Body Corporates

Also known as an Owners Association

What is a Body Corporate?

The first high rises were built in Roman times over 2,000 years ago and the Chinese embraced communal living almost 700 years ago. With the invention of the elevator high rise buildings have now become part of every modern city.

Most of those early high rises were owned outright by one single owner who then let the apartments. That’s because the property must have its own registered title to be on-sold and the buildings as a whole had a title, but not the individual apartments.

The process of turning one title into many titles is called subdivision, and it relates to land. There is not enough land around a high rise to be subdivided enough times to create the many titles needed and so evolved the process known as Strata Titling.

The land cannot be subdivided to make enough titles, so the solution was to NOT to subdivide the land, instead ownership of the land is invested in an entirely new entity, the Body Corporate. The lots are then built on the body corporate land and each lot is given a title which creates the Strata Titled Building.

That title notes the body corporate as a stakeholder of the individual lots, the body corporate cannot be separated.

It is a separate title though and the lot is able to be sold independent of the other lots in the building.

Membership

Who owns a Body Corporate?

Ownership of the body corporate is invested in the lots contained within that body corporate. Basically, when you buy a lot, you are automatically a member of the body corporate and as a member, every lot owner is collectively responsible for the financing, maintenance or managing of the body corporate.

Although there are extensive rules around body corporate activities, and how they’re managed, the business of a body corporate is a private matter between the lot owners.

Who runs the Body Corporate?

Each of the lot owners is a part-owner of the body corporate and as an owner has a say in how the body corporate is managed.

However, the day to day running of the body corporate is undertaken by an elected committee.

Further, most body corporate will have contractors who will help the committee undertake day to day maintenance.

What the committee and contractors can and can’t do is regulated by the BCCM Act 1997 and subsequent amendments and regulations. There are very strict guidelines about all actions but particularly regarding the spending of communal funds

Common Property

Body Corporate property is broken into two areas: the lots and the common property.

For a high rise building, the common property will normally be the areas not contained within a lot as these are privately owned. The common areas will include the land the building is built on, the basement car park, any facilities such as a pool, the main entrance foyer, the lifts, each floors lift lobby, and the entire external of the building.

A gated complex will probably be broken into land that is contained within a lot and land that is common property.

The common property is maintained by the Body Corporate.

The lots are maintained by the individual lot owners.

The boundaries of all lots are referred to in the plans for either a building format plan or a standard format plan.

Although the common property is collectively owned by all lot owners that doesn’t mean lot owners can do whatever they want. There will be rules about how the common property can and can’t be used called By-Laws.

Body Corporates Responsibility

For the most part, the committee will:

Enforce/enact any motions all lot owners have resolved at general meeting

• Issue and collect levies

• Pay bills and maintain financial records

• Organize the day to day cleaning of the scheme

• Ensure all lot owners are complying with by-laws

• Set maintenance/upgrade schedules

• Set and monitor yearly budgets

• Mediate on disputes between lot owners

• Answer any correspondence directed to the body corporate

• Call and minute body corporate meetings

• Maintain the body corporate records

A committee is elected each year at the Annual General Meeting or AGM and is elected for one year until the next AGM.

There are office bearer positions including Chairperson, Secretary and Treasurer, as well as ordinary committee members.

The office bearers are responsible for specific duties. There are also non-voting members of the committee.

The size of the committee is governed by the regulation module of the body corporate with a maximum of seven.

Members of the Body Corporate Committee are volunteers and consequently, the Body Corporate may engage a contractor(s) to take on some of the committee members’ responsibilities.

Even with outside contractors, there may be no lot owners who will volunteer to sit on the committee. The legislation has provisions for how the body corporate may continue in those circumstances however it is usually a very expensive option.

Contractors

The body corporate is a legal entity and may enter into contracts with whomever it pleases.

Contracts can be entered into for cleaning, security and so forth but there are only two contractors who will sit on the committee.

They are:

The Body Corporate Manager
The Building Manager also known as Caretaker Manager or On-Site Manager

Body Corporate Managers

A body corporate manager is a person or firm who is contracted to undertake the tasks of the Treasurer and Secretary. They will manage the body corporate finances, create and implement budgets, call and minute meetings, maintain the body corporate records and implement any committee decisions.

Their most important role is to consult and provide advice on the proposed actions of the committee. There is a substantial amount of legislation that applies body corporate activities and the body corporate manager provides interpretation to help the Body Corporate Committee with clarification of those rules.

Body corporate managers do not make decisions and they do not vote on committee motions.

