16 November 2015

Land: Body Corporate 207715 v. McNish

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