After 7 glorious years of harmonious community titles scheme living, you decide to sell your unit. You are sad to leave your two-storey walk-up, and the five neighbours you now call friends. Your ‘meetings’ have been quick chats around a BBQ, or over an afternoon cuppa. You handled the insurance, Bob (the retired builder) from Lot 1 arranged the maintenance contractors, Shirley from Lot 5 kept the books straight, and if anything was urgent, it just got done. You land a buyer, and sign the contract of sale, for a great price.
A week later, your solicitor calls, and starts asking questions that you have no answers for – ‘Body Corporate Roll? What’s that? AGM minutes, I thought only public companies have those…’.
Your solicitor says that your sale will crash unless you can hand over to the buyer’s lawyer:
- minutes of the last three (3) Annual General Meetings of the Body Corporate;
- a copy of the certificate of currency of insurance, in the name of the Body Corporate;
- the Body Corporate Roll, Asset Register, Register of Improvements to the Common Property (including for your carport), sinking fund report, last fire safety inspection report, balances for the administrative and sinking funds; and
- confirmation of what the Body Corporate is going to do about fixing the roof leak into the shared foyer, (next to the skylight that Bob installed a few years ago) and when the fix is going to be completed.
Your solicitor is on a fixed price / fixed scope engagement, and ‘does not do strata law’. What do you do?
Re-Establishing the Body Corporate
Re-Establishing the Body Corporate
First things first, get an order of an Adjudicator from the Office of the Commissioner for Body Corporate Management that an ‘out of time’ annual general meeting may be held, so that you can start the process of re-establishing the Body Corporate.
It’s worthwhile having a solicitor experienced with adjudication applications help you with this, to make sure nothing is missed, and to ensure that you qualify for an emergency order (if practicable).
Next, make sure all the necessary formalities and obligations are being met at (or if possible, before) the meeting, by having the necessary paperwork in order, including (for example):
- establishing bank accounts for the body corporate;
- obtaining an insurance valuation report;
- checking that the insurance policy covers the risks required by statute;
- obtaining a building condition report and sinking fund analysis (so you can set the sinking fund budget);
- obtaining a workplace health and safety report;
- obtaining a fire safety compliance report;
- preparing administrative fund and sinking fund budgets; and
- getting at least two quotes to fix the leaking skylight.
The above list is not exhaustive, and neither is it a checklist; it’s just an example. Good body corporate managers (BCM’s) can help you compile the list you need for your Body Corporate. What they cannot (or should not) do is advise you about, for example, who is liable for fixing the leaking skylight, or the consequences of there not having been a formal AGM (or indeed even a committee meeting) for the last 5 years.
A good BCM can be worth their weight in gold when it comes to saving time, stress and headaches in putting the AGM together, and preparing drafts of all the documents, rolls and registers that you will need.
In exchange, the BCM will want to be paid, usually only a modest fee, and a chance of being engaged to act as the BCM for your Body Corporate; usually for at least a year, and sometimes up to 3 years. If you are re-establishing a body corporate, then the BCM’s fees are money well spent, including for at least 12 months after the ‘out of time’ AGM is conducted.
Once that AGM is conducted, the documents, rolls and registers in place, the budgets set, the contributions levied and the rectifying contractors engaged, your Buyer (indeed any buyer) should then be happy. While there is an exception to part of the new disclosure regime under the Property Law Act 2023 and the Property Law Regulation 2024, if the body corporate records are ‘in disarray’, it’s a brave seller who would rely on that, as yet unused and untested, exemption.
Prevention Beats Cure
Prevention Beats Cure
If you own a unit in a smaller body corporate (e.g. somewhere between 3 to 12 units) that’s been DIY’ing everything from insurance to maintenance, please, give some consideration to getting your body corporate back into compliance with the Act sooner, rather than later.
Buyers aren’t stupid; and what they cannot find during their purchase can come back to haunt you, as a seller, down the track. Taking our ‘carport’ above as an example, it’s easy to foresee a disappointed buyer suing the seller when the unapproved carport has to be pulled down.
It does not take the sale of a unit to precipitate a crisis either; e.g. the unapproved skylight was built after Bob’s building licence expired, and there is evidence of structural damage to the roof, as a result of the water leak. In this case, the insurer is likely to deny the claim, and the $64,000 question is ‘who pays for the repairs?’.
If the Body Corporate had been functioning as it should, before the skylight was proposed, then the entire issue would have been avoided.
Conclusion
Conclusion
If you, or someone you know, owns a unit in a ‘DIY’ scheme, and would like to get the body corporate back up and running again, then contact us for help.
– Senior Associate Michael Young and QLD Partner Michael Kleinschmidt
© 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.
