Guide t: BODIES CORPORATE Created: January, 2014 Last Updated: February, 2016
WHAT IS A BODY CORPORATE? A bdy crprate, ften referred t as a strata title r unit title develpment, is a unique feature f the unit title scheme and cnsists f all the wners f the units acting as a grup. A bdy crprate has tw main duties: T rganise and maintain all buildings and ther imprvements; T keep the cmmn prperty in a gd state f repair A bdy crprate has rules, which gvern the unit wners' relatinships with each ther and with third parties. The bdy crprate als has duties that apply under its rules. Rules are based n the Unit Titles Act 2010 but can vary with each bdy crprate. In large cmplexes a Manager r Management Cmmittee may be emplyed t carry ut the bdy crprate's duties. Within a bdy crprate, members wn their dwelling (which is called a principal unit) and may wn accessry units (such as car parks, strage lckers and curtyards). Areas such as grunds, gardens, internal halls and stairs in blcks are cmmn prperty and are wned by all the wners cllectively. The exterir f all buildings, including the rf, may be within the unit r part f the cmmn prperty. WHAT IS A UNIT TITLE? A Unit Title is a type f sub divisin f a Unit Plan used t allw individual wnership f parts f a single building r separate buildings within a cmplex. It is similar t ther prperty in that it can be bught and sld, r leased r mrtgaged. But unlike ther frms f title, a Unit Title is made up f three cmpnents: Ownership in the particular unit and accessry units. An undivided share in the wnership f the cmmn prperty. An undivided share in the wnership f the units if the unit plan is cancelled. BODY CORPORATE GOVERNANCE BODY CORPORATE CHAIRPERSON The Unit Titles Act 2010 intrduced the new rle f Bdy Crprate Chairpersn, wh must be elected by the bdy crprate at every Annual General Meeting. It is a requirement f the Act that the Chairpersn must be an wner. The rle f Chairpersn has clearly defined duties in accrdance with the Unit Title Regulatins: Maintain the register f unit wners. Prepare the agenda fr each general meeting. Chair each general meeting (unless it is agreed at the start f the meeting that anther persn will chair). Prepare minutes f each general meeting. Recrd reslutins vted n and whether they were passed. Keep financial accunts and recrds. Submit the bdy crprate s financial statements t an independent auditr. Receive reprts frm the bdy crprate cmmittee and distribute them t unit wners. Sign dcuments n behalf f the bdy crprate. Prepare and issue ntices f reslutins t be passed withut a general meeting. Ntify unit wners f the result f any vte n a reslutin t be passed withut a general meeting. Ntify the bdy crprate cmmittee f any delegatin f a duty r pwer t the bdy crprate cmmittee. Undertake any ther duties relating t the administratin f the bdy crprate that the bdy crprate has decided by rdinary reslutin t cnfer n the Chairpersn. The bdy crprate can chse t delegate sme r all f these tasks either t the bdy crprate cmmittee r t a bdy crprate manager under a cntractual arrangement. If emplying a bdy crprate manager it is imprtant t set ut clearly within the cntract exactly what the manager is expected t d. Fr the sake f efficiency there seems little pint in the Bdy Crprate Chairpersn nt being part f the bdy crprate cmmittee. In many cases the Bdy Crprate Chairpersn will als chair the cmmittee and the meetings. 2
If the sitting Bdy Crprate Chairpersn sells their unit, they must give ntice f their intentin t resign frm the pst f Bdy Crprate Chairpersn. The Bdy Crprate Chairpersn can resign at any time giving ntice in writing t the bdy crprate. As the rle f Bdy Crprate Chairpersn is a requirement f the Act, fllwing resignatin r remval, the psitin must be filled as sn as pssible. Any wner, including directrs f cmpany wned units and trustees f trust wned units, within the bdy crprate are eligible t be elected t the rle f Bdy Crprate Chairpersn as lng as they are nminated by anther unit wner and agree t be nminated. BUYING INTO A BODY CORPORATE This sectin cvers infrmatin specific t purchasing in a bdy crprate whether it's an apartment, terrace r standalne huse. FIND OUT ABOUT THE BODY CORPORATE Is the prperty freehld r leasehld? Lease hld prperty may appear attractive as the prperty is cheaper t buy because land is nt included in the sale. Instead there will be an additinal payment t the landlrd t use the land. A ptential dwnside is that lease csts need t be renewed and incumbent wners have n cntrl ver the cst f renewal. Recent examples have seen lease csts increase significantly. It is very imprtant that yu check the terms and cnditins f the lease with reference t the ability fr the land wner t ratchet up the grund rental charges and in what time frames these increases will ccur. If the prperty is leasehld check the remaining lease term. Under the Unit