Body Corporate Speech
Posted by editor (editor) on Jun 10 2010
2010 >>

Acknowledgements
·       I would like to thank my Parliamentary colleague, Grace Grace for inviting me here today.

·       Cr Hinchliffe

I have been asked to talk about lot entitlements and the setting of body corporate fees in Queensland.
It may be useful to start with some introductory remarks.

When you buy a unit, townhouse, duplex or house in a community titles scheme, you don’t just  purchase a lot
You do several other things too.

You automatically join a new organisation. 

You become a member of the body corporate with voting rights and responsibilities. 
Whether you buy into a big or small scheme, a decision to buy a lot in any scheme means that you enter into a new social and political contract.

Most of you will be familiar with the concept of due diligence.  When you buy into a community titles scheme, there should be a lot of due diligence, and not just about your particular lot.

Some of the key questions include:
o      How much is in the ‘sinking fund’?
o      is it enough?
o      how stable is the administrative fund budget?
o      how many dispute application have there been over the past 3 to 4 years?
o      are there by-laws incompatible with your life ?
o      is the building registered as a class 2 building when it should be a class 3 building?
o      is it registered in the accommodation module with a 25 year management rights contract when it should be in the standard module and have a 10 year contract?

There are more questions but these are some of the more basic.

But one particular question stands out more than the rest.  And that is, how have the interest and contribution schedules been calculated?

Are they right or wrong?  - well, are they right or wrong for you?

Under the current law, the ‘astute’ buyer, and I use that term advisedly, can identify and purchase a lot in a scheme that is under-valued and with unequal contribution schedule lot entitlements and with a view to seeking adjustment of the contribution schedule.

A successful application for adjustment towards equality obviously has both immediate and long term benefits. 
The astute buyer then realises immediate savings on his or her annual body corporate fees. 
The adjustment can also make the lot more marketable and typically results in an increase in the capital value of the lot.
 
Currently, there are four ways a lot owner can apply to adjust lot entitlements.
1.   The body corporate can record a new community management statement incorporating a change in lot entitlements by passing a resolution without dissent consenting to the new statement.
2.   The owners of two or more lots can agree in writing to redistribute amongst themselves the lot entitlements for their lots.
3.   An owner can apply to the Queensland Civil and Administrative Tribunal for an order for the adjustment of a lot entitlement schedule or,
4.   An owner of a lot can apply under the dispute resolution provisions of the Body Corporate and Community Management Act for an order of a specialist adjudicator for the adjustment of a lot entitlement schedule.  Parties have to agree in writing regarding the choice of ‘specialist adjudicator’ and agree to the method of payment for the specialist adjudicator.
Every successful application to the Queensland Civil and Administrative Tribunal for adjustment of a community titles scheme’s contribution schedule lot entitlements typically has a negative consequence for some other lot owner or owners.
In many schemes, where there have been successful applications for contribution schedule lot entitlement adjustments, a number of lot owners have consequently seen their body corporate fees rise and the value of their lots fall.
Now, there are many advantages to living in a community titles scheme. 

Costs for facilities like pools and gyms can be shared and people who otherwise could not live near the CBD are able to afford an otherwise unobtainable lifestyle.   And often, the initial purchase price is affordable as are the body corporate fees, so long as there are no unforseen contribution schedule lot entitlement adjustments or significant increases in annual administrative or sinking fund budgets.

A well governed scheme can provide a fantastic accommodation solution and wonderful lifestyle but a ‘troubled’ scheme is another matter.   Fortunately, there are more of the former than the latter.

Returning to the theme of a social and political contract, as well as the many benefits which can flow from community living, whilst we have a positivist legal system, there is a question regarding the civil morality of a system that typically allows the more affluent to obtain a benefit at a cost to others. 

If that is too moralistic a view, then there is a more fundamental public policy question regarding the trade-off between flexibility and certainty and fundamental questions around fairness.

The government doesn’t think the balance is right so we intend to make changes in the BCCM Act later this year.  Changes we believe will make the system more fair.

For community titles schemes which have been subject to contribution schedule lot entitlement adjustment orders, the Government will legislate for those schemes to be able to revert to their original method of dividing body corporate fees before the adjustments were made.

The new reforms will require developers to set lot entitlements in accordance with clear legislative guidelines.
In addition, the developer’s method for setting lot entitlements will be required to be disclosed to buyers, providing greater transparency and allowing buyers to make informed decisions. 

While under the Building and Group Titles Act 1980, the predecessor Act to the BCCM Act , some rogue developers may have set lot entitlements unfairly, the new arrangements will curb such behaviours and act as an incentive for developers to set contribution schedule lot entitlements appropriately. 

If a developer does not set the contribution schedule lot entitlements for a community titles scheme in accordance with the legislative guidelines, lot owners will be able to appeal the developer’s setting of the contribution schedule lot entitlements.
Now, there are many people who are unhappy about the government’s decision, but there may be ‘winners’ and ‘losers’ regardless of the approach taken towards seeking the most appropriate lot entitlements system.  The government’s approach is about looking after the most vulnerable people in our society and about the ideas of certainty and fairness.  
There will be some lot owners who say that removing the right to seek adjustment of contribution schedule lot entitlements will entrench inequities and remove flexibility. 

However, people purchase and purchased property in community titles schemes knowing what their portion of body corporate expenses are or were. 

The changes to the Body Corporate and Community Management Act will almost certainly result in more emphasis on due diligence when buying into a scheme. 

One of the things we’re looking to do is to increase transparency through enhanced disclosure.

This will be a good thing and people have and will continue to be encouraged to seek good legal advice before purchasing any property. 

There is a lot more I could say but this gives you a flavour of some of the issues at hand.  And, I am not responsible for all body corporate legislation in Queensland. 

It’s a complex and increasingly important area of the law and likely to become more so with the projected increase in medium and high density developments as a solution to some of our accommodation and infrastructure challenges.

We will be consulting further once we have an amendment Bill.

Before closing, I have also been asked to touch briefly on the issue of class 2 and class 3 buildings and the supply of hotel accommodation in Brisbane.

Class 2 buildings are intended, under the Building Code, to be used as a permanent place of residence or for long term letting.

Government’s ability to influence new hotel development is limited.  Commercial factors are the primary drivers for investment on hotel development.

However, many people also prefer to stay in serviced apartments or commercial units.  Therefore, the availability of new and refurbished developments is an important supply element in the success of Queensland’s tourism sector.

But, we have seen a mix of owner occupiers and owner investors in many schemes and this has led to some problems. 
Some people behave differently when they are on holiday. 

This mix of people on holiday who don’t have time pressures or a long-term interest in the property and permanent occupants who are working and studying and are often looking for a quiet life has created unfortunate tensions in buildings right across Queensland.

Historically, there have been issues with the definitions which have impeded the capacity of the relevant authorities to ensure strict compliance with the building’s design characteristics and original coding.

I am advised that the Department of Planning and Infrastructure is looking at new standards and will continue to undertake further consultation with the industry.

So, in closing, I hope this sweep across some of the big issues has been informative if not entertaining.

I seek your views and encourage you to be involved in the consultation process.

I am happy to take questions although I cannot provide legal advice on particular matters. 
Thank you for coming and over to you for questions…

Last changed: Jun 10 2010 at 12:29 PM