Understanding the Body Corporate

As a New Owner you would like to know more about "What is a Body Corporate?".

Community titles schemes are becoming more significant and is a growing sector in Queensland. Bodies corporate, which comprise all lot owners in a Community Titles Scheme, are responsible for making decisions on matters of shared interest for the community. Many new owners are unclear about their rights and responsibilities as body corporate members. Below we have provided a basic understanding of community titles schemes and body corporate.

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Community Titles Scheme

Community titles schemes allow you to privately own an area of land or part of a building, as well as a share of the common property and facilities with other owners and occupiers. A community titles scheme is made up of 2 or more lots, so it could be a:

  • Duplex
  • Residential apartment complex
  • Townhouse complex
  • Shopping complex
  • Commercial complex

The term ‘community titles scheme’ refers to the area of land comprising the scheme. The scheme contains the individually owned areas of land, called ‘lots’, together with the body corporate ‘common property’. The common property for a community titles scheme includes all parts of the complex that are not part of a lot. Common property can include lawns, access roadways, stairs, recreational facilities and infrastructure such as pipes and wiring.

All lot owners within the scheme collectively make up ‘the body corporate’. Each owner automatically becomes a member of the body corporate when they purchase a lot. Owners are NOT able to decline to be body corporate members. The body corporate is responsible for the good management of the scheme. All owners can vote on management decisions at the Annual General Meeting (AGM), but decisions are usually made on behalf of the body corporate by a committee of owners who are elected at the AGM. Some schemes also manage the day-to-day financial, maintenance, and other administrative duties themselves, but given these are complex, most choose to use the services of a professional body corporate manager.


Lot Owners will not only have certain rights and responsibilities for their own property, but also the common property shared with other owners within their complex. Therefore, it is important for potential owners to understand what the common property is and what the costs will be for maintenance and general upkeep.

The Body Corporate and Community Management Act 1997 (the BCCM Act) is the Queensland legislation regulating bodies corporate and must be complied with by the Body Corporate. It sets out the rights and responsibilities of all parties associated with the management and administration of a Body Corporate, particularly lot owners and managing agents. The Department of Justice and Attorney-General administers the BCCM Act.

 

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What is a Body Corporate?

The body corporate for a community titles scheme is composed of all the owners in the scheme. Every new owner automatically becomes a member of the body corporate. The body corporate (owners or their representatives) makes decisions on matters with shared responsibility.

What a body corporate does?

The body corporate is given powers under the legislation to carry out its necessary duties.

  • maintenance and management of common property, including equipment and services
  • determining levy contributions which owners must pay to fund the expenses of the body corporate
  • public risk insurance over the common property to provide coverage for compensation for death, illness or injury and damage to property to at least $10 million for a single event
  • any compulsory building insurance
  • establishing and enforcing by-laws (rules) relating to the management and control of lots and the common property
  • must keep records including minutes of general and committee meetings, a roll of owners, financial accounts and registers of assets, engagements and authorisations.

The body corporate makes decisions about these and other matters either at a general meeting or through an elected committee.

What do I own in a community titles scheme?

The major difference between owning a house and owning a unit or apartment (known as a ‘lot’) in a community titles scheme, is that the external walls, the floor and the roof do not usually belong to the lot owner. These areas are usually common property and the maintenance and repair of these parts of the building is usually the responsibility of the body corporate.

As it is common property, the lot owner is not able to alter or renovate these areas without the permission of the body corporate. The key concept to remember is that the lot owner effectively owns the airspace (and anything included in the airspace) inside the boundary walls, floor and ceiling of the lot. The dividing walls within the lot (for example, the wall between the kitchen and the lounge room), floor coverings such as carpet and fixtures such as baths, toilet bowls and bench tops are all the property of the lot owner. Airspace can also extend to balconies and courtyards. The registered survey plan is a document which details the boundaries of the lots and common property. If unsure, you should seek advice by contacting your body corporate manager or for questions about boundaries of the lot and common property, contact the Department of Natural Resources and Mines, Lands Registry Office on 13 74 68 or their website.

