Contribution Entitlements Can Be Changed Again!

Contribution Entitlements Can Be Changed Again!

A recent QCAT decision by His Honour DJ McGill SC has reopened the door for applications to change CSLEs. If there has been a change to your legal rights, or if the expenses paid by your body corporate have changed since the last time the contribution schedule lot entitlements (CSLEs) were set, you may now be able to bring an application to change the CSLEs under section 47B(1) of the Body Corporate and Community Management Act 1997 (BCCMA).

Section 47B(1) requires, as a threshold, that before an application to change CSLEs can be made, the community titles scheme must have been affected by a ‘material change’.

In Heaton v Body Corporate for Windsong Apartments CTS 31804 [2012] QCAT 45, Tribunal Member Dr. J Forbes was among the first decision-makers to consider what constitutes a ‘material change’. The learned Member’s decision, which has been followed for over 12 years, held that a “material change” must be both a physical change and not insignificant.

. For example:

• change of the use of a Lot from a restaurant to an office was not a material change;^[1]
• a purported, minor encroachment from a lot onto the common property was not a material change;^[2]
• alterations to the interiors of lots, which do not affect individual lot sizes or the removal / addition of lots to the scheme, was not a material change; ^[3] and
• recording a new CMS after a specialist adjudication order was made was not a material change.^[4]

As other QCAT tribunal members adopted Dr Forbes formulation in subsequent decisions, it became extremely difficult for lot owners to successfully bring an application to change their CSLEs. In short, the ‘bar’ to establish a ‘material change’ had become very high.

The Heaton formulation had remained the leading authority until 11 October 2024, when  Judicial Member DJ McGill SC handed down his decision in Huang v Body Corporate for Anchorage One CTS 35311 [2024] QCAT 381.

In essence, the Huang decision has made the meaning of “material change”, for the purpose of s47B(1) of the BCCMA, less restrictive as applicants no longer need to demonstrate a physical and not insignificant change to the scheme.

Instead, His Honour endorsed the approach taken in the earlier authority of Fisher v Body Corporate for Centrepoint CTS 779 [2004] QCA 214, subject to two very important preconditions.

In Fisher, the Court of Appeal found that the nature of a contribution schedule suggested that the allocation of contributions among lot owners should depend on the impact individual lots make on the costs of operating the scheme, and that this is the only basis by which CSLEs could be consistently changed. In other words, costs of operating the scheme should be shared equitably.

The first precondition to applying Fisher is that the applicant must first demonstrate that the revised (new) “material change” threshold has been met. To do so, applicants must show that:

1. There has been some kind of change at the scheme;
2. This change occurred after the last time the CSLEs were set; and
3. This change substantially impacts the CSLEs to a significant extent.

In Huang, the “material changes” accepted by Judicial Member DJ McGill SC were not physical in nature. Some were changes to legal rights, and others involved changes to shared expenses.

In respect to the latter, the Applicant’s Lot operated solely as a restaurant within a hotel. The body corporate began allocating some expenditure (which the Applicant contributed to) toward expenses that did not benefit the Applicant’s Lot but benefited the owners of the hotel (residential) lots. These expenses included pest control treatments for the residential lots, provision of television services, additional fire safety services, intercoms, and security services.

Once the first precondition is met, the Tribunal has jurisdiction to entertain the application under s47B(1). However, the second precondition is that the approach to setting CSLEs in Fisher cannot be used when there is a deciding principle for the scheme. Where there is a deciding principle, that principle must be used.

Usefully, His Honour pointed out that if a scheme was established prior to 2011, it would not automatically have a deciding principle (for example, unless the body corporate had, since 2011, passed a resolution without dissent to record a New Community Management Statement for the scheme that included a deciding principle).

If there is no such deciding principle, then a change to the CSLEs must be made in accordance with the approach in Fisher, that is, what is “just and equitable” in the circumstances.

What does this mean for you?
If you believe that your legal rights or your body corporate’s expenses have changed significantly, such that your CSLEs should also be changed, please contact Kimberley Johnson at kimberley@bagl.com.au or Michael Kleinschmidt at michael.kleinschmidt@bagl.com.au

© Bugden Allen Group Legal Pty Ltd. This is general information only and not legal advice. You should not rely on this information without seeking legal advice tailored to your specific circumstances.

[1] See Tan & Ors v The Body Corporate for Paddington Boulevard CTS 8174 [2019] QCAT 374.

[2] Ibid.

[3] See Radchenko v Body Corporate for Richmond Apartments CTS 30240 [2018] QCAT 251.

[4] See Heaton v Body Corporate for “Windsong Apartments” CTS 31804 [2012] QCAT 45.