Northern Territory Second Reading Speeches

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UNIT TITLE SCHEMES BILL 2009

Ms LAWRIE (Justice and Attorney-General): Madam Speaker, I move that the bill be now read a second time.

The main purpose of this bill is the establishment of a new scheme for the issue multi-unit titles. Multi-unit titles are those where there is a sharing between the owners of various parts of common property and assets, and of rights and responsibilities regarding the property as a whole. Currently, these titles are dealt with under the
Unit Titles Act and related legislation, such as the Real Property (Unit Titles) Act. This bill follows on from the Land Title and Related Legislation Amendment Act 2008 that was passed in February of 2008. That act made substantive policy reforms concerning the planning processes that apply to unit title developments, and also to the management of bodies corporate that result from such developments. It has not commenced operation.

The
Unit Titles Act was originally designed for single stage, single use developments, like the construction of a block of flats. Its one size fits all approach has struggled to cope with more complex developments and, as a result, over the years it has been amended numerous times. The first major amendment in 1986 allowed developments to be completed in stages, provided that the developer set out in a disclosure statement exactly when and how the future stages would be completed. These amendments proved inadequate for large scale developments, thus Cullen Bay, in late 1992, had to be developed under its own special legislation that created a body corporate structure for the management of communal assets, such as the marina and lock, in what as otherwise a broad acre unit development for vacant lots.

The next major amendment in 1993 to the
Unit Titles Act provided for generic estate developments of the kind that had occurred in Cullen Bay. This meant that, in future, any development like Cullen Bay would not require its own special legislation. Parts of Bayview have been developed in accordance with these provisions.

The most recent significant amendment in 2002 saw the creation of the concept of a building lot. This concept allows further subdivisions within buildings. Building lot titles can be issued for different parts of a building or different buildings on a single parcel of land, and those titles can then be further subdivided into unit titles. An example of a building lot development is Old Admiralty Towers on the Esplanade. For that development, one of the building lots has been subdivided into residential units, whilst another has been subdivided into office units. The estate development and building lot developments allow for different layers of management corporations within a single development. However, each have their own rigid, somewhat idiosyncratic requirements that have limited their application.


Madam Speaker, the view was reached that there is no need for substantial variations in land development processes or in land title arrangements between the various type of multi-unit developments. The current variations add considerable complexity to these matters. Additionally, there are gaps in the legislation that adversely effect both developers and owners. There is room for reducing the complexity, improving consumer protection, and reducing regulatory burden.


For multi-unit developments commenced after the start of this proposed legislation, the new scheme created under this bill will replace the four different types of schemes contained in the
Unit Titles Act. It will allow for subdivision within subdivisions in an unlimited number of layers. The result may be a series of subsidiary bodes corporate in a layered structure. This will be broadly analogous to a group of companies, with a body corporate at the top of the pyramid, and various subsidiaries, and subsidiaries of subsidiaries beneath it.

However, the significance difference is that the corporate body in the bottom layer is a member of the higher layer and thus, is one of the owners of the common property of the higher layer.


Under this legislation, there could potentially be a suburb that starts off as a single unit title scheme. This will be the top layer, with individual units for parcels of land suited to residential, business, sporting or industrial uses. It would also include ‘common property’ such as a park or a golf course. The individual parcels could be split into units, for example a building could be constructed on a parcel of land and then be divided into apartments, with a separate unit title for each of the levels of the building. The ground floor could be further divided into shops, or the basement level of that building could potentially then be further subdivided into individual unit titles for the car parks. Sporting areas, such as marinas, may be further subdivided so there are titles for individual marina berths.


The extent to which these further divisions and land uses may occur will be governed by the scheme statement. That is, the scheme statement will provide for any limitations on future development. The legislation will also commit the amalgamation of schemes. The unit titles will remain in operation, to permit titles to be issued in accordance with its provisions if the land concerned has already been developed or partly developed in accordance with its provisions. It will also remain in place to govern the ongoing management of existing unit developments and corporations. These management provisions were substantially reformed by the
Land Title and Related Legislation Amendment Act 2008. Those amendments are to commence at the same time as the commencement of this proposed new legislation.

