Property

What you need to know about body corporates

Body corporate issues regularly turn up in court. So Auckland District Law Society president Joanna Pidgeon explains what investors need to know about them to avoid ending up in a legal battle.

Tuesday, February 26th 2019

Investing in properties that are part of a body corporate can be an easier first step onto the property investment ladder than buying a stand-alone investment property.

However, it means you will not be making decisions on your own as you are buying into a group of co-owners.

All too often body corporate matters become mired in legal proceedings. If you want to avoid going down that path, there are a few critical things to look out for when investing in a body corporate arrangement.

When you purchase a unit in a body corporate you are buying into a community of owners.

So, first up, always review the body corporate minutes; what do they suggest the dynamics are like within the complex?

There can often be different factions within a building, such as commercial versus residential in a mixed use building, or investors versus owner-occupiers. They may have different views on maintenance expenditure.

Do the minutes show that while issues may crop up they are resolved, or are there intractable differences? Are the differences handled professionally, or is there appalling behaviour?

Fractious body corporates can slow down decision making and increase overall costs, which impacts on your investment return.

If you are buying into a development where there may be a lot of units leased or managed by a single operator, there may be a “power block” of votes. That’s where votes at AGMs may be proxy farmed.

This can make it hard to make decisions which are against the interests of that party. An example of a situation where this can happen is in some serviced apartment hotels. 

By reviewing the minutes before buying you can be aware of whether there are negative dynamics which may impact on the financial performance of your investment.

To read more of what Joanna Pidgeon has to say about body corporates, click here to get the digital issue of NZ Property Investor magazine.

Subscribe to NZ Property Investor magazine here to get great stories like this delivered to your mailbox every month.

 

Comments

No comments yet

Heartland Bank - Online 6.69
SBS FirstHome Combo 6.74
Wairarapa Building Society 6.95
Unity 6.99
Co-operative Bank - First Home Special 7.04
ICBC 7.05
China Construction Bank 7.09
BNZ - Classic 7.24
ASB Bank 7.24
ANZ Special 7.24
TSB Special 7.24
Unity First Home Buyer special 6.45
Heartland Bank - Online 6.45
China Construction Bank 6.75
TSB Special 6.75
ICBC 6.75
ANZ Special 6.79
ASB Bank 6.79
AIA - Go Home Loans 6.79
Kiwibank Special 6.79
BNZ - Classic 6.79
Unity 6.79
Westpac Special 6.39
China Construction Bank 6.40
ICBC 6.49
SBS Bank Special 6.55
Kiwibank Special 6.55
BNZ - Classic 6.55
Co-operative Bank - Owner Occ 6.55
ASB Bank 6.55
AIA - Go Home Loans 6.55
TSB Special 6.59
Kainga Ora 6.99
SBS FirstHome Combo 6.19
AIA - Back My Build 6.19
ANZ Blueprint to Build 7.39
Credit Union Auckland 7.70
ICBC 7.85
Heartland Bank - Online 7.99
Pepper Money Essential 8.29
Co-operative Bank - Owner Occ 8.40
Co-operative Bank - Standard 8.40
First Credit Union Standard 8.50
Kiwibank 8.50

More Stories

Support for regulation

Monday, March 18th 2024

Support for regulation

REINZ has emphasised the need for property management regulation to Parliament’s Social Services and Community Committee.

A better investment market

Thursday, March 14th 2024

A better investment market

“Reinstatement of interest deductibility starting from the new tax year on 1 April brings property investors back in line with every other business in the country, where interest costs are a legitimate deductible expense," Tim Horsbrugh, New Zealand Property Investors Federation (NZPIF) executive committee member says.

[OPINION] Recessionary times

Thursday, March 14th 2024

[OPINION] Recessionary times

It is not the best out there for many businesses and property sector people. Sales are down across the board, our clients’ confidence is falling, and there is a lot of uncertainty.

Interest rate expectations: It’s not over yet

Thursday, March 07th 2024

Interest rate expectations: It’s not over yet

Most Kiwis think interest rate increases have peaked.