Successful Challenge to Special Levies for Separate Block Roof Repairs

OUTCOME: Allowed

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[2025] NZTT 9052824

TENANCY TRIBUNAL AT QUEENSTOWN | TE TARAIPIUNARA RETIHANGA KI TĀHUNA

APPLICANT: [redacted] Owner of a principal unit, Owner of a principal unit

RESPONDENT: [redacted] [NAME_3]: Unit/Flat 822 & 608, [ADDRESS] 8, Lake Tekapo 7945, Bluewater Resort

ORDER

1. The notices of special levy issued by the [NAME_3] to [COMPANY_1] ($6842.71) and to [NAME_2] and [NAME_4] as trustees for [COMPANY_1] ($6,606.42) are set aside.

Reasons:

1. This application is made by the owners of units 822 ([COMPANY_1]) and 608 ([NAME_2] and [NAME_4] as trustees for [COMPANY_1]) at the unit title development known as Bluewater Resort at Lake Tekapo.

2. Both unit owners ([NAME_1], and [NAME_1] and [NAME_1]) attended the hearing I held by video on 3 April 2025 as did counsel for the [NAME_3] Mr [NAME_5] and [NAME_6].

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Background

3. Bluewater Resort is a unit title development that comprises 142 rooms including hotel studio rooms, and one, two, and three-bedroom villas across 24 different buildings. The units are separated into different blocks numbered 100 to 800.

4. Around May 2019 the [NAME_3] engaged [COMPANY_12] to carry out a weathertightness assessment. The main identified area of concern was the 800 blocks – there was water ingress around the balconies to the third-floor units on each block. The 800 blocks comprise 4 separate 3-storey blocks.

5. The [NAME_3] resolved to fund the repair work; the roofs on the 800 block units had to be replaced and the work was completed at a cost of nearly $500,000.00.

6. The [NAME_3] then issued notices of special levies to all the unit owners in the development based on their utility interests.

7. The unit owners of units 822 and 608 spoke at an annual general meeting that considered (among other matters) how the repair costs would be levied. They believed they should not be responsible for any of the repair costs since their units were stand-alone units, completely physically separate from the 800 block units.

8. The unit owners wanted the [NAME_3] to recover the repair costs from the affected unit owners only (the owners of the units in the 800 block) by applying section 126 of the Unit Titles Act 2010 (UTA).

9. The [NAME_3] voted on that proposal but decided to levy all the unit owners for the 800 block roof repairs according to their utility interests.

10.The owners of units 822 and 608 then applied to the Tribunal for relief.

11. I held a hearing on 3 April 2025.

The unit owners’ case

12.The unit owners spoke to written submissions. Their main points are:

• Section 126 UTA allows a [NAME_3] to recover the cost of repair work it has funded from the unit owners who derive a substantial benefit from the work, rather than from all unit owners.

• Because their units are physically separate from the units in the 800 block where the roofs required replacement, they received no benefit at all from the repairs.

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• Their units were differently designed, and in [COMPANY_1]’s case, the company purchased its unit specifically to avoid what it believed were obvious design flaws in the 800 block units.

The [NAME_3]’s case

13.Counsel for the [NAME_3] submitted:

• The [NAME_3] had to fund the repair work as it related to a building element. It then raised a levy to fund the work following a resolution.

• Section 126 is a recovery provision, not a levying provision.

• Section 126 UTA provided a [NAME_3] with a discretion to apportion costs where there was a substantial benefit for particular units. But in this case all units benefitted from the work; without it the development would be devalued.

• The Tribunal had no jurisdiction as the overall levy was $400,000.00 well beyond the Tribunal’s monetary jurisdiction.

Directions post hearing

14.When the Tribunal began to consider the application, it identified an issue neither party had addressed at the hearing. Was the application a minority relief application and therefore time-barred under section 210(2) UTA?

15. I invited submissions from the parties addressing that issue on a timetable. I received submissions from both.

16.Both parties seem to accept that the application was not one brought under section 210 UTA. So, the Tribunal will proceed on the basis that the dispute is simply a challenge to the special levies that were applied to these two unit owners.

