Tenants
in a Santa Rosa apartment at Gulf Harbour near Auckland are currently living
free of levies for maintenance and weathertightness repairs because their landlord
no longer exists.
The Santa Rosa body corporate failed in
legal action against a Mr and Mrs McNish as tenants for $79,550 unpaid by their
insolvent landlord, LVO Ltd. LVO as the
registered owner of the apartment is primarily liable for body corporate
levies. But LVO Ltd no longer exists.
The court was told that when Santa Rosa
was under construction in early 2000, apartment purchasers initially were given
perpetually renewable 21 year leases. It
was intended purchasers would later freehold their apartment. The McNishes showed no interest in
freeholding and LVO Ltd was put in place as a nominal landlord owning the
apartment freehold and listed as unit holder in the body corporate. The McNishes lease was now from LVO. The lease required the McNishes as tenants to
pay levies invoiced by LVO Ltd as landlord.
Evidence was given that the McNishes initially
paid the body corporate levies re-invoiced from LVO Ltd, but later stopped
payment. The Body Corporate sued
claiming the Contracts (Privity) Act entitled it to sue through the LVO/McNish
lease to recover levies the McNishes were contractually obliged to pay LVO
Ltd. LVO Ltd had been put into
liquidation in the interim. No buyer
could be found for its freehold interest in the Santa Rosa apartment. Under insolvency law, interests in land with
no owner default to the Crown as bona
vacantia. The Crown is not liable
for the Santa Rosa body corporate levies due on the McNishes’ apartment. No one is.
Justice Katz ruled that Santa Rosa body
corporate could not use the Contracts (Privity) Act to enforce the LVO/McNish
lease. The Act does not allow an
outsider to sue on someone else’s contract if this contract does not intend to
allow an outsider to sue. The lease
between LVO Ltd and the McNishes did not contain a separate and independent
promise of the body corporate’s
entitlement to levy payments.
Justice Katz warned the McNishes they
could not expect continued occupation of their apartment free of body corporate
levies. It was suggested the body
corporate, or a group of existing Santa Rosa apartment owners, would take over from
the Crown LVO Ltd’s interest as landlord and then sue the McNishes to recover
unpaid levies.
Body
Corporate 207715 v. McNish – High Court (16.11.15)
16.007