What is Common Property?

Common property is all the areas of the land and building not included in any lot. It is jointly owned by all owners, and the body corporate is responsible for its management. The lot and common property will be defined on your individual survey plan.

It is the responsibility of the body corporate to maintain common property. It is very important for the body corporate to know what type of plan the scheme is registered as. A scheme registered as a
‘building format plan’ will have a significantly different area of responsibility than one recorded as a ‘standard format plan’. Copies of plans may be obtained from Department of Natural Resources and Mines, Lands Registry Office.

The body corporate can engage the services of contractors such as cleaners, gardeners and plumbers to carry out regular maintenance and repairs to common property. In some smaller schemes, body corporate members volunteer their own time to undertake these duties. Naturally, engaging service contractors will involve some costs, and these and other financial matters must be considered by the body corporate at the annual general meeting. In order to pay for maintenance of common property, the body corporate must raise funds from all individual lot owners through regular levy contributions (an amount of money decided by the body corporate).

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Different Types of Schemes

There are simple community title schemes which might consist of residential lots, however, some community title schemes can be mixed use schemes, with an overall principal body corporate at the top, and one or more subsidiary schemes. Most often these more complicated arrangements are established because there are areas of 'mixed use' in the building or community which is the subject of the titling arrangement e.g. a building which comprises a hotel with a residential apartment component, and maybe some retail shops.

Some of these mixed use schemes also include shared facilities such as tennis courts, swimming pools, country clubs and parks. These properties require not only the management and administration of the common property for each subsidiary scheme, but also the management and administration of the facilities shared between the schemes.

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What is the Commitee?

The body corporate must elect a committee at each annual general meeting. The committee is made up of a group of lot owners or people who are elected to represent the body corporate. The committee consists of executive members (a chairperson, secretary and treasurer) and any ordinary members. Depending on the size of the scheme, committees vary in size from at least three to no more than seven members. If not enough body corporate members are interested in forming a committee or at least one of the executive positions is not filled, regulations allow a body corporate to employ a body corporate manager to carry out the functions of a committee.

Once elected, the committee's responsibilities include:

  • looking after the administrative and day-to-day running of the body corporate
  • making decisions on behalf of the body corporate
  • implementing lawful decisions of the body corporate.

The committee can make decisions by calling a committee meeting or by voting outside a committee meeting.

Committee members

A committee must have at least 3 members:

  • chairperson
  • secretary
  • treasurer.

If a community titles scheme has more than 7 lots, the maximum number of committee members is 7. If a community titles scheme has less than 7 lots, the maximum number of committee members is the same as the number of lots. This is called the ‘required number of committee members’.

The Chairperson

The chairperson must chair all general meetings and committee meetings which they attend. If the chairperson is not at a meeting, the voters present can choose another person to chair the meeting.

When chairing a general meeting, the chairperson’s duties include:

  • ruling a motion out of order if:

- it is unlawful or unenforceable

- it conflicts with a by-law

- the substance of the motion was not included in the agenda for the meeting

  • declaring the results of voting on motions at the meeting
  • confirming that each ballot-paper is the vote of a person who has the right to vote in the election (where a ballot for a committee position is needed)
  • declaring the result of an election for a committee position.

If the chairperson rules a motion out of order they must give reasons. The chairperson does not have more authority than anyone else on the committee. View the Body Corporate and Community Management Act 1997 (the BCCM Act) for more information on the chairperson.

The Secretary

The secretary has the duty of:

  • sending out notices for meetings
  • calling for and receiving nominations for committee positions at an annual general meeting. If a notice inviting nominations is forwarded to lot owners, the secretary must also invite owners to submit motions for the meeting
  • preparing the ballot papers for the committee election, and sending the ballot papers and the other material with the meeting notices
  • having all of the following available to be viewed by voters at a general meeting

- the roll

- a list of the persons who have the right to vote at the meeting
- all proxy forms and voting papers

  • receiving the completed voting papers for a general meeting
  • receiving the completed proxy forms for general and committee meetings.