Building Managers

The building manager is usually a lot owner who has signed the Caretaker and Letting Agreements with the Body Corporate appointing them to undertake specific tasks such as:

Daily cleaning or control and monitoring of cleaners
Care and upkeep of the grounds or overseeing of groundskeepers
Minor repairs around the scheme
Obtaining advice and quotes for other repairs or major projects
Ensuring all lot owners comply with by-laws

If the scheme has a building manager their Caretaker Agreement will set out which tasks they must complete.

The building manager is a non-voting committee member and reports directly to the committee.

Contractors do not have any power to make decisions for the body corporate but they are acting on behalf of the committee.

Raising the Money to Operate

Levies

As a mandatory member of the Body Corporate every lot owner is responsible for paying whatever costs are involved in the day to day operation of the Body Corporate building and future expenses,upgrades ,renovations or equipement replacement.There are 2 funds set up for these payments, the Administration Fund and the Sinking Fund.

Administration Fund

The administrative fund is for day to day upkeep of the scheme and will cover everything from replacement of light bulbs to pool cleaning to the payment of contractors.

Sinking Fund

The sinking fund is a type of savings fund. A sinking fund levy is issued every year to accumulate funds for major works at some date in the future. The intention is to collect a little money from every lot owner who was ever a member to fund replacements and refurbishments when they’re needed.

An administrative and sinking fund levy will be issued every year. In addition, there are other types of levies that may be issued by the body corporate.

Special Levies

Special levies arise when extra funds are required when special circumstances arise but they can be almost for anything that the majority of lot owners agree upon.

Mostly special levies occur because something unforeseen has happened which was not budgeted for but it can be for common area improvements as well.

Other Levies

Sometimes other amounts, such as marina levies or insurance levies are charged to lot owners.

This will be a reflection of the individual body corporate and their facilities, circumstances, and makeup.

What current levies are payable by your lot will be shown in the disclosure statement that forms part of the purchase contract and the levies shown refer only to the current financial year. Levy amounts change, usually annually.

How Levies Are Calculated

Levies are set by estimating a budget for the next year. Every year the committee meets for the Budget Committee Meeting where they finalize what works they intend to have undertaken. They also review the previous year’s expenditure and fund balances.

Administrative Fund

Administration Fund costs are calculated by estimating total previous years outgoings then budgeting for inflation and any additional funds that will be needed for the future year. The best practice process is to use the unspent amount of the previous year’s Administration fund to offset the future year.

For example: if the Budget was for a $50,000 Administration Fund need to be raised for the year and there was $10,000 leftover from last year, then the Body Corporate only needs to raise $40,000 from levies to each lot owner.

Sinking Fund

Sinking Fund costs are estimated with reference to the Sinking Fund Forecast which is a document that forecasts expected repairs and future expenses to keep the building and common areas in their best possible condition. The Sinking fund Forecast is normally for 10 years of future expenses and will give a schedule of when certain improvements are to be completed.

The Sinking Fund is also used as a cash buffer for any emergency repairs or to pay for the replacement of essential equipment.

Lot Entitlements

The budgeted amounts needed for the Sinking and Administration funds are divided between the lots according to the contribution schedule of lot entitlement for the building.

This proportion of the body corporate costs per contribution lot entitlements is normally listed in the By-Laws of the scheme or the schemes Community Management Statement.

Budget Details

Budgets are prepared and presented to all lot owners at Annual General Meeting where a vote is taken as to whether or not they are acceptable.

Levies are usually issued in bite-sized chunks throughout the year to help with both the body corporate and lot owner cash flow.

Levy Notices

A levy notice will be sent each period detailing the amount payable by the lot, the due date and any discount.

It’s a good idea to pay your levies on time to both foster community spirit and ensure the financial viability of your body corporate.

Overdue Levies

Levies are payable by the due date, although almost all body corporate managers will give you a few days beyond that point to clear your payment.

If the levies are not paid by the due date then the collection process will start.

A body corporate does not have any extra leeway in their budgets to chase overdue levies as it is unfair to expect the collective lot owners to cover the cost of ensuring collection.

Consequently, any costs involved with the collection of overdue levies will be added to the lot owners account and if the body corporate has resolved to charge interest then daily, weekly or monthly interest charges will be accruing.

Queensland Community Living Handbook

The information supplied on this website is general information only.

Individuals or companies must seek their own professional advice in relation to their own set of circumstances.

You can contact the Author Steve Reynolds by emailing [email protected]

or by Snail Mail to PO Box 394 Surfers Paradise.4217