Transitional provisions will give the developers of projects already under way, at the time of the commencement of the new legislation, the option, subject to compliance with the transitional provisions, of having titles issued under the new legislation. Alternatively, they may proceed under the
Unit Titles Act. Additionally, bodies corporate established under the Unit Titles Act will have the option of converting to a unit title scheme under the new legislation.

The new legislation will provide greater flexibility concerning changes in proposals partway through a development. Where land is currently being developed in stages under the
Unit Titles Act, developers are required to enter into disclosure statements that are very difficult to change. For this reason, there have been very few staged developments. Developers prefer instead to subdivide land under the Planning Act and then complete each stage as and when there is suitable demand for units created. This means that each stage has its own independent body corporate rather than a single body corporate. This can lead to long-term management problems about assets that look as if they should be or can be shared, but where this may not legally be the case.

Disclosure requirements for building lot developments have also not worked in a satisfactory manner. This arises from the fact that the disclosure statement is only required to be lodged for registration when the developer is seeking the issue of titles. Fairly naturally, this leads developers, instead of seeking building lot titles at the outset of a project, to wait until the physical development has been completed. This allows them to lodge a disclosure statement setting out what has been done rather than what will be done. It avoids the risk of disgruntled purchasers seeking redress under the legislation for changes made to the building during the course of construction.


Effectively, for any such cases, there has been no effective disclosure other than that which may be set out in a contract. This has resulted in some purchasers of expensive units being somewhat surprised with what they have ended up purchasing. The legislation provides that a seller of a proposed unit must provide a disclosure statement at the time when the contract is made. A copy of the disclosure statement must be registered against the title for the land. This reforms current practices relating to disclosure statements, and the content of disclosure statements is set out in clause 45(2).


They must deal with matters such as estimated annual contributions, any proposed authorisations for letting agents, details of scheme statements, details of management modules and methods for adjudicating any disputes that may arise from matters dealt with in the disclosure statement.


I will now deal in more detail with the processes that will take place in accordance with the proposals contained in the legislation.


A developer seeking to obtain a unit title under the new legislation will make an appropriate subdivision application under the
Planning Act. The Planning Act will be amended by this bill so a developer will be required, as part of the application, to provide to the Consent Authority a plan in a form approved by the minister under the Planning Act. This plan will show buildings that will be suited for occupation.

The
Planning Act will also be amended so that it is clear under regulations that the Consent Authority, in making its decision, must decide whether any building or part of a proposed building will be suitable for separate occupancy of the kind suited for the subdivision of land. In considering the application the Consent Authority will be required to assess whether any buildings in the proposed development are suitable to comprise separate land title lots.

Thus, the Consent Authority will do more than simply check that there is an occupancy permit under the
Building Act or under any transitional operation of the various acts repealed by the Building Act. Instead, it will look to see if the building is such that the Australian building code would operate so as to permit the building to be occupied for the purpose for which it is being subdivided.

The Consent Authority will also have the power to give subdivision approval for units even if the unit has only reached, in effect, the stage of a shell of a building requiring further work before it might be suited to use as a residence, as a shop or as a home. Thus, in considering occupancy, the Consent Authority is not required to decide that the building is suitable for occupancy for a residential or business purpose. Rather it could, for example, grant a subdivision application which provides for the initial subdivision of a building into shells which may have basic facilities such as walls, roof and utility services.


A second developer, or an owner, could then further subdivide the land or obtain a land use approval for changing the shell into a residential unit. The subdivision plan will also show details of changes that might be permitted by regulation for the purposes of the progressive development of the land. Regulations will also be made that will set out the information that the Consent Authority may require to consider the application.


The subdivision application will then be handled in much the same way as a subdivision of broad acre land, that is there will be a survey plan that will be signed off by the Surveyor-General under section 49 of the
Licensed Surveyors Act. The developer will be required to provide various additional documents for endorsement by the Consent Authority. These documents will form part of the scheme statement that is lodged with the Registrar-General for the purpose of issuing titles. The documents will include prescribed information about progressive developments, information about layered schemes and information about exclusive use by-laws.

On the signing of the survey plan by the Surveyor-General and endorsement by the Consent Authority of the key subdivision documents, the developer will then be in a position to seek titles by lodging with the Registrar-General those documents, together with other documents relating to the long-term management of the land. These other documents include those relating to by-laws and the management module. The by-laws are rules that prescribe behaviour on the land that is the subject of the scheme statement. This land includes the common property as well as land that will comprise privately owned units.


