Having botched a re-allocation of insurance costs between residential apartment owners and then hampered attempts to remedy the problem, a central Wellington body corporate is facing an order to pay increased court costs as a penalty.
In 2022, management of a body corporate governing apartments on the Terrace in central Wellington set about re-apportioning ‘utility interests’ between owners, intending to adjust contributions towards insurance costs.
These efforts became a playbook on how not to do the job: the necessary resolutions were not included in notices mailed out prior to the members’ annual meeting; the resolution passed did not actually assign to owners the proposed new proportionate utility units; minutes of the meeting did not match what had in fact occurred.
Michael McIntyre owns one of the apartments: unit 14. This apartment is unusual in that it is a stand-alone house of a different character and construction from its neighbours.
The Unit Titles Act starts with the presumption that ‘ownership interests’ and ‘utility interests’ are of the same proportionate value. Owners’ utility interests provide the formula for allocating overhead costs like insurance.
It is open to unit title owners collectively to re-apportion utility interests where relevant benefits and costs may depart from their ownership interests. The key legal point is that any change to utility interests must be recorded on the land register since it constitutes a change to the legal title.
Mr McIntyre objected to proposed changes. Body Corporate management proposed that he bear 19.06 per cent of replacement insurance premium costs. Council’s rating valuation valued unit 14 at 12.46 per cent of the total value of all apartments. His registered utilities interest proportionate share stood at 8.3 per cent.
In the High Court, Justice Palmer pointed out that a quick way to resolve the issue would be to have ownership ratios (and with it, utility interests) re-determined. But this was blocked by a body corporate resolution stalling any revaluation and re-allocation of ownership interests until Mr McIntyre’s objection had been resolved.
Justice Palmer cut through the knot by setting aside the disputed resolution and directing body corporate management to obtain valuation reports necessary to update registered ownership interests.
Costs are yet to be assessed, but Justice Palmer signalled the body corporate would likely be ordered to pay an increased contribution to Mr McIntyre’s legal costs since it had forced unnecessary court proceedings to get things moving.
The body corporate indicated unresolved issues will still remain as Mr McIntyre’s contributions to long term maintenance costs are also disputed. Since his apartment stands alone, it does not form part of the integrated building infrastructure framing conjoined apartments.
McIntyre v. Body Corporate 80146 – High Court (14.12.23)
24.030