Amended Unit Title powers enabled a Tauranga body corporate to assume ownership of an apartment, forcing a sale after the bankrupt owner squatted there for more than a decade without paying council rates, body corporate fees or contributing towards his $242,000 share of building remediation costs.
The High Court was told Michael Philip Donovan was bankrupted in 2009.
Insolvency Service disclaimed rights to his inner city Willow Street apartment; the amount secured by mortgages registered against the apartment meant it was valueless as an asset in Mr Donovan’s bankruptcy.
Land disclaimed in a bankruptcy defaults to crown ownership; a relic of feudal law from England. Land tenure is derived ultimately from crown ownership.
Mr Donovan remained living in his apartment as if nothing had happened.
Known as Strata Views, the building has seven apartments; six operating as business premises. Mr Donovan’s is the only one occupied as a residence.
Strata Views body corporate told the High Court it had received little co-operation from Mr Donovan. He refused to leave. Body corporate levies due following his bankruptcy mounted up, unpaid. Council rates were not paid.
Attempts by Tauranga Council to force a Rating Act sale for non-payment of rates foundered. No agreement could be reached with the first mortgagee over setting an auction reserve price.
By late 2024, unpaid arrears totalled $604,000: rates, insurance, body corporate levies and Mr Donovan’s unpaid share of weathertightness remediation costs. Fellow apartment owners were covering his costs.
The High Court allowed the body corporate to assume ownership of Mr Donovan’s apartment.
Since 2010, the Unit Titles Act has allowed bodies corporate to exercise powers of a ‘natural person.’
Strata Views, like any natural person, was entitled to make an Insolvency Act application for the disclaimed apartment to be registered in its name. It had ‘suffered loss,’ incurring body corporate expenses covering Mr Donovan’s apartment, Justice Andrew ruled.
Once registered as owner by court order, Strata Views body corporate is entitled to have current mortgages removed, clearing the title, enabling sale of Mr Donovan’s apartment, Justice Andrew said.
Two of the mortgages secure debts which fell due for repayment in July 2008 and July 2009. No action has been taken to force repayment.
Limtation Act rules state recovery of a mortgage debt is time-barred if no steps are taken for twelve years from repayment date. Both these mortgages are now ‘stale;’ time-barred and not enforceable, Justice Andrew ruled.
The remaining mortgage secured debts owed by Mr Donovan to the body corporate. Strata Views right to recover this debt is achieved by assuming ownership of the apartment.
The court was told the body corporate intends to clean up the apartment, then sell.
Mr Donovan’s claim to instead have ownership of the disclaimed apartment returned to him was dismissed by both the High Court and the Court of Appeal.
Mr Donovan has no realistic ability to pay arrears, now well overdue, the court said. Vesting ownership in Mr Donovan would perpetuate the body corporate’s current impasse attempting to deal with him.
Ownership passes to Strata Views’ body corporate, holding title on behalf of all the other apartment owners, who have been paying Mr Donovan’s share of outgoings.
Body Corporate 49407 v. Donovan – High Court (16.12.24) & Court of Appeal (8.10.25)
25.216