Often the secretary will take the minutes of meetings even though the Body Corporate and Community Management Act 1997 does not require them to.

The Treasurer

The treasurer’s duties under the Body Corporate and Community Management Act 1997 are limited. If there is no body corporate manager, the committee may ask the treasurer to create a reconciliation statement. If the body corporate passes an ordinary resolution at a general meeting, a statement must be prepared, within 21 days after the last day of each month, for each account kept for the administrative and sinking fund, showing the reconciliation of:

  • a statement, from the financial institution where the account is kept, showing the amounts paid into and paid out of the account during the month
  • invoices and other documents showing payments into and from the account during the month.

Code of conduct for committee voting members

The code of conduct sets the standard of what is expected of each voting member of the committee. It applies to each voting member of the committee.

The code requires the voting members to:

  • try to develop an understanding of the law and the code
  • act honestly, fairly and with confidentiality
  • act in the body corporate’s best interests
  • comply with the law and the code
  • not cause a nuisance
  • disclose a conflict of interest.

See Schedule 1A of the Body Corporate and Community Management Act 1997 (PDF) for the full code of conduct.

Restrictions that apply to committee decisions

The committee cannot make a decision about:

  • setting or changing a body corporate levy
  • a change to the rights, privileges or obligations of lot owners
  • a decision that has to be made by ordinary resolution, special resolution, resolution without dissent or majority resolution
  • starting a proceeding unless it is:

- a proceeding to recover a liquidated debt against the owner of a lot
- a counterclaim, third party proceeding or another proceeding where the body corporate is already a party
- a proceeding for an offence under the bylaw contravention provisions of the Body Corporate and   Community Management Act 1997
- a dispute resolution application lodged with us

  • paying any money to committee members unless it is less than $50 incurred by a committee member attending a committee meeting and not more than $300 reimbursed to a committee member in a 12 month period.

See Section 42 of the Standard Module (PDF) for more information.

Committee spending limit

Committee spending is limited and money must be available in the budget before the committee can spend it. If there is not enough money in the funds the committee would have to think about calling a general meeting to amend the budget or to raise a special levy.

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What is a Body Corporate Manager and what do they do?

A body corporate has the power to engage a body corporate manager, building/resident manager or caretaker to help it perform various functions. The size and complexity of the scheme will determine which of these they appoint.

Unlike a caretaker or building manager; a body corporate manager’s role is mainly administrative. A body corporate and its committee should play a proactive role in the running of the scheme, and encourage the ongoing need to work closely with their body corporate manager.

Strata managers are professionals who are responsible for the administration of bodies corporate. Depending on the state and territory, they are also called body corporate managers, strata managing agents, managers, and agents. It is their task to ensure buildings and common areas within a strata titled or community titled scheme are properly maintained for the benefit of all lot owners. They follow specific instructions issued by the Executive Committee.

Body corporate managers are specialists in their field, possessing the knowledge and skills to administer the body corporate in accordance with the complex requirements of the particular state-based legislation. They also work to achieve consensus in decision making by the lot owners, and to otherwise assist the lot owners by assuming onerous responsibilities.

Duties of a body corporate manager
Body corporate managers are involved in coordinating the affairs of lot owners including conducting meetings, collecting and banking levies, arranging property maintenance, advising on asset management, placing insurance and keeping financial accounts.

The manager can only do what the body corporate asks them to. The committee’s powers are not lessened by the authority given to the manager and the manager cannot stop the executive members of the committee from acting within their authority (e.g. the secretary can still call a committee meeting if asked to do so). A manager automatically becomes a non-voting member of the body corporate committee. The voting members of the committee can also ask a manager not to attend a committee meeting.

Helping the committee
The duties of the manager are contained in the written administration agreement entered into with the body corporate. Usually the manager performs the duties of secretary and treasurer including:

  • calling committee and general meetings
  • sending out levy notices and by-law contravention notices
  • sending out the minutes of meetings and managing the body corporate’s money

Maintenance of common property

The manager is not responsible for the maintenance of the common property, but may organise maintenance is requested to do so by the committee.

