Clause 1 is the Title clause.

Clause 2 is the commencement clause. The commencement of the Bill is delayed (but with a backstop mandatory commencement of 2 years after Royal assent) so that sufficient time is given for the sector generally and, in particular, currently operating body corporates, to inform themselves about the changes and be prepared for when the legislation does commence.

Clause 3 states that Part 1 of the Bill amends the Unit Titles Act 2010.

Clause 4 amends section 5 of the Act to insert a new signal-post definition for the term “body corporate manager”. The substantive definition is found at new section 114G and is particularly relevant for the purposes of new sections 114H, 114I, and 157B (see clauses 15 and 20).

Clause 5 amends section 39 of the Act, which relates to the assigning of utility interests to each principal unit. The amendment allows for apportioning of utility interests so that costs of particular utilities can be more fairly divided, based on use. For example, if there is a lift installed in a unit development, the interests amongst all the units could be apportioned in a way that results in those on the upper floors being responsible for a larger share of the operating costs than those on the ground floor.

Clauses 6 and 7 amend sections 79(e) and 80(1)(i) of the Act to provide context to the phrase “materially affect” used in both those provisions. The amendments reflect the amendment made to section 65(1) of the Act by section 27 of the Regulatory Systems (Building and Housing) Amendment Act 2017 (2017 No 11).

Clause 8 amends section 95 of the Act to clarify the quorum requirements for a general meeting of the body corporate.

Clause 9 amends section 101 of the Act to clarify how matters at meetings of a body corporate are to be decided. The default position is that a matter is decided by way of ordinary resolution unless the Act provides specifically for a matter to be decided by special resolution or the body corporate has delegated the matter to its body corporate committee to decide.

Clause 10 amends section 102 of the Act, which relates to proxy voting. The amendment inserts limitations on the number of proxy votes any one proxy may hold.

Clause 11 inserts new section 104A into the Act. This section authorises members of a body corporate to attend meetings and vote at those meetings using some form of remote access facility, for example, a telephone or audiovisual link. Preconditions, set out in the section, must be satisfied before a meeting can be held in this manner, including compliance with the relevant regulations.

Clause 12 amends section 112 of the Act, which relates to the establishment of body corporate committees. A new subsection (3) is added to better signal the relationship between this provision and the requirements in the regulations (which also have specific requirements relating to the establishing of a body corporate committee).

Clause 13 inserts new section 112A into the Act. The section provides for the chairperson of a body corporate to also be the chairperson of the body corporate committee, if any, for the body corporate. This is a default position and applies unless the body corporate decides that the chairperson should be another person elected by the committee.

Clause 14 replaces section 113 of the Act, which relates to decision-making of body corporate committees. The Act authorises a body corporate to set up a body corporate committee to perform its functions and exercise its duties by way of delegated authority (subject to certain limitations and restrictions). Replacement section 113 expands on the meeting procedure requirements for these body corporate committees.

Clause 15 inserts new sections 114A to 114I. New sections 114A to 114F introduce accountability requirements to body corporate committees and their members. New section 114A requires members of body corporate committees to comply with the code of conduct prescribed in the regulations (see clause 35, new regulation 28A). The code is modelled on that contained in Queensland’s Body Corporate and Community Management Act 1997. New sections 114B to 114F set out what and how conflicts of interest of members of a body corporate committee are to be dealt with. Currently the Act is silent on this matter. The provisions are based on corporate governance principles and provisions in other New Zealand legislation, including the Companies Act 1993 and the Crown Entities Act 2004. The provisions confer a duty on a member to disclose any conflict of interest to the committee who then is prohibited from voting on any decision that relates to the matter in which the member is interested. New section 114C sets out the test for determining whether a member has an interest in a matter (a defined term, for this and the other provisions relating to conflicts of interests). New section 114F requires a body corporate to keep a register of disclosures of interests made by members. The register is required to be available for inspection by all committee members and, depending on its operational rules, other members of the body corporate.

New sections 114H and 114I introduce provisions into the Act in relation to body corporate managers (as defined in new section 114G). New section 114H sets out matters relating to the functions and duties of a manager (who may be the owner of a principal unit). New section 114I requires a body corporate manager to act in the best interests of the body corporate and, without limiting the generality of that statement, provides specific requirements as to how a manager must fulfil that duty (for example, by acting in good faith, complying with all relevant legal requirements, and disclosing conflicts of interest). The provision also sets out, to avoid any doubt about the matter, that if a manager is engaged to manage the affairs of more than one body corporate, the manager must act independently in each case and not mingle funds, property, or any other thing between the body corporates for which the manager is responsible.

