Buying in a Body Corporate - QLD

What issues might arise if you are buying in a Community Titles Scheme?

If you are buying in a Community Titles Scheme there might be issues arising from building defects and work required in relation to:

• external cladding, including identifying if the cladding is combustible, and whether it may need removal or replacement; and
• structural issues which might be noted from inspecting common property areas of the building revealing cracks, water leaks etc., which, for example, could result in significant costs for owners and have insurance disclosure and exclusion implications.

In addition to the concerns mentioned, it's also important to consider the potential impact of ongoing maintenance and future repairs on the overall value of the property. The condition of common areas and the building's infrastructure can influence not only the immediate costs for owners but also the long-term appreciation of your investment. Furthermore, any unresolved disputes within the community regarding repairs or upgrades can lead to delays and further financial strain. Ensuring that there is a clear and well-documented maintenance plan in place can help mitigate these risks and protect your investment in the long run.

Understanding Contribution and Interest Entitlement when Owning a Unit or Townhouse

Body corporate levies are typically payable each quarter of the year. The total annual levies that you are responsible for are outlined in the disclosure statement provided to you.

How is my share of body corporate levies and voting rights calculated?

The Contribution Entitlement is a key figure used to calculate how much you owe towards the body corporate's administrative and sinking fund levies, excluding insurance.

Here's how it works:

1. Contribution Lot: This is the specific amount assigned to your lot in the body corporate.
2. Contribution Aggregate: This is the total of all contribution lots in the entire body corporate scheme.

Your share of the levies is determined by dividing your Contribution Lot by the Contribution Aggregate. This ratio represents your proportionate share of the total costs that need to be covered by all the property owners in the body corporate.

For example, if your Contribution Lot is 10 and the Contribution Aggregate is 100, your share of the costs would be 10/100, or 10% of the total levies.

This same ratio also determines your voting power in the body corporate. So, in our example, you would have 10% of the voting rights in decisions made by ordinary resolution. This ensures that your financial contribution is proportionate to your influence in body corporate matters.

What Is Your Interest Entitlement in a Body Corporate?

The Interest Entitlement is an important figure used to determine several key aspects of your financial and ownership responsibilities within a body corporate scheme.

Here's how it works:

• Interest Schedule Lot: This is the specific value assigned to your lot within the body corporate scheme.
• Interest Schedule Aggregate: This is the total value of all interest schedule lots in the entire body corporate scheme.

Your share of certain costs and ownership rights is determined by dividing your Interest Schedule Lot by the Interest Schedule Aggregate. This ratio influences several important areas:

1. Insurance Premiums: Your portion of the body corporate’s insurance premiums is based on this ratio. For example, if your Interest Schedule Lot is 15 and the Interest Schedule Aggregate is 150, you would be responsible for 15/150, or 10%, of the total insurance premium.
2. Common Property Ownership: The ratio also determines your share of ownership in the common property, which includes areas like gardens, pools, and hallways that are shared by all property owners.
3. Scheme Termination: In the event that the body corporate scheme is terminated, this ratio determines your share of the remaining assets or liabilities.
4. Unimproved Value: The Interest Entitlement affects the unimproved value of your lot, which can impact your property’s valuation and rates.

The Interest Entitlement ratio plays a crucial role in determining your financial obligations and ownership rights within the body corporate, ensuring that everything is proportionate to the size and value of your lot compared to the entire scheme.

Implied Warranties in Body Corporate Sales Explained

What implied warranties does the BCCM Act require a Seller to give about the body corporate?

The BCCM Act contains certain implied warranties that the Seller is deemed to have given, such as the absence of:

1. any patent or latent defects in the common property or body corporate assets (for example, substantial building defects that require repair which can include common boundary walls of the lot or exclusive use areas and may include repairs required as a result of issues such as concrete cancer, structural or water issues and rectification works required because of the use of combustible cladding on the building);
2. any actual or contingent or expected liabilities of the body corporate not part of the body corporate’s normal operating expenses (for example, significant debts or judgments or other liabilities that may result or have resulted in the levying of a special contribution); and
3. anything else regarding the body corporate’s affairs which may affect you.

What rights do I have if the Seller breaches any of the implied warranties under the BCCM Act?

If any of the above exist and are not disclosed before entering into the Contract, the Buyer may have a right to terminate up until 14 days after the Contract Date. The right of termination given under the BCCMA does not limit a Buyer's rights in relation to a breach of warranty and, if a Buyer does not exercise that right and proceeds to settle the Contract, they may have a right to pursue the Seller for compensation for any loss as a result of the breach of warranty. However the costs and uncertainty of litigation to recover any damages means it may be better to terminate or re-negotiate with the Seller during this 14 day period.

Guide For Reviewing Strata Reports

When going through a Strata Report, consider the following important areas:

1. Look at the body corporate's financial records to understand their stability. This includes reviewing levies, unpaid debts, and any planned future capital works, which can indicate potential financial risks. Pay special attention to any mention of a “Special Levy” in meeting minutes.
2. Look for any ongoing disputes or legal issues connected to the property.
3. Review the property’s maintenance history, including any repairs or defects. This will help you understand the overall condition of the property and anticipate future maintenance requirements. This is important if there may be large amounts pulled out of the sinking or admin funds, which may in the future cause a Special Levy to recoup funds.
4. Understand the property’s by-laws which are generally under the Form 14, which outline your rights and obligations as an owner, as well as any restrictions on your property use, and common area.
5. Finally, look at the body corporate insurance, ensuring it has satisfactory insurance for common areas and shared assets. Review the level of coverage and what is included in the policy.

‍