Their specific duties include:

  • Maintaining the records of the body corporate as required by law, which includes the body corporate roll and other statutory records
  • Prepare budgets, quarterly and annual financial reports and keeping all accounting records required to prepare such reports
  • Arrange for the preparation and submission of income tax returns on behalf of the body corporate
  • Implement credit control procedures in respect of the maintenance contributions
  • Have possession of and care for the records and documents of the body corporate
  • Enforce the by-laws strictly as directed by the body corporate
  • Pay accounts and outgoings in accordance with the instructions of the body corporate and the agreed terms
  • Ensure that insurance policies are effected, provide adequate cover and are promptly renewed as required by Body Corporate and Community Management Act 1997.
  • Promptly attend to any insurance claims that may arise
  • Arrange and attend the annual general meeting of the body corporate – which includes serving the notices of the meeting, and preparing and distributing the minutes of the meeting
  • Ensure the scheme complies with all the Work Health & Safety (WHS) regulations
  • Arrange as required by the body corporate; the day to day maintenance and repairs to the common property
  • Act as secretary and treasurer of the body corporate and carry out the functions required of these officers by the Body Corporate and Community Management Act 1997
  • Provide advice and assistance to the body corporate in regard to matters relating to the affairs of the scheme. In particular this relates to advice on community titles legislation relating to meetings, management and accounting decisions
  • Have custody of the common seal and attest to its affixation
  • Generally implement the decisions of the body corporate

Engaging a body corporate manager that is a member of Strata Community Australia (SCA) is an important step to ensure the professional and compliant administration of a scheme. Body Corporate legislation is complex and designed to protect the interests of its lot owners.  A body corporate manager who knows the legislation well can prevent inadvertent errors which can be made by self-managing owners. Members of SCA practising as body corporate managers are required to keep abreast of all changes in the relevant legislation through a program of continuing professional development and also maintain professional indemnity insurance. Not least, they are required to adhere to an ethical Code Of Conduct.

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What is a levy?

In accordance with the body corporate regulations a lot owner is required to contribute to the body corporate, in order to meet expenses which include water and electricity charges for common areas, building and public liability insurance, and repairs and maintenance of common property. In a community title scheme, there may also be additional costs associated with the running of the scheme such as fees for a body corporate manager, workers compensation insurance or building valuations.

Who determines the amount of the levies?

Levy contributions are calculated in accordance with the lot entitlement as set out by the surveyor of the property when the community titles scheme is created. In order to cover the costs of expenses, the law requires that each body corporate establishes an administrative fund and a sinking fund and raises levies from owners. All levies must be charged in proportion to the lot entitlement of each lot. Levies are determined by the owners at the Annual General Meeting (AGM).

Who issues the levies?
The body corporate at the AGM instructs the body corporate manager to issue the levies, usually quarterly in advance.

What is a Sinking Fund?
The sinking fund is for the costs of future capital expenses. The amount in the fund must be enough to cover standard and unexpected capital expenditure items.

Where does all the Levy money go?
All of the levy monies are deposited into your scheme’s individual trust account and divided into two (2) funds:

Administrative Fund which covers the following items (amongst others):

  • Regular maintenance
  • Insurance of the building and common area
  • Pool maintenance (if applicable)
  • Postage and stationery
  • Minor building repairs
  • Body Corporate manager/administration
  • Legal obligations
  • Pest control (of common grounds) etc
  • Electricity for common area lighting and facilities
  • Water usage
  • Caretaker/On Site Manager

Sinking Fund which covers the following items (amongst others):

  • Repainting
  • Roofing replacement
  • Guttering replacement
  • Driveway repairs
  • Fence installation
  • Major plumbing repairs
  • Pool resurfacing (if applicable)
  • Pool/shade cloth installation (if applicable)
  • Lift upgrade of replacement etc.
  • Other capital expenditure items

Non-payment
Levies must be paid by the due date. Lot owners cannot object to a levy by not paying it. The body corporate can take debt recovery action through the local court.

Click here for more information on Levy Administration.