The by-laws deal with issues such as noise, animals, the appearance of buildings and the like. Contravention of a by-law leaves the offender liable to a maximum fine of 20 penalty units, which is $2100. The by-laws will be either the standard by-laws as contained in Schedule 2 to the bill or as specified in the scheme statement.


The management module is the document that sets out how the body corporate makes its decisions and runs itself. It will cover matters such as the budget, annual contributions, borrowings, keeping of accounts, auditing, funds and powers concerning recovery actions, and voting. Various management modules will be set out in regulations to be made under the act.


Facts such as the size and nature of the unit title scheme will, as a rule, determine what management module will apply to any particular scheme. However, the developer may, in accordance with an approval given by the scheme supervisor, create a management module whose contents are designed specifically for the scheme.


The bill also proposes to regulate sales of the plan. These are generally sales of units and proposed buildings but can also include lots in a broad acre development under the proposed act. Firm contracts for the presale of such units are often critical in a developer obtaining finance for the project as a whole. Thus, it is of great importance to ensure that the systems for such presales have a significant level of integrity.


There will be only long-term integrity if buyers end up with units that meet their expectations. The current legislation has a number of provisions that seek to provide the buyer of a future unit with firm details about the land development.


These provisions do not work well for a variety of reasons. For estate and condominium development, this is because they are to prescriptive and, thus, tie down the developer. The building lots are created after the time a presale is made and, thus, they are of limited use to the buyers. For presales, this bill focuses on ensuring that the buyer is provided with key information before entering into a contract, and that this information is formally recorded.


The bill provides that a developer must lodge with the Registrar-General for registration a disclosure document that contains an estimate of any contributions that are likely to be imposed by the body corporate after the body corporate comes into existence. In providing this information, it is not expected that the developer will provide an estimate that turns out to be a precise figure. It is acknowledged that factors may change so as to affect outcomes. However, it is expected that a developer could show that the estimates had some logical basis when they were made.


The developer will also be required to disclose details of any facts relating to letting agents, body corporate managers, and service contractors. For example, if a developer has entered into a long-term contract for serving, letting, or body corporate management, this will need to be disclosed ...
________________________

Visitors

Madam SPEAKER:
Minister, do you mind if I just acknowledge these students here? Honourable members, I draw your attention to the presence in the gallery of Year 7 Palmerston High School students, accompanied by Ms Pat Munn. On behalf of all honourable members, I extend to you a very warm welcome.

Members:
Hear, hear!
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Madam SPEAKER:
Thank you, Attorney-General.

Ms LAWRIE:
Madam Speaker, if there is no firm arrangement but a mere intention, it is the intention that must be disclosed. The developer will also be required to disclose information concerning scheme statements, planning applications, management modules, by-laws and dispute resolution. This capacity to make changes during the course of a development will be linked with the appropriate mechanisms to protect the interests of persons who have purchased property off the plan.

The bill also contains novel provisions dealing with the termination of schemes. Under current legislation in place in the Northern Territory and elsewhere in Australia, there are very limited options regarding the termination of schemes. In essence, the options are, firstly, that all owners agree or, second, that a court approve the termination. These options are not suited for those cases where a unit development has become old, and for which it may be clear to some owners of the units that there are significant corporate advantages in redeveloping the land for a higher and better use.


Governments also have a strong interest in urban renewal and in better use of land. The current provisions do not provide any meaningful solution for situations where a small percentage of owners refuse to agree to the termination. Such persons may make these decisions for perfectly valid reasons that apply to all owners of property, such as ‘We like our home’, ‘We do not want to take the risk of redevelopment’, or ‘We are holding out for a top price that we will obtain in a few years time’. Operating on the basis that each landowner is entitled to his or her own castle, there are clear policy concerns in permitting a majority of other owners to, in effect, boot a person out of property ownership. It is also considered that courts are very reluctant to intervene to promote the interest of the majority over those of a minority.


