From Glossy Brochures to Real Responsibilities: A Beginner’s Guide to Body Corporates
By Owen Tongue
So, you’re looking to buy your next home: you find an apartment in a new development in the city, close to your favourite café, at the right price. You’re drawn in by the glossy brochures and can’t wait to use the steam room and stock your exclusive use wine cellar. But you’ve never lived in a community titles scheme before. In fact, you’re not even sure what a body corporate is, or what it does.
This is an all-too-common experience for those considering buying into new, or existing, developments. Enquiries we often receive from our clients relate to the basics, such as:
What is a body corporate, and what does it do?
Simply put, a body corporate refers to the lot owners within a scheme which, as a collective, are conferred with distinct legal personality under section 33 of the Body Corporate and Community Management Act 1997 (Qld) (‘BCCMA’).
At its core, your body corporate is required to carry out the following duties under section 94 of the BCCMA:
- administering common property and body corporate assets for the benefit of the owners of the lots included in the scheme (aka, keeping that steam room in working order);
- enforcing the community management statement (including enforcing any by-laws for the scheme in the way provided under the Act); and
- carrying out the other functions given to the body corporate under the Act and the community management statement.
To assist it in carrying out its function, bodies corporate are vested with ‘all powers necessary for carrying out its functions’ under s 95 of the BCCMA, and may, inter alia:
- enter into contracts;
- acquire, hold, deal with and dispose of property; and
- employ staff.
However, it is worth noting that this power is not limitless, and body corporates must be mindful not to act beyond their powers.
What is a committee — is it the same as the body corporate?
No, the role of a committee can be compared to the role of a board of directors in a large company and is distinctly different to the role of the body corporate. There must be a committee for the body corporate if the regulation module applying to the scheme requires it.
The committee is the administrative arm responsible for the day-to-day management of the body corporate and is empowered to make decisions for the body corporate by virtue of section 100 of the BCCMA. Whilst compositions vary between schemes, committees are composed of members (lot owners) elected by their fellow members with positions such as chairperson, secretary, and treasurer.
It is worth noting that the discretion of the committee to make decisions for the body corporate is not unfettered, and in this respect, committees are generally restricted from making decisions in relation to the following (example under section 52 of the Body Corporate and Community Management (Standard Module) Regulation 2020):
- fixing or changing contribution levies;
- changing rights, privileges, or obligations of members;
- starting legal proceedings.
If there’s a body corporate and a committee, what is left for the body corporate manager to do?
That’s a good question, and the answer is simple: it depends. The role of the body corporate manager is to support the body corporate in discharging its administrative function.
You might be thinking that serves the same purpose as the committee, except that section 119 of the BCCMA allows community title schemes with a committee to engage a body corporate manager to exercise some, or all, of the powers of an executive member of the committee.
Most commonly, a body corporate manager will be authorised to perform powers such as managing compliance with the BCCMA, preparing annual budgets, and issuing and monitoring levy payments.
Why do I have to pay contributions?
Subject to the applicable regulation module, a body corporate is required to establish and keep an administrative fund and a sinking fund. What is the difference? Well, it’s in the name. Sort of.
The purpose of the administrative fund is to deal with the day-to-day running expenses of the body corporate, such as maintenance, repairs, and paying for any service contractors engaged by the body corporate (ensuring the steam room remains functional and common property areas are maintained).
The sinking fund can be thought of as the ‘piggy bank’ of the body corporate. It deals with larger items of a capital or non-recurrent nature, such as replacing body corporate assets, or painting of the building.
Each year the body corporate passes a budget for each fund, and it follows that contributions to those funds are levied on you, the lot owner.
So, should I buy into that new development after all?
Well, that’s a matter for you. It might be that you take some comfort in knowing the reality, at least from a governance perspective, that community title schemes are highly regulated and subject at all times to the scrutiny of their members, and prospective buyers.