Clause 16 amends section 116 of the Act, which relates to the long-term maintenance plan for a body corporate. New paragraph (aaa) is inserted and requires the plan to also identify any defects in or repairs required to the unit title development and an estimate of the costs involved in rectifying the situation.

Clause 17 amends section 139 of the Act, which relates to service contracts entered into by an owner before the date that the control period ends (as defined in section 6 of the Act, being, effectively, the period of time during which the original owner of the development retains control of the development). The amendment adds extra safeguards in relation to any service contracts that the owner may enter so as not to unfairly burden or disadvantage the body corporate members once control (and benefit or responsibility, or both) passes from the original owner.

Clause 18 replaces sections 146 to 149 of the Act with a simpler regime. The provisions relate to information required to be disclosed by a seller of a unit to a prospective buyer. New section 146 requires the information to be disclosed to a buyer to be endorsed by the body corporate as being correct (see new section 148). The seller is responsible for providing the information to the buyer and discussing any issues arising from it, however, this does not prevent a body corporate manager from preparing such a statement.

New section 147 provides for an additional disclosure statement to be made to a buyer, if requested.

New section 149 provides a right to a buyer to delay settlement if a seller provides disclosure information later than permitted; if the information is incomplete and not substituted within the permitted timeframe; or if the information is simply not provided at all.

Clause 19 amends section 151, that relates to the cancellation of an agreement for defects in disclosure.

Clause 20 inserts new Part 2A into the Act. This Part sets out special provisions relating to two particular types of unit title developments characterised by the number of residential units that are contained within the entire complex. These are developments that—

• include no fewer than 30 principal units that are primarily used as residences (defined in new section 157A(3) as large residential developments); or

• include no fewer than 10 but no greater than 29 principal units that are primarily used as residences (defined in new section 157A(3) as medium residential developments).

The Part imposes particular obligations on these types of developments, although, in most cases, medium residential developments may opt out of complying with the obligations if the body corporate so decides (by special resolution). The obligations conferred by new Part 2A include the following:

• employing or engaging one or more body corporate managers (new section 157B):

• complying with additional reporting requirements by the body corporate committee (new section 157C):

• complying with additional reporting and planning requirements in relation to the long-term maintenance plan for the development (see new section 157D):

• mandatory establishment and auditing of a long-term maintenance fund (see new sections 157E and 157F):

Clause 21 amends section 171 of the Act to insert a reference to body corporate managers in subsection (2). The significance of this being the Tenancy Tribunal has jurisdiction to hear and determine all disputes arising between any of the persons falling within the categories listed in subsection (2). This includes, for example, owners and former owners of principal units, body corporates, and prospective buyers.

Clause 22 amends section 217 of the Act, the provision of the Act that confers regulation-making powers on the Governor-General for the purposes of the Act. The clause adds two further powers:

• the power to prescribe professional or expert bodies that may certify matters relating to long-term maintenance plans required under new Part 2A; and

• the power to specify matters associated with the functions and duties that a body corporate manager may perform or exercise, including any terms that must be included in a manager’s terms of engagement.

The clause also amends the regulation-making powers in paragraphs (f) and (h) (in relation to the use of remote access facilities at meetings) and paragraph (n) to clarify that fees and charges may be imposed in relation to the settling of disputes (for example, mediation or arbitration fees).

Clause 23 inserts new Part 2 into Schedule 1AA, which contains transitional, savings, and other related provisions for the Act. New Part 2 inserts a savings provision in relation to service contracts already in force before the commencement of this Bill (as an Act) to the effect that the amendments do not apply to those contracts. The section is for the avoidance of doubt.

Part 2 of the Bill (clauses 24 to 40) makes consequential amendments to the Unit Titles Act 2010 and related and consequential amendments to regulations made under that Act.

These include the following amendments to the Unit Titles Regulations 2001:

• authorising self-nomination for a chairperson of a body corporate during the control period and at any time that all the principal units in the unit title development are owned by the candidate (clause 30):

• requiring candidates for election to a body corporate committee to have no outstanding amounts owing to the body corporate at the time of nomination (clause 31(3)):

• authorising self-nomination for a candidate for election as a body corporate committee member (clause 31(4)):

• inserting a code of conduct for body corporate committee members into the Unit Titles Regulations 2011 (clause 35, new regulation 28A):

• setting out the new information required in a pre-contract disclosure statement (clause 37, replacement regulation 33).

And the following amendment to the Unit Titles (Unit Titles Disputes—Fees) Regulations 2011:

• adjusting the fees payable for filing an application about a dispute with the Tenancy Tribunal (clause 40).