too.

My unit was one of the eighteen which was tested. We were given the option of requesting to be included in the testing and I chose to do so because I had been concerned for some time about an odour in winter in a dark, south-west facing bedroom. They didn't test that side of the complex however because it is all concrete - but I still wonder....
The southern wall is all concrete, but the back (Northern aspect) of the units in my block, have timber infill framing which is clad with direct fixed fibre cement. The timber they tested on my unit is not affected by any damp - nor are most of the downstairs units because they are protected by the concrete patios of the upstairs apartments although some of them are because the patios are not weatherproofed correctly and have to be recoated correctly.
This is why it does seem that my unit does not have any damage. The repair costs compiled by the Company were broken down according to the unit blocks and it was from those figures I obtained the amounts I quoted. I realize however that it is just an estimate.

We had the building inspected a few years ago by a different company, when we would still have been within the 10 year claim period, but it was only a visual test and the problem with the patios was identified and
an unsatisfactory repair done, and no major issues identified. Big mistake!!

[marief]

We'd be v interested to hear how you get on. Legal action may not be expensive if your specific case fits within the Tenancy Tribunal limits. See Part 4 of the Act. But in any case a fair bit of water needs to go under the bridge before that is contemplated. And it may well be that the Body Corp takes a case in order to get a formal decision which will bind all owners. In that case I expect all owners would be levied for the cost of the action.

Suggest as eri said have a talk to the body corp secretary. Perhaps consider asking to be co-opted onto the committee pro tem so you are involved in the decisions, or at least keep a close eye on meetings and minutes. Likely to be v interesting and a great learning experience.

PS I'd have to wonder if the neighbour interested in a swap has been looking up s126 of the Act!
PPS I thought your original post was well thought through and written. You'd be an asset to the committee.

I could not have asked for a better resolution (so-far) to my original question. Of course nothing is fair in this whole, dreadful faulty construction situation. But at least, at this stage, the final decision has meant that those of us in the apartments of mostly concrete, do not have to pay as much as those on the upper floor who do not have concrete walls. The fact that we have no damage doesn't alter the fact that we still have to pay a share in the whole remedial project of course and pay for alternate accommodation and storage of our belongings while it is done etc. - (or lose income in the case of most for whom the units were rental properties) but at least the loss won't be as much as was originally expected for myself. We are now at the stage of awaiting tenders and building permits --- and deposit payments from several owners who have ignored reminders. Of course there is the possibility that those owners may be seeking legal advice which could change the entire outcome. We are now just waiting on tenders and building permits and expect the project to go ahead ...... one day.

[marief]

Warning to anyone facing remedial work. Estimated time for the repairs was 3-4 months. It is now 9 months and unfinished.
Total cost has increased so additional levies have to be paid.
The date for completion has been changed four times and communication terrible.
May need to start another thread for my query: who should be advising apartment owners of the date changes? The Building Manager, Body Corp Manager, Body Corp Secretary or Chairman, the project management or
the Building Supervisor?

[artemis]

I'd say the BC Chair as it will be the BC which has entered into the contracts. The Chair might delegate though. You are entitled to put requests in writing, to see the minutes, and attend meetings. Suggest you get one or more of the Committee to raise the issue at each and every meeting and make sure the response is recorded.

The whole thing won't be much fun for the Committee but they do need to keep everyone informed. .

[John the builder]

You need to download the Unit Titles Act and read it This determines your rights.

Body corporates confuse being responsible for damage (s138 and maintenance as being responsible to make it all go away. They are scared of future owners and some members will not have the financial concern that you may have. The problem with this is that in 10 years they will be reacting to another reclad as the building wears out again? Buildings need to be managed for their life.

Study the Unit Title plan and understand what you own and what is the common property. Where is the exact boundary? The BC has some rights over common property but you get the benefit of it and have responsibility for the cost of that CP (s126)


Your "reputable consultants" are likely getting there ticket clipped for 100k plus (what is their inducement?) so they are hardly independent.
get independent advice (PM if you want, I know someone who can help.) The experts also are risk averse and will recommend reclad as the safest solution rather than the prudent one.

If there is no damage to your unit (what does this mean? no decay or no need to reclad oris it different materials?) and no reclad being done then you dont have to pay anything. If there is work on your unit you only pay to the extent that you receive benefit. (refer s 126 UT2010)

Watch out for experts recommending reclad over masonry for example.

Do not agree to s72 as this is a mechanism to get you to sign away your rights!

If you are disadavataged by a vote you can seek minority relief from TT under s210. You must be prepared to asert your rights? find other owners similarly concerned and share costs!

Sorry didnt realise this was an old post and being updated
What I said applies though as now you are at the sharp end of dividing cost