Relevant statutory provisions

17.Section 80 UTA provides in part:

80. Responsibilities of owners of principal units

(1) An owner of a principal unit— …

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(g) must repair and maintain the unit and keep it in good order to ensure that no damage or harm, whether physical, economic, or otherwise, is, or has the potential to be, caused to the common property, any building element, any infrastructure, or any other unit in the building:

18.Section 138 UTA provides in part:

138. [NAME_3] duties of repair and maintenance (1) The [NAME_3] must repair and maintain— (a) the common property; and (b) any assets designed for use in connection with the common property; and (c) any other assets owned by the [NAME_3]; and (d) any building elements and infrastructure that relate to or serve more than 1 unit. (2) … (3) The [NAME_3] may access at all reasonable hours any unit to enable it to carry out repairs and maintenance under this section. (4) Any costs incurred by the [NAME_3] that relate to repairs to or maintenance of building elements and infrastructure contained in a principal unit are recoverable by the [NAME_3] from the owner of that unit as a debt due to the [NAME_3] (less any amount already paid) by the person who was the unit owner at the time the expense was incurred or by the person who is the unit owner at the time the proceedings are instituted.

. 19.The term ‘building elements’ is defined in section 5 UTA, the interpretation

section, as:

Building elements includes the external and internal components of any part of a building or land on a unit plan that are necessary to the structural integrity of the building, the exterior aesthetics of the building, or the health and safety of persons who occupy or use the building and including, without limitation, the roof, balconies, cladding systems, foundation systems (including all horizontal slab structures between adjoining units or underneath the lowest level of the building), retaining walls, and any other walls or other features for the support of the building.

20.Section 126 UTA provides:

126. Recovery of money expended for repairs and other work

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(1) This section applies where the [NAME_3] does any repair, work, or act that it is required or authorised to do, by or under this Act, or by or under any other Act, but the repair, work, or act— (a) is substantially for the benefit of 1 unit only; or (b) is substantially for the benefit of some of the units only; or (c) benefits 1 or more of the units substantially more than it benefits the others or other of them. (2) Any expense incurred by the [NAME_3] in doing the repair, work, or act is recoverable by it as a debt in any court of competent jurisdiction (less any amount already paid) in accordance with the following: (a) so far as the repair, work, or act benefits any unit by a distinct and ascertainable amount, the owner at the time when the expense was incurred and the owner at the time when the action is instituted are jointly and severally liable for the debt; or (b) so far as the amount of the debt is not met in accordance with the provisions of paragraph (a), it must be apportioned among the units that derive a substantial benefit from the repair, work, or act rateably according to the utility interest of those units, and in the case of each of those units, the owner at the time when the expense was incurred and the owner at the time when the action is instituted are jointly and severally liable for the amount apportioned to that unit. (3) Despite subsection (2)(b), if the court considers that it would be inequitable to apportion the amount of the debt in proportion to the utility interest of the unit owners referred to in that paragraph, it may apportion that amount in relation to those units in the shares as it thinks fit, having regard to the relative benefits to those units.

Case law

21.Recently, the High Court issued its decision in Lora Trading Limited v Stirling Investment Properties Limited1. That was a weathertightness case. [ADDRESS] said:

[48] Until now, cases concerning s 80(1)(g) of the Unit Titles Act have dealt with physical harm. Sections 80 and 138 impose complementary repair and maintenance obligations upon unit owners and the [NAME_3]. As the Court of Appeal observed in [NAME_7] v [NAME_3] 342525 ([2015] NZHC 884; [2016] NZCA 247):

[29] …if a building element or infrastructure serves more than one unit the

[NAME_3] has the obligation to repair it, if it is part of a unit but does not

serve more than one unit then it is the owner’s responsibility to repair, and if it

is common property, it is the [NAME_3]’s responsibility.

1 [2024] NZHC 2532

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22. In [NAME_8] v [NAME_3] 3185962 the Court said (in relation to the 1972 Act section 126 equivalent), that the section:

Provides a mechanism to reallocate repair costs after they have been incurred and are thus known. It contemplates i) a levy; ii) repairs; iii) reallocation of the cost of those repairs …if the repairs substantially benefit some units(s) more than other(s).

23. In [NAME_3] 199380 v Cook3 [NAME_9] comprehensively analysed how sections 138(4) and 126 UTA can be applied. His Honour said at para [98]:

It follows that when a [NAME_3] is considering its approach to the recovery of costs of repairs to building elements, it does not have an unfettered discretion as to whether to apply s 126 or s 138(4).

