Body corporate rules – where’s the line between reining in ‘ferals’ and riding roughshod over unit owners’ rights?

This article originally appeared in LawNews and is here with permission.

Rules for owners and tenants are needed to prevent apartment complexes from ‘going feral’. But when it comes to banning pets, Airbnb and brothels, bodies corporate are straying into ultra vires territory, experts say.

Unless they’ve been living under a rock, most people – especially property lawyers, real estate agents and anyone living in apartment or townhouse complexes – have heard the horror stories about overzealous, incompetent and sometimes downright officious body corporate committees.

For many of these committees, their mission in life, it seems, is to regiment and control residents’ lives with as many petty rules and restriction as possible, such as bans on pets, noise, visible washing on balconies, political slogans, and using your apartment as an Airbnb or brothel.

Some body corporate rules say your curtains can be any colour so long as it is white while others try to prescribe the colour of the window frames and even the type of flooring a property owner might have in his or her townhouse.

Less clear, however, is how far body corporate restrictions can go before they impinge on the rights of unit owners and tenants.

Equally important is the issue of whether these bodies corporates have the statutory power to impose bans on issues like curtain colours and whether pets are permitted to live at the property.

These questions are becoming relevant to an increasing number of New Zealanders as planning authorities encourage medium-to-high density housing such as apartments and townhouses.

The answer, perhaps surprisingly, is not clear cut. For instance, a body corporate may be able to dictate an exterior colour scheme but it can’t necessarily prevent a unit owner from operating a brothel or short-term accommodation, such as Airbnb, from their property.

“It’s a tricky one. It’s a fine balance,” said Liza Fry-Irvine, a specialist in body corporate and unit title law, when asked where the boundary lies on the legal powers of a body corporate.

Fry-Irvine said hot topics for conflict between bodies corporate and unit owners included pets, age restrictions, short-term accommodation and brothels.

But she said disputes could arise from numerous sources, such as installation of garden trellises or sheds, colour schemes, the choice of flooring in a unit, or leaving clothes hanging on a balcony.

Bodies corporate can set out rules on these issues but Fry-Irvine said they could be challenged in the Tenancy Tribunal and ultimately the High Court if owners felt they were too prescriptive.

“It’s an interesting question because we don’t get a lot of cases coming out from the Tenancy Tribunal around those things, so we don’t get a lot of guidance around what is going too far, but body corporate rules like that are very common,” she said.

Close proximity living

As of 2024, there were 15,678 buildings using the strata title ownership model in New Zealand, containing 176,333 units.

Each of these developments has a body corporate overseen by a committee, usually lay-people, who generally take advice from a strata management company.

The committee sets out rules for the complex and adopts a budget, funded by levies on owners, which includes a long-term maintenance plan, designed to ensure there are funds for the property’s upkeep when major work such as repainting or roof renovations are needed.

Property lawyer Joanna Pidgeon from Pidgeon Judd said that as with any form of communal living, tensions could arise and rules were needed to deal with issues such as excessive noise and waste disposal.

Or, as Andrew Nicol, the managing director of Opes Partners – a business that specialises in finding new-builds, usually townhouses, for investors – puts it: “Rules are needed to stop these places turning feral pretty quickly.”

“Complicated building systems need to have some rules and structure about how people operate in close proximity,” Pidgeon said. “I think in New Zealand it’s traditionally been ‘this is my home, it’s my castle, I live in a quarter-acre section, I can pretty well do what I want, other than council maybe having something to say about it’.

“But when you live in close proximity, where people’s behaviour can impact on others, there’s a desire put a framework in, so that you hopefully remove a bit of the unnecessary rub between co-owners, the body corporate, and the committee, so that you hopefully have a building where there are as few disagreements as possible.”

Pidgeon said Schedule 1 of the Unit Titles Regulations 2011 contains default body corporate rules covering basic issues.

“It’s just damage, rubbish noise, parking on common property, interfering with use of common property, and dealing with rubbish hygienically. Nothing about pets, nothing about a lot of things that people want to have addressed,” she said.