Nonetheless, the Property Council of Australia has been urging Australian governments to take action so as to permit terminations on 75% majority votes rather than 100%. Its representatives point out that similar laws exist in places such as Singapore and the American mid-west. So far, no Australian government has made any moves in the direction sought by the Property Council. The Northern Territory government is also not prepared to go this far. Despite government’s self-interest in promoting urban renewal, it is our current view that the primacy of individual land ownership ought to prevail over the collective interest of co-owners.


The main exception to this principle is that of compulsory acquisition by governments, which can only occur having regard to principles derived from the Australian Constitution. In taking this policy position, we take account of the fact that all of the unit owners bought their units knowing that certainty of title was guaranteed by the need for 100% agreement or court orders. However, the government is agreeable to commencing a reform process for the future.


The bill, in clause 15(b) provides that a unit title scheme under the new legislation may resolve to terminate itself if persons holding 90% of the interest entitlements vote in support of the termination. Such a vote and termination can only occur if the scheme statement establishing the scheme provides for a management module that deals with such a termination. Thus, anyone buying a unit will be aware of the possibility of such a termination. Additionally, such a termination can only occur for a scheme that has existed for at least 20 years after the commencement of section 15 of the new legislation.


This means that there will be a period of 20 years for schemes under the current legislation that convert so as to be schemes under the new legislation. Any such clause 15(b) termination will also need to comply with provisions in the relevant management module for the scheme. These provisions will seek to protect interests of owners that object to the termination, and also of others, such as tenants, who may be adversely affected. The inclusion of such provisions in a scheme will be optional and thus will depend on a developer making an appropriate decision. The Department of Justice will develop model provisions that can be adopted into a scheme’s management module on a tick box basis. Proposed 15(b) terminations that vary from the model will be subject to approval of the scheme supervisor, who will make a decision based on principles to be contained in the regulations.


The bill also provides for exclusive use by-laws. These are a new feature of Northern Territory law, but they exist elsewhere. In effect, they permit rules to be made that provide for a unit owner or a group of unit owners to have exclusive use of a particular part of the body corporate’s common property. For the Northern Territory, the immediate likely use is for the allocation and use of car parks, but the principle can extend to the use of lifts in building, or for differential use of facilities, such as swimming pools, tennis courts or marina births.


Other features of the bill include: exclusion of the Commonwealth’s
Corporations Act 2001. As with the current Northern Territory legislation and all state and territory laws dealing with these kind of corporations, it is proposed that they be excluded, in accordance with the intergovernmental agreement of corporations law and section 5F of the Corporations Act.

Reform and amendment of the voting requirements for both this act and the
Unit Titles Act. The provisions have been made in uniform with various anomalies and uncertainties with the current provisions being removed.

The enactment of key principles that underpin any arrangements a developer may enter into on behalf of a body corporate regarding letting agents, body corporate managers and service contractors.


For the time when the original owner has 100% or some dominant control of the body corporate, it is clearly open to that owner to make decisions concerning letting agents, serving contracts or body corporate management that, over the short or long term, may not be in the best interests of the future owners of the units in the scheme. These arrangements can be extremely valuable. In Queensland they have become valuable assets. Under current Northern Territory law, the legal position concerning such rights is extremely vague. This bill clarifies the law, for the future, from the perspectives of owners of units, developers and the various types of agents.


In essence, the bill will make it clear that such agreements can be binding and long term. Any agreement entered into in the period whilst the original owner has control over the development will be subject to the principles that the terms of the arrangement are suitable for the scheme, and that the terms are fair and reasonable for the agent and for the body corporate as will exist at the end of the owner control period. If an arrangement breaches these principles, the body corporate or individual owners may recover losses from the original owner.


The body corporate of a scheme is also prohibited from seeking any benefit from any arrangement for a body corporate manager or a service contractor. The same principle also applies to the appointment of letting agents subject to the exception that the arrangement can be made if there is no other arrangement made during the original owner control period and if the benefit was a fair market value for the arrangement.


The legislation also provides for codes of conduct to apply to body corporate managers, caretakers and letting agents.


The requirements of the
Agents Licensing Act will also continue to apply so that body corporate managers and property agents will need to continue to have a licence unless they come within an exemption under the Agents Licensing Act.

