Action needed on high-rise maintenance

16:00, Mar 22 2014

The failure to squirrel away enough money to pay for the long-term maintenance of multi-unit dwellings like high-rise apartment blocks must be addressed before the country further intensifies its cities, warns the Home Owners and Buyers Association (Hobanz).

The lobby and consultancy group, set up during the leaky homes crisis, alleges that many body corporates have woefully inadequate long-term maintenance plans (LTMP), and simply aren't salting enough away to pay for future maintenance.

That penny-pinching threatens great unfairness to future owners of apartments, who will find the previous owners effectively transferred some of the cost of ownership to them, says Hobanz spokesman Roger Levie.

Hobanz raised the issue against a backdrop of rising apartment-dwelling as the drive to pack more homes into cities gains momentum, a trend most prominent in Auckland where house prices are high due to short supply. It is calling for a prospectus-style set of documents including LTMPs to be given to all prospective apartment buyers. And it wants improvements in the enforcement of the Unit Titles Act 2010 which requires bodies corporate to have LTMPs and maintenance funds, many of which will have to build into millions of dollars to meet the cost of future repairs.

Hobanz has been helping prospective apartment-buyers assess LTMPs, but has been unimpressed so far. "Many are totally under-funded," Levie said.

He accuses the regulator tasked with ensuring LTMPs are fair and maintain equity between present and future owners, of not doing the job. The Ministry of Building, Innovation and Employment (MBIE) has not checked a single one since becoming responsible for regulating them in June 2011.


"The ministry has not exercised its powers. It has very broad, sweeping powers, but it has declined to use them," Levie said.

The ministry has the regulatory power under Section 133 of the Unit Titles Act 2010 to act on LTMPs. In its defence, MBIE said it had never been asked to check a plan, therefore, hadn't done so.

It acknowledged a "well-functioning unit titles framework" was an important part of a well- functioning higher density housing market. It said it was helping body corporates and unit owners to manage their own affairs and

exercise their property rights by providing advice online and via a contact centre.

The ministry added it was researching how much body corporates and unit owners knew about their rights and obligations and where any gaps were to see if it needed to improve its services.

Not everyone shares Hobanz' views. Andrew King, executive officer of the New Zealand Property Investors' Federation, said: "It's potentially a problem. The larger ones should be okay."

It is an area investors need to investigate when buying an apartment, King said.

Lyn Clapperton from property manager Crockers, which has a body corporate management business, had not seen anything to indicate widespread problems, but she acknowledged it was early days for the Unit Titles Act.

She said the LTMPs brought in by the act were a "100 per cent improvement on what there was before", but added that most LTMPs had been in place for three years and that body corporates were revisiting them now.

One of the key problems is there is a significant disincentive for owners, particularly investor owners rather than those living in the apartments, to be realistic about how much money should be put aside each year to pre-fund repairs that could be needed years in the future. The more money chipped in by the current owners, the lower yields investors get which can drag down prices when apartments are on-sold.

Levie said Hobanz was concerned for inexperienced buyers as the law does not even require owners or real estate agents to hand over details of the LTMPs unless asked to do so.

"We are looking at the intensification of Auckland, but were are still dealing with people buying into these complexes who are relatively unsophisticated in their understanding," he said.

Sunday Star Times