24.His Honour set out the matters a [NAME_3] had to consider when deciding whether to apply s 126 or s 138(4), including:

• Where a [NAME_3] exercises its powers to repair unit property pursuant to s 138(1), a starting presumption is that the cost of repair should be met by the owner of the unit to which the repairs were made in accordance with s 138(4);

• Account needs to be taken, however, of the nature of the particular building or complex; a “one size fits all” approach is not appropriate;

• The weathertightness of a building is interlinked and indivisible and all owners have a mutual interest in keeping the building weathertight and in good repair; if part of a building is not weathertight, it affects the saleability and value of all units, whether or not they are leaky;

• A departure from allocation of costs of repair to unit property based on title is appropriate where reasonably necessary to achieve what is fair as between unit owners in the circumstances; the objective should be an outcome aimed at balancing the interests of unit holders in a way that achieves the outcome that is fair to all unit holders;

• Where the repairs result in a substantial benefit to other units in term of s 126, recovery under that section is unlikely to be appropriate;

2 [2011] NZCA 420 3 [2018] NZHC 1244

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• Where the repairs benefit the building generally but do not benefit one or more units substantially more than they benefit other units, recovery from all unit owners on the basis of utility interest may be appropriate.

Discussion

25.First, I do not accept counsel for the [NAME_3]’s submission that the application seeks orders beyond the Tribunal’s monetary jurisdiction. While the overall levy might be greater than $100,000.00, the issues before the Tribunal are specific to the two notices of special levies issued to the unit owners.

26.The relief sought is relief from the special levy that applied to each of them following the repair work - $6,842.71 and $6,606.42 respectively. Clearly, the amounts in question fall within the Tribunal’s jurisdiction. The reallocation of those levy amounts also does not raise any issue as to monetary jurisdiction.

27.Nor do I accept the submission that the decision whether to invoke section 126 UTA is a discretionary decision that the applicants cannot challenge. The decision in [NAME_10] addresses that. While owners cannot oblige a [NAME_3] to exercise the discretion, they can challenge a decision declining to exercise the discretion. That is often the way weathertightness issues come before the Courts.

28.Given the complete physical separation of the buildings that comprise this development, it is difficult to see how the repairs to the 800 block units could benefit these unit owners in any way.

29.Counsel for the [NAME_3] suggested that the repairs preserved the overall investment, a protection against devaluation. But given the size of the development with its many separate blocks of units, that argument does not seem plausible. It would seem unlikely that the whole development would ever be sold, given the number of individual unit owners.

30. As well as the physical separation, the unit owners described how their units were differently constructed, a factor that attracted them to avoid weathertightness issue.

31.Were this a development that comprised one large building, clearly the applicants would be liable for their share of the repair costs because the saleability and value of the units would be at issue. Here, the physical layout of the development is such that the repairs to the 800 block units could not reasonably be considered to have any benefit to the physically separate, and differently constructed, units owned by these applicants. As [NAME_9] put it in [NAME_10]:

Account needs to be taken, however, of the nature of the particular building or complex; a “one size fits all” approach is not appropriate.

32. I find that the applicant unit owners have established on the balance of probabilities, that they should not have been liable for a share of the repair costs

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to the 800 block units. The repairs substantially benefit some unit owners more than others. The work did not benefit these unit owners at all.

33. It follows that the notices of special levies setting out the respective contributions for these two unit owners, who have received no benefit from the work, must be set aside.

Result

34.The application is successful. The notices of special levies issued to [COMPANY_1] ($6842.71) and to [NAME_2] and [NAME_4] as trustees for [COMPANY_1] ($6,606.42) are set aside.

J Greene 19 May 2025

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Please read carefully:

SHOULD YOU REQUIRE ANY HELP OR INFORMATION REGARDING THIS [COMPANY_11] [PHONE].

MEHEMA HE PĀTAI TĀU E PĀ ANA KI TENEI TAKE, PĀTAI ATU KI TE [COMPANY_11] [PHONE].

AFAI E TE MANA’OMIA SE FESOASOANI E UIGA I LENEI MATAUPU FA’AMOLEMOLE IA FA’AFESO’OTAI’I LOA LE OFISA O LE [COMPANY_11] [PHONE].

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