Residents Association Explained

Newbuild properties often have residents' association fees. So, what are they, and what do you need to know?

When purchasing a townhouse or new build in New Zealand, one of the most overlooked, but crucial, elements of due diligence is understanding how shared property management works.

Whether you're buying in Christchurch, Auckland, or anywhere in between, you’ll likely encounter either a Residents’ Association or a Body Corporate.

This guide breaks down the key differences, how insurance works under each model, and what to look out for when reviewing budgets and agreements.

What Is a Residents’ Association (RA)?

A Residents’ Association is a legal entity formed to manage shared responsibilities in a residential development, typically fee simple townhouses.

The comparison is often made to Body Corporate (BC) because this is a more familiar term, but they are different models. Typically, you will see BC on apartment complexes with unit titles, where RA is more common for fee simple townhouses.

Key features of a residents' association:

• Ownership: Each homeowner owns their dwelling and land outright due to the fee simple title
  

• Shared Areas: Driveways, fences, gardens, lighting, or infrastructure are jointly managed
  

• Governance: Requires a constitution, a governing body, and annual meetings
  

• Flexibility: Rules and levies are set by members, often with lower compliance costs than Body Corporates

What Is a Body Corporate?

A Body Corporate is mandatory for unit-titled properties, such as apartments or terraced housing, that are registered under the Unit Titles Act. It’s a more formal structure with stricter compliance and broader responsibilities.

Key Features:

• Ownership: Owners hold a unit title (typically the interior of the dwelling); common areas are collectively owned
  

• Shared Areas: Includes roofs, exterior walls, driveways, and sometimes internal infrastructure
  

• Governance: Legally required to maintain records, hold meetings, and disclose issues like weathertightness or legal disputes
  

• Higher Levies: Covers more extensive maintenance and insurance obligations

Insurance is one of the most important distinctions between a residents' association and a body corporate.

Residents’ Associations typically follow one of these three setups:

Model	What's Covered	Who Pays	Notes
Shared Areas Only	Driveways, fences, etc.	RA budget	Owners insure dwellings individually
Group Policy	Dwellings + shared areas	RA budget, split by unit size	Simplifies claims, lowers premiums
Hybrid	Shared areas + optional dwelling cover	RA budget + opt-in	Owners may choose to join group cover

The type of RA insurance you will get is project-specific. Often, developments with fewer than 5 townhouses won't have any RA, but larger developments will often have either a shared-area-only or a group policy.

Landlord insurance (e.g. rental income loss, tenant damage) is not covered by RA policies - investors must arrange this separately.

Body Corporate Insurance

Body Corporates are legally required to insure:

• The entire building structure
  

• Common areas
  

• External cladding, roofs, and shared infrastructure
  

Owners pay levies to fund this insurance, and claims are managed centrally.

Case Study: Christchurch Townhouse Residents’ Association

Let's consider a project in Somerfield, Chrsitchurch, which is made up of 8 units. The RA has adopted a group insurance policy covering both dwellings and shared areas.

Each unit contributes proportionally based on size. For example:

• Unit 1 (66.83m²) pays $1,005.76 toward insurance

  
  

• Unit 2 (79.67m²) pays $1,198.99 toward insurance

This model:

• Reduces individual premiums through bulk purchasing
  

• Simplifies claims
  

• Ensures consistent coverage across the development

What Buyers Should Ask

Before purchasing, always review the Residents’ Agreement or Body Corporate Agreement. Key questions include:

• What does the insurance policy cover?
  

• Are individual dwellings included?
  

• What are the annual levies?
  

• Who maintains the exterior of the home?
  

• Are there restrictions on paint colours, landscaping, or renovations?
  

• Is the RA incorporated and legally empowered to make decisions?

Final Thoughts

Understanding the difference between a Residents’ Association and a Body Corporate isn’t just a legal technicality; it directly affects your insurance, maintenance costs, and decision-making power as a homeowner or investor.

There are benefits on both sides of the coin for projects that do have RA, or don't have it at all, so it's important to understand how this impacts your investment during your due diligence period.

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