 ‘Quiet enjoyment’

However, Pidgeon said a body corporate committee was free to adopt its own rules: “You just need to have a quorum of 25% of the members at a meeting, then you need only 50.01% of owners that attending to approve it.”

The Law Association recently released updated model operational rules, which can be used as a guide when amending the default rules outlined in the regulations.

But body corporate committees can come up with their own rules and it’s these self-drafted efforts which can become overly restrictive and stray into ultra vires territory.

The Unit Titles Act 2010 says owners are “entitled to have quiet enjoyment of his or her unit without interruption by other unit owners or occupiers, or the body corporate or its agents, except as authorised by this Act or the regulations”.

There have also been two recent cases at self-styled “lifestyle villages” where bodies corporate overstepped by introducing age restrictions on who could live there. Both were unit title developments where the owners own equity in their property, rather than registered retirement villages, where residents buy a licence-to-occupy.

At one development, the Ferniehirst Lifestyle Villa in Ōtaki, a resident brought her unwell daughter to live with her, but the body corporate said her presence violated a rule that all residents must be aged over 50. An arbitrator overturned the ban, with the decision later backed by the High Court.

In another case, the body corporate at the Leamington Mews complex in Cambridge told the daughter of an owner a unit could not be sold to anyone aged under 50. The Human Rights Commission found that amounted to age discrimination and sent a blunt message to bodies corporate.

“Body corporate rules cannot conflict with other legislation, such as the Human Rights Act,” it said.

What the law says about pets

LawNews obtained the body corporate rules for an upmarket apartment complex in Auckland. It’s a beautiful development, with one apartment with direct access on to Takapuna Beach currently for sale.

The body corporate rules document runs to more than 20 pages, setting out the colour of backing material residents must use on their curtains, banning them from cleaning dusty rugs on their balcony, and warning that anyone guilty of excessive noise could have their power cut off.

It also prohibits pets, a common restriction imposed by bodies corporate but one that is open to legal challenge.

Pidgeon argues such blanket bans are ultra vires. She said a body corporate could ban pets in specific cases if they had reasonable cause and it was affecting other owners’ enjoyment of their property, such as someone who owned multiple cats which created odours in common areas.

But banning all pets outright is likely to be deemed an unreasonable exercise of body corporate power. It not only prevents residents accommodating their furry friends, but in many instances, including the swanky Takapuna Beach complex mentioned above, it can have adverse effects on an agent’s ability to sell the property, not to mention resale values.

In another example, Pidgeon says she had a client who had been refused a pet. “The client was selling the unit and the purchaser wanted to have a small animal,” Pidgeon said. “[The body corporate] refused, so they lost their sale, and then ended up reselling for less. We actually filed a claim against the body corporate for the loss, the reduction in price. I would have loved this case to proceed, but the body corporate settled.”

Similarly, Fry-Irvine said that the Tenancy Tribunal tended to rule in favour of owners in cases involving brothels or short-term accommodation, provided local planning laws permitted them.

“If they’re allowed under the planning laws, then I tend to caution my body corporate clients from adding in new rules that prohibit either one of those things – private brothels or short-term accommodation – because I think the tribunal decisions we’ve got coming out now are suggesting that is stepping outside the body corporate’s powers,” she said.

Fry-Irvine said many bodies corporate tried to impose fines for breaches of operation rules, which were not legally enforceable under the Act.

Devil in the detail

Other rules governing issues such as aesthetics and behaviour are more open to interpretation.

“The body corporate can only introduce rules that are incidental to the powers and duties the body corporate already has in the Act. Therefore, a rule coming in that says you cannot do X, Y, Z in your unit is going beyond the power of the body corporate. And then also on top of that, owners have got a right to enjoy their unit without interference from the body corporate, unless that interference is legal,” Fry-Irvine said.

“With issues like drying washing and colour schemes, you’d be arguing that they fall within the body corporate’s incidental powers and the building envelope in parts that make up the building’s aesthetics and they’re something that it’s generally required to repair and maintain. So you’d say the aesthetics are an important part of the building envelope and those sorts of rules are therefore valid in order to protect the envelope and its aesthetics.”