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Insurance

The body corporate has an obligation under the Act to insure the common property against damage or destruction by fire, explosion and other insurable events. It also has an obligation to insure the building for its true replacement value. Periodically, the  manager will arrange a building valuation to make certain that the insurance cover is adequate.

The insurance policy, arranged in the name of the scheme in most instances, covers the structure of the property and does not extend to cover privately owned fixtures and fittings in any unit e.g. carpets, paint, curtains, blinds, light fittings or other electrical appliances which are not built into the lot and can be removed without interference to electrical wiring. We strongly advise that you insure your contents against loss or damage from such events beyond your control.

If you are letting your lot to a tenant, for your protection, we recommend that you arrange Landlord’s Fixtures and Fittings cover and include public liability for the area inside your unit.

By-Laws

All Community Titles Schemes have by-laws written into their Community Management Statement. These by-laws are rules that the owners and tenants in a  scheme must follow. These can be changed at a general meeting of the body corporate or owners corporation. To amend the by-laws, the owners must agree at an AGM with 75% or more of the owners present supporting the amendment.

All by-laws are not the same, so you should obtain a copy of the current by-laws for your scheme from the Manager.

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Alterations to Common Property

Please be aware that it is a breach of the model by-laws of the Strata Schemes Management Act 1996, for an owner to make alterations to his/her Lot which affect common property without first seeking the approval, in writing, of the body corporate. If in any doubt at all, please contact your strata manager so that they can advise you of the correct procedure.

Who is responsible for what in Common Property? Click on link to read docment from SCA.

Repair & Maintenance

The body corporate has a responsibility under the Act to look after the common property. This is part of your asset, therefore if you become aware of an item of common property that requires repair, please contact your Body Corporate manager immediately so that they can arrange the necessary contractor.

Repairs to the common property are paid for from the Administrative Fund. Long-term replacements or renovations such as painting, gutters, fences, stairwell carpets etc., are paid for from the Sinking Fund, therefore it is very important to make sure that Sinking Fund levy contributions are set at a realistic level.

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Meetings

Almost all decisions are ultimately made by the committee or body corporate in meetings. Owners need to know meetings are being held and what is to be considered so that they can decide what they want to do (and how). The integrity of meetings and the decisions made at them affects the reliable operation of schemes. Meetings are one of the more critical scheme activities.

All states require schemes to have at least one meeting per year for owners – the Annual General Meeting (AGM), but the notice period varies. And, if a special or unanimous resolution is required, the notice period is usually longer. Some states prescribe the things that must be considered at annual general meetings. And, there are limits in most states as to how far apart annual general meetings can be held. For more information download Fair Trading's Strata living booklet (PDF size: 505kb)

Voting

The lot owners as part of the owners corpration run strata schemes by exercising their right to vote on decisions in meetings. So, the right to vote, the extent of their vote and the kinds of decisions made are a key feature of lot ownership. Every state gives each lot one equal vote on basic decisions (if no poll is called or required). But some states limit the maximum number of votes a person can hold or the maximum number of proxies a person can hold.

In New South Wales some kinds of proxies cannot be used by developers.

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What are Proxies?

When a lot owner cannot attend meetings, they have the option of appointing a substitute representative by proxy. This allows owners to have their say in all circumstances. But proxies need controls to ensure that the representation is valid and accurate. In most states there is a prescribed proxy form. Some states also require the form to be given to lot owners with the meeting notice.

And, in most states the proxy can be submitted anytime up to the start of the meeting (and even at the meeting).  In large schemes in New South Wales proxies need to be delivered before the meeting date.

Disputes

In strata and community schemes it often means that people of diverse interests and backgrounds are brought into close contact and sometimes disagreements and disputes arise. Hopefully, most can be sorted out by the people involved by talking about the problem and through developing tolerance and an understanding of others.

The first step towards resolving a problem is communication and to make every attempt to talk to the other parties involved. When disputes cannot be resolved informally, there is a more formal process of dispute resolution set out by the Strata Schemes Management Act 1996.

Check also the Fair Trading's Strata living booklet for more information on disputes (PDF size: 505kb)

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