The legislation, for new schemes, retains the same dispute resolution process as provided for in the
Unit Titles Act. Disputes will continue to be dealt with by the Local Court. At this time, the government does not see the need to establish specialist tribunals and adjudicators along the lines of those that exist in Queensland and New South Wales. The legislation will provide that the Supreme Court, rather than the Local Court, will have jurisdiction to deal with the termination and amalgamation of schemes. The Unit Titles Act will also be amended so that the Supreme Court has this jurisdiction.

These amendments have been made following views expressed by the master of the Supreme Court and the chief magistrate. Whilst the legislation sets out various roles and functions for the courts, it is not intended that the legislation affect the inherent jurisdiction of the Supreme Court concerning due compliance with procedural issues, such as those that may lead to a termination in accordance with clause 15(b) of the bill.


The legislation provides for the appointment of a scheme supervisor. This position is expected to be filled by a senior officer within the Department of Justice as part of an officer’s wider range of duties. This position will be the central point of contact concerning issues with the operation of the legislation. The scheme supervisor will also have specific duties concerning the providing of advice when schemes are been terminated, when security deposits are being considered or when a developer or body corporate is seeking that a non-standard management module apply to the body corporate’s decision making and management roles.


The legislation also changes the nature of the rules governing behaviour on the unit titles land. Under the current law, for most unit titles, the behavioral rules operate in a contractual way. It is only estate corporations and building lot corporations that can make by-laws that can be enforced by imposing fines within the court system. Under the new legislation, all new body corporates will have this power. The maximum penalty for continuing breach of a by-law will be 20 penalty units or $2100. The body corporate rather than the police or government will be responsible for taking the prosecution action.


In respect of the other offences in the act, the common maximum penalty is 100 penalty units or $11 000. The offences are classified as strict liability offences for the purposes of the application of Part 2AA of the Criminal Code.


The bill also provides for consequential amendments to 19 other acts and regulations. Most of the amendments are of a technical or statute law review nature. That is, insert cross-references into all of the various laws that mention unit titles. Significant amendments are made to the
Land Title Act and the Planning Act.

The
Land Title Act is to be amended so that it sets out all of the duties concerning the registration of scheme statements. The Planning Act is to be amended so that, as I have previously mentioned, the consent authority considers unit titles proposals under the same provisions that apply to subdivisions of land.

The bill also makes amendments to the transitional provisions contained in the
Land Title and Related Legislation Amendment Act 2008. These amendments ensure that the changes made by that act do not adversely affect subdivisions in the course of completion at the time of the commencement of that act.

This bill has been the subject of considerable consultation over the past two months. The core proposals were proposed in late 2005 by the Property and Commercial Law Taskforce as established by the former Attorney-General, the Honourable Peter Toyne.


My colleague, the Honourable Chris Burns, as minister for Justice and Attorney-General, released a draft of the bill on the 29 November 2008 for consultation. For the purposes of the consultation, the Department of Justice has:


placed on its web page copies of the bill along with various ancillary documents;
run advertisements advising the public of presentations in Darwin and Alice Springs;
conducted public seminars in Darwin and Alice Springs;
conducted seminars for various professional occupational and government groups (lawyers, conveyancing agents, real estate agents, body corporate managers, surveyors and the Department of Planning and Infrastructure; and
engaged in further face-to-face and email discussions for the purpose of working through the issues.

The consultation has resulted in considerable fine tuning of the bill. I thank all of the people who have participated and I note, in particular, the contributions of the Commercial Law Committee of the Law Society, the Property Council of Australia and the Real Estate Institute of the Northern Territory.


I look forward to any further contributions, especially concerning the various legislations and other documents that will be developed between now and May 2009.


In broad terms, the development of the legislation has been based around the concepts containing Queensland’s
Body Corporate and Community Management Act 1997, but it has a significantly different structure, and many differences in detail that reflect Northern Territory drafting practices as well as the way some things are currently done in the Territory.
This is a complex area of the law. It is also law that is fundamental to land development and protecting the property and living arrangements of many Territorians. I am committed to ensuring that the law is both comprehensive and appropriate. Any comments made about the proposed law, especially the transitional provisions, will be fully considered by government and any necessary changes will be made to the bill prior to its enactment.


Accordingly, I urge members and their constituents to carefully consider this draft legislation and to pass on to the Department of Justice any problems that may exist. This is legislation that concerns a large number of people. I commend the bill to honourable members and I table a copy of the explanatory statement.


Debate adjourned.


 


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