She said most rules were generally accepted as appropriate because they gave day-to-day direction on how owners, or their tenants, are expected to behave.

Pidgeon made a similar point, saying someone in an apartment who replaced carpet with hardwood floors could create noise that was unbearable for those in the unit below them, impacting their enjoyment of the property and creating an issue for the body corporate.

Another example might be erecting a shed, which could potentially block sunlight for other units, increase flood risk, or affect insurance for the complex.

“The devil is really in the detail,” Pidgeon said. “Absolute prohibitions are often harder to be able to successfully uphold. If you want robust rules that will withstand challenge, you’re often better to at effects… Then you’ll be looking at the particular instances and whether there are reasons to withhold consent legitimately.”

 A ticking time bomb

Aside from setting rules, a major role of body corporate committees is overseeing long-term maintenance plans (LTMP). Any complex with 10 units or more must have a plan that outlines budgeting needs to cover maintenance issues for a period of 30 years.

But Roger Levie, chief executive of the Home Owners & Buyers Association of New Zealand (HOBANZ) is concerned that loopholes in the law, penny-pinching by some body corporate committees and lack of enforcement are creating a time-bomb for owners that will erode the value of their properties.

He said LTMPs were often “not worth the paper they’re written on” because they rely on visual inspections and don’t include checks for weather tightness or evaluate upkeep of crucial components of a building such as cladding, roofing, joinery and the waterproof membranes.

“Getting a proper plan done is not cheap, it’s going to be a $20,000 exercise,” Levie said “But what the body corporate does is go and get a $2,000 plan that’s based on a visual. It’s not a real plan based on the building’s performance, it’s a theoretical plan that assumes the materials in the building will perform in accordance with the building code, which is probably unlikely.”

And while bodies corporate must commission a long-term plan, he said they can cut corners by electing to leave out big-ticket items or even pass a special resolution not to have a long-term maintenance fund, keeping owner levies down in the short term but effectively passing on maintenance costs to future owners.

When problems such as weathertightness issues occur, Levie said he knew of body corporate committee members who had kept it secret, sanitising minutes to prevent the complex becoming known as a leaky building while they focussed on selling up before property vanes tumbled.

“The issue is self-interest,” he said. “You can’t create a committee of owners who can leave self-interest at the door, particularly when you’re dealing with issues that have major financial impact… What happens is that the people with power, or the people who have the most to lose, are the most bullish and end up getting themselves on the committee in order to push their own self-interest. That’s how we get into these problems.”

Levie said a lack of resources meant MBIE’s enforcement of Unit Titles was “non-existent”: “They’re the ones that are meant to be monitoring and enforcing. They’re not funded. They don’t do it. So there’s no enforcement.”

He would like to regulations ensuring only qualified building inspectors compile long-term maintenance plans, that the plans were properly implemented, and a duty on body corporate committees to ensure all records and minutes of meetings are accurate, so other owners and potential buyers have a true picture of any issues affecting a building.

“The ministry thinks that you can solve these problems by going to the Tenancy Tribunal or voting out your committee or whatever,” he said.

“It just doesn’t work that way. It’s a totally failed system, and it’s built to fail because you just cannot expect a group of lay homeowners with a vested interest to do what’s right in these situations where there’s so much money at stake. It affects people’s lives, their marriages, this whole environment just wrecks people, that’s what we’re dealing with continuously.”

Fry-Irvine said while some sources of conflict, such as owners’ ability to operate short-term accommodation, were now clearer, the areas body corporate powers would continue to evolve as new issues emerged.

“It’s really been probably in the last five to 10 years as those have been coming under scrutiny but there’s the possibility that other rules will come under scrutiny too, and there will be some questions around whether they are legally binding or no,” she said.

“I think that over time we’re looking at the way our society is changing and units are being used for things that we didn’t envisage many years ago. We’re now having to look quite carefully at what the body corporate’s powers are in a different context many years ago, when things were a little bit simpler.”

*Neil Sands is  Deputy Editor at LawNews.  This article originally appeared in LawNews and is here with permission.