Text Box:


Buying an apartment under the UTA the new unit owner becomes a member of the body corporate. What are the consequences on your finances when considering long term maintenance and body corporate operational structure?

How much does a Body Corporate cost you?

Follow kjs2006 on Twitter
body corporate, AGM (Annual General Meeting)


A body corporate (BC) is created by the developer at the time the unit plan for the development is registered with Land Information New Zealand (LINZ). When the developer or an unit owner sells an apartment then the new unit owner becomes a member of the body corporate. Normally at the Annual General Meeting (AGM) the body corporate elects the chairperson and the committee. Both are representing the body corporate, engaging contractors like building manager and body corporate managers and control the body corporate operation. For responsibilities have a look at the Unit Titles Act.


Depending on the total number of units some body corporates are very small and operate without professional assistance. That can be good keeping expenses down or bad if disagreements canít be settled. In huge apartment buildings professional services like BC manager, building manager and subcontractors are engaged for looking after the building. That indicates the individual owner has little or no control about what happens in the building.



Hidden consequences


Developerís interest is to squeeze as many apartments as possibly into the building, especially true for budget (shoe-box) apartments. Investors are the target market and marketing strategies may include rental guarantees, furniture package, etc only to justify the price. The driver is to inflate the price by adding additional costs with cheap bulk order appliances and furniture.†


Such apartments are great as long as they are new. Unfortunately, when sooner or later appliances need to be replaced and expensive repairs cause headache then the financial struggles start. The often seen consequence is that body corporates are embroiled in politics and disagreements. Under dysfunctional BC good renters move out and the social climate goes down combined with huge expenses for vandalism and repairs. In the course of actions unhappy unit owners battle against steep increasing BC levies.



How much can it cost you?


Well, nightmares you get for free if you havenít done your due diligence on building and BC. The pre-contract disclosure statement will help to understand budget and levies. However, asking questions about the BC structure, maintenance, repair and levy history gives you an impression what to expect in future.


With lack of maintenance and repairs small issues for instance water damage from overflowing (blocked) drainage on balconies or leaking pipes can cause huge repair bills and underfunded long term maintenance plans may impose lump-sum payments.



Long Term Maintenance Plan (LTMP) Ė facts and confusions


A fully funded LTMP means in simple words the apartment owners pay in addition to ongoing costs pro-actively into a maintenance fund the amount needed for replacement work - money for re-cladding a building, putting on a new roof etc. The LTMP is one of the key changes to the Unit Titles Act 2010† to settle growing problems with† underfunded BC, not being able to repair major damaged buildings.


The opposite extreme is overspending the LTMP. To illustrate, if you own a 400k house, would you pay in addition to your mortgage and ongoing maintenance the replacement value into a saving account?† Well, for an disaster you pay your insurance premium and for re-cladding your house, a new roof, etc you would plan ahead, right? It is a common sense issue, but some body corporations are divided in disagreements.



What can we learn from this?


 It is just not true that an apartment is an easy going home ownership model for first-time buyers.

 Take the apartment building and the body corporate under careful scrutiny before signing a contract.

 Donít be lulled into a false sense of security just because you deal with professionals and the selling agent told you so.

 Be certain that ill managed buildings and body corporate are deal breakers because you have little or no control



And the final word goes in direction finance. Banks impose restrictions on apartment buyers. Know the lending rules before looking at apartments for sale. With finance you get the unit title,† but the bank owns the unit as security until you paid off the loan. So, the lack of control is the major issue you need to be comfortable with, good luck.



[ KPL Home† ]† [ Top ] [ Previous Page ]



Home Owner's Blog


Klauster Blogs lead to a real person, IT professional, investor, landlord and business owner with interests in technologies, residential properties and healthy lifestyles.†


The passion of making experiences available comes from renting in different countries and working with people who are interested in home ownership. Helping people to avoid pitfalls has been most rewarding, when forming relationships.


Our philosophy to treat life, partnerships and hobbies as an investment has helped people in our circle. Life is a dream with a deadline, happiness comes from making the right choices by having realistic expectations.


Come along and participate ó boost your confidence!