Titles Act 2010, all multi unit cmplexes with mre than 10 units are required t have a bdy crprate cmmittee unless a reslutin f the bdy crprate t nt have a cmmittee is passed. Cmplexes with nine r fewer units may frm a bdy crprate cmmittee. Des this cmplex have a cmmittee? If it des, hw active is it? What are the bdy crprate annual fees? Fees vary; make sure yu are aware f the annual cst t live in the bdy crprate yu are interested in. Des the prperty yu are lking t buy have any unpaid fees? Is there a maintenance plan in place? Under the new Unit Titles Act all bdies crprate must have a lng term maintenance plan (LTMP) in place, and this became mandatry as f the 1st Octber 2012. The LTMP must be fr a minimum f 10 years and reviewed every tw years. Yu shuld be very wary f maintenance plans that are prepared fr the minimum f 10 years as there may be sme very significant maintenance that falls just utside f the 10 year perid that has been assessed. We say that a prudent bdy crprate ught t have a 30 year maintenance plan and build adequate maintenance reserves in their Lng Term Maintenance Fund t fully fund the LTMP ver the years. Yu must apply extreme cautin when analysing the financial recrds and the LTMP t ensure that nt nly is the LTMP adequate, but that the bdy crprate has built up adequate reserves therwise yu risk assuming a significant cntingent liability if yu buy the unit. 3
ADDITIONAL THINGS TO CONSIDER Apartment & Cmplex Is the apartment in a gd state f repair - make sure yu lk beynd the unit yu are buying and take a critical lk at the entire cmplex? Has maintenance been carried ut recently? If s, what, why and when and by whm? Is any maintenance planned? If s, is it rutine maintenance r fr anther reasn? Are car parks allcated t the prperty yu are viewing? If s, hw many? Is there any security, security gates, CCTV, etc? Is it in gd cnditin? Is there an n-site building manager? Was the prperty wner-ccupied r tenanted? It is generally accepted that wner-ccupiers take mre care f prperty than tenants. Are pets allwed? Hw easy will it be t get yur furniture in and ut f the building? Bdy Crprate Determine the date f the next Annual General Meeting (AGM) r if there is an Extrardinary General Meeting (EGM) pending. This is imprtant because we have seen a lt f units g n the market prir t a general meeting being called because an wner has becme aware f matters that will be raised at the next meeting that will result in a significant increase in the annual levy r will negatively impact the value f the cmplex. If a general meeting is pending yu must ensure that yu put the questin in writing t the agent asking whether the vendr is aware f any matters that will be raised at the next general meeting that will either significantly increase the annual levy r have a material impact n the value f the cmplex - yu shuld insist that the answer is prvided t yu in writing. Ask fr a cpy f the: Operatinal Rules. Minutes fr all general meetings (AGM's & EGM's) and cmmittee meetings fr the last three years. Financial Statements fr the last three years including audit reprts. Budget fr current year. Lng Term Maintenance Plan. Insurance Plicy cvering the cmplex and cmmn prperty. 4
In additin t finding ut the abve, ensure yu carry ut the apprpriate due diligence, i.e.: building cnditin survey, LIM reprt, pre-cntract disclsure statement (highlighting details f bdy crprate levies, planned maintenance, financial statements and infrmatin n any claim r prceedings related t water ingress), etc. We strngly recmmend that yu btain cpies f the financial statements, audit reprts, current budget and cpies f the minutes f all general meetings and cmmittee meetings ver the last three years. This will enable yu t get an insight int the fiscal fitness and standard f gvernance f the bdy crprate and t enable yu t get an insight int whether r nt there are maintenance issues, legal actin n ft r being cntemplated. Many bdies crprate are flishly sanitising their minutes and nt prperly declaring the issues at hand s sme times it is a matter f what is nt written in the minutes as ppsed t what is - HOBANZ can assist yu in vetting this infrmatin if yu wish. Once yu are satisfied yu knw as much as yu need t knw abut the prperty make an ffer. Remember ffers can be made cnditinal n ne r a number f factrs such as finance apprval, lawyer's apprval, building cnditin survey r LIM reprt. LIVING IN A BODY CORPORATE THE IMPORTANCE OF BODY CORPORATE RULES Bdy crprate rules are essential t ensure the smth running and management f the bdy crprate. It is imprtant that wners, and their tenants, as well as prspective purchasers are aware f what is set ut in these rules. The purpse f bdy crprate rules is t uphld a gd standard f living fr all wners and a gd bdy crprate will implement these rules fairly. While sme bdy crprate rules may appear trivial, they set ut