External Research Report Report ER23 Issue Date: 06/06/2017 ISSN: 2423-0839 Revised Legal Frameworks for Ownership and Use of Multi-dwelling Units Elizabeth Toomey, Jeremy Finn, Ben France- Hudson and Jacinta Ruru Project LR0480 University of Canterbury funded by the Building Research Levy © BRANZ 2017 1 BUILDING RESEARCH LEVY PROJECT Revised Legal Frameworks for Ownership and Use of Multi-dwelling Units Professor Elizabeth Toomey, Faculty of Law, University of Canterbury Professor Jeremy Finn, Faculty of Law, University of Canterbury Dr Ben France-Hudson, Faculty of Law, University of Otago Professor Jacinta Ruru, Faculty of Law, University of Otago 1 May 2017 2 AUTHORS’ FOREWORD One of the challenges of this collaboration was that two authors were based in Christchurch and one in Dunedin for the whole research period, and the fourth changed universities from one to the other during the project. Abundant use of e-mail, regular skype calls and some researcher meetings enabled us to ensure we reached agreement on critical issues. A research project of this kind and scope requires the assistance and support of a wide range of people in different roles. We have been exceptionally lucky that that assistance and support has been so generously given by so many people and we take this opportunity to express our gratitude for their contribution to the project. The principal funder of the research was the Building Research Association of New Zealand, and we have greatly appreciated their support. Further funding was provided by the New Zealand Law Foundation which enabled us to employ a number of research assistants to help us with this work and by the Law School of the University of Canterbury which provided funds for transcription of interviews. Their generosity was and is greatly appreciated. We are indebted to our researchers, and especially to our principal research assistant, Lara Goddard, who worked tirelessly on this project. Lara’s work was exemplary and her enthusiasm and humour were never more valuable than when things threatened to go awry. Other significant contributions were made by undergraduate research students at Canterbury and Otago - Anna Needham, Adelaide McCluskey, Rachel Kim, Joe Barclay and Laura Austin (University of Canterbury); Alice Eager, Laura MacKay, and Helen Baker (University of Otago). The production of this report was greatly assisted by the editorial work of Rachel Souness to whom we are greatly indebted. Nor could we have carried out the whole project without the skilled help and support of our wonderful administrator Fiona Saunders. The greatest debt of all is to the dozens of people in New Zealand, England, Australia, Canada and Hong Kong who gave up their time to be interviewed for this project or to complete our on-line survey. Their knowledge and insights provided much of our raw material; their willingness to assist was a constant reminder of the relevance of our project and also a spur to complete it to the best of our abilities. 3 Last but most importantly the researchers would like to thank their spouses - Michael, Anne, Rachel and Andrew - for support, understanding and encouragement while we have been engaged in our research and writing. Elizabeth Toomey Jeremy Finn Ben France-Hudson Jacinta Ruru Christchurch and Dunedin May 2017 4 TABLE OF CONTENTS AUTHORS’ FOREWORD ......................................................................................................... 2 CHAPTER 1 ................................................................................................................................ 9 INTRODUCTION ....................................................................................................................... 9 I THE GENESIS OF THE PROJECT ....................................................................... 10 II VALUABLE FUNDING ............................................................................................ 10 III BUILDING BETTER CITIES AND COMMUNITIES ......................................... 11 IV METHODOLOGY..................................................................................................... 11 V SYSTEM FAILURES ................................................................................................ 13 A Property owners do not understand what they own ............................................... 13 B Lack of governance structure ................................................................................... 17 C Insurers ...................................................................................................................... 19 D Vulnerable owners and residents .............................................................................. 21 E Poor communication .................................................................................................. 23 F Privacy issues .............................................................................................................. 25 G Access to justice .......................................................................................................... 26 VI OUR WORK ............................................................................................................... 27 VII OUTPUTS ................................................................................................................... 28 A Journal articles ........................................................................................................... 28 B Conference Papers ..................................................................................................... 28 CHAPTER 2 .............................................................................................................................. 30 OVERSEAS FINDINGS ........................................................................................................... 30 I INTRODUCTION ...................................................................................................... 31 II ENGLAND .................................................................................................................. 31 A The culture around disaster response and housing repair and replacement ....... 31 B Recent developments .................................................................................................. 33 C The influence of leasehold tenure ............................................................................. 34 D Leasehold land and insurance ................................................................................... 35 E Leaseholds and repairs .............................................................................................. 35 F Freehold land, multiple owners and a company structure ..................................... 36 G Commonhold: an experiment and failure ................................................................ 37 III HONG KONG ............................................................................................................ 38 A State involvement and supervision ........................................................................... 38 B Deeds of Mutual Covenant ........................................................................................ 39 C Public liability insurance cover ................................................................................. 40 IV AUSTRALIA/CANADA ............................................................................................ 41 A The defective building: lack of regulation and sub-standard construction .......... 41 B Warranties and deductibles ...................................................................................... 42 C The disappearing developer ...................................................................................... 46 D Economic damage: the AirBNB problem ................................................................ 47 E Lack of maintenance/reserve funds .......................................................................... 48 F Victoria: large scale fires ........................................................................................... 51 5 G Canada: lien for repair .............................................................................................. 52 H Canada: licensing regime for strata managers ........................................................ 53 I Canada: airspace subdivisions .................................................................................. 53 J A New South Wales Reform ...................................................................................... 54 V SOME COMPARATIVE FINDINGS ...................................................................... 55 A Challenging body corporate decisions ...................................................................... 55 B Insuring the building ................................................................................................. 56 C The problem with end-of-life buildings and/or buy- out for redevelopment ........ 58 VI WHAT LESSONS CAN BE LEARNT .................................................................... 61 A A priority lien ............................................................................................................. 61 B Maintenance and reserve funds ................................................................................ 61 C Accessibility of the dispute resolution regime ......................................................... 62 D A warning about potential