ACT unit title law overhauled

04 October 2001

New Act to replace outdated law
The new ACT Unit Titles Act 2001 (Act) commenced on 6 October 2001. The old Act is outdated and out of step with modern ownership practices. The popularity of unit titling in the ACT has generated a need for a far more streamlined process for administering unit title plans.

Overview of new Act
The Act governs the arrangements under which land may be subdivided into units, unit subsidiaries and common property. The new law clarifies the rights, liabilities and obligations of owners, the owners corporation, executive committee and agents. In addition, the Act allows alterations to boundaries in a units plan and requires owners corporations to maintain a budget, sinking fund and corporate register.

Principal changes
The Act introduces a number of changes relevant to unit title holders and owners corporations. These include:

• simplifying the procedure to cancel a units plan. The owners corporation may now apply to the Magistrates Court instead of the Supreme Court. This will significantly reduce the cost of cancelling a units plan and the time involved in doing so. If unanimous agreement is reached by the members, the units plan may be cancelled by ministerial authority
• reforming body corporate powers dealing with decision making and dispute resolution
• removing the onerous requirement of a unanimous resolution for many body corporate decisions, and allowing for majority agreements in appropriate circumstances. The new Act introduces the concept of an unopposed resolution for a number of body corporate functions
• allowing for minor alteration of the internal boundaries of a units plan
• requiring owners corporations to prepare a budget and set money aside in a sinking fund for future maintenance and repairs. This will help the body corporate to smooth out the level of financial contribution required from members and avoid the large one off contributions needed to carry out major works
• simplifying the language contained in the legislation.

Some of these changes are outlined in more detail below.

Owners corporation must establish sinking fund
An owners corporation must now establish and maintain a sinking fund to pay for capital expenditure items. The minimum annual deposit is 10 per cent of the budget for class A units plans. The only exception to this is where a units plan contains only two or three units and the corporation has resolved that it will not establish, or continue to maintain, a sinking fund.

Payments from a sinking fund may only be made by an owners corporation for prescribed purposes, including painting of buildings, renewing, replacing or repairing common property and any other capital expenses for which the corporation is responsible.

Only one class of units on a parcel
The new legislation only allows unit title applications to provide for the subdivision of a parcel into class A or class B units, but not both.

Class A units are part of a stratum or level. The boundaries of class A units are defined by the floors, walls and ceilings of the units. The most common example is a multistorey unit development. Ancillary areas or buildings, such as a balcony or garage, may be subsidiaries.

Class B units are defined by survey, similarly to other leased blocks of land and may be thought of as a 'footprint' in the ground.

Decision making and dispute resolution powers of unit corporation
The new Act reforms owners corporation powers for decision making and dispute resolution.

The old Act posed several administrative problems in this regard especially deadlock in the administration of unit title plans. Under the old Act, the unanimous consent of all unit title holders was required before a proposal to provide for improvements and maintenance, or changes to the administration and planning could take place. Given the large number of properties held as investments by absentee owners, this was a near-impossible standard to achieve.

Deadlock orders
The new Act provides for deadlock orders. An application to the Magistrates Court for a deadlock order may be made if an owners corporation has made an unsuccessful attempt to obtain the passage of motions requiring either:

• an unopposed resolution
• a unanimous resolution, or
• for an owners corporation with only two members: a unanimous resolution at a general meeting or executive committee meeting.

An application for a deadlock order may be made by the owners corporation, a member or a mortgagee's representative.

The Court will make a deadlock order if satisfied that it is just and equitable to do so, having regard to the overall interests of everyone with an interest in the units or the common property.

Where the order relates to a resolution of a general meeting of an owners corporation with only two or three members, (or of an executive committee of a corporation with only two members) the Court must be satisfied that the applicant has done everything possible under the articles of the corporation to resolve any dispute about the passage of the resolution.

Simpler procedures for cancelling units plans
The Act sets out a procedure by which an owners corporation may apply to the Minister for authority (a cancellation authority) for the cancellation of a units plan. For a cancellation authority to be granted, the application must be authorised by a unanimous resolution of the corporation made within three months prior to making the application. Further, the Minister must be provided with written agreement of each interested non-voter, unless certain conditions are met. Dispensing with the old requirement of obtaining Supreme Court approval will simplify this process greatly.

Comment
The new Act is the product of a number of years of discussion and input from key stakeholders. Its prime objective is equity, accountability and simplicity.

The new legislation recognises that units plans range from a simple dual occupancy to major multistorey, multi-unit developments, and seeks to impose a level of regulation that is appropriate to the size and nature of each particular units plan. It also recognises the investment nature of many units plans and, by introducing the concept of unopposed resolution, enables those most interested to manage the affairs of the corporation.

There is likely to be a period of adjustment to the new Act, and it is hoped that it will achieve a simpler, clearer and fairer unit titles regime in the ACT.