standards fr: Hw the upkeep f the prperty will be carried ut s the maximum value f each prperty is maintained. Acceptable use f the buildings. Nise levels. Rubbish remval. Types f pets allwed. The rules als cver the management and gvernance f the bdy crprate including: The duties f an wner. The pwers and duties f the bdy crprate. An utline f pwers that can be delegated t an wner s cmmittee. Running f general meetings. OWNER'S OBLIGATIONS Typically an wner's bligatins will be t: Grant the bdy crprate access t yur unit at reasnable times fr purpses set ut in the Act. Cmply with the bdy crprate rules. Pay all required funds t the bdy crprate n time. Repair and maintain yur unit s there is n damage r lss in value t neighburing units r cmmn prperty. Nt carry ut any structural changes t the unit withut written cnsent f the bdy crprate. WHO PAYS FOR MAINTENANCE? The intrductin f the Unit Titles Act 2010 has cmplicated the matter f maintenance. Bth the bdy crprate s and the wner s respnsibilities are utlined under Sectins 138 and 80 respectively. Sectins 138(1) and (2) state a bdy crprate s duties f repair and maintenance: 1. The bdy crprate must manage, maintain, and keep in a gd state f repair the cmmn prperty... 2. The bdy crprate must maintain, repair, r renew all building elements and infrastructure that relate t r serve mre than ne unit. Sectin 80 states that an wner must repair and maintain the unit and keep it in gd rder t ensure that n damage r harm, whether physical, ecnmic, r therwise, is, r has the ptential t be, caused t the cmmn prperty, any building element, any infrastructure, r any ther unit in the building. Sectin 5(1) defines cmmn prperty as: a) All the land and assciated fixtures that are part f the unit title develpment but are nt cntained in a principal unit, 5
accessry unit, r future develpment unit; and b) In the case f a subsidiary unit title develpment, means that part f the principal unit subdivided t create the subsidiary unit title develpment that is nt cntained in a principal unit, accessry unit, r future develpment unit The Unit Titles Act 2010 has intrduced the new terms building elements and infrastructure. Building elements include internal and external cmpnents f a building necessary t its structural integrity, aesthetics, r health and safety, and includes the rf, fundatins, walls, decks, balcnies, and cladding. Infrastructure includes pipes, wires, cables, gutters, and ther matters necessary fr shelter and services/utilities. within ne unit it is fundamental t the integrity f the whle building. Sectins 138 and 126 seem t cnflict here and there is n instructin as t which sectin t adpt given this scenari. This culd lead t disagreement between wners which may ultimately need t be decided by either the Tenancy Tribunal r the Curts. The bligatins f bth the bdy crprate and the wners are clearly established. What has nt been established is wh pays fr what. Sectin 138(4) states: Any csts incurred by the bdy crprate that relate t repairs t building elements and infrastructure cntained in a principal unit are recverable by the bdy crprate frm the wner f that unit as a debt Therefre, the cst f repairing any building elements r infrastructure situated within a principal unit is recverable frm that unit wner. S, if the leaking rf frm the riginal questin is within cmmn prperty, then sectin 138(4) will nt apply; meaning that the bdy crprate must repair it and the cst is shared amng all members f the bdy crprate in prprtin t their utility interest. Cnversely, if the rf is cntained in a principal unit then sectin 138(4) will apply with the csts recverable the wner f that unit. There is hwever anther sectin f the Unit Titles Act 2010 t cnsider. Sectin 126 indicates that where the bdy crprate des any wrk substantially fr the benefit f ne r mre units, but nt all units, r which benefits sme wners mre than thers, then the cst f that wrk is recverable frm thse specific unit wners, and nt all wners. If the cmplex is a multi-strey develpment this prvides sme argument as t wh shuld pay fr the rf as it culd be argued that while the rf is 6
WHO PAYS MATRIX Fr simplicity a matrix fr respnsibility and payment is shwn belw. Area Respnsibility Wh Pays? UTA 2010 Sectin Cmmn Prperty Bdy crprate respnsibility Wrk substantially fr the benefit f ne r mre units Bdy crprate pays 138(1) Recverable frm unit wners based n benefit, r utility interest, r relative benefit as determined by Curt r Tribunal 126(1)-(2) Unit Unit wner respnsibility Unit wner pays 80(1)(g) Bdy crprate pays, unless damage caused by wner ptential recvery 138(2) Building elements / Infrastructure On cmmn prperty Within a unit bdy crprate pays and recvers frm wner Wrk substantially fr the benefit f ne r mre units, recverable frm unit wners based n benefit, r utility interest, r relative benefit determined by Curt r Tribunal 138(4) 126(1)-(2) 7