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N IO IT 13 ED 2 0 L R IA M E EC U M SP S

The official newsletter of Unit Owners Association QLD Carmel-by-the-Sea Administration Costs Before Expiry of old Management Rights regime

TOTAL ADMIN COSTS

73%

EXPIRED CARETAKER COSTS

27%

SUMMER 2013 MARCH 2011

At Last a Win for Carmel Owners They now have a better Management Rights Contract that costs them less

2011 Financial Year

Total Admin Cost

$786,890* After expiry – Owner implemented new management structure

Deduct Caretaker’s Costs

$214,207* TOTAL ADMIN COSTS

100%

($1,714 average per lot per annum)

= Net Administration

572,683

Costs $

*Figures sourced from 2011 Audited Financial Statements.

Become a Member Today Join now www.uoaq.org.au

EST. 1978


From the Editor

Paul Cassels

Contents Summer 2013 www.uoaq.org.au Unit Owners Assocation QLD 6th Floor. 333 Adelaide St, Brisbane Q 4000 E help@uoaq.org.au P 3220 0959 uoaq.org.au

Brisbane

P 3220 0959 or www.uoaq.org.au and request to communicate to a particular person Sue Ekert, Bob Boundy, Elle Young, Paul Cassels. Published by Unit Owners Association QLD Editor Paul Cassels

Gold Coast

Wayne Stevens, Greg Carroll, Roger Dearing

Art Direction

Dan Hancock - P 3162 8823 E hi@danhancock.com.au

Web Development

John Connole - P 0439 879 740 E john@stickybeakmedia.com.au

At Last a Win for Owners Apartment owner occupiers and bodies corporate Don’t Dig Your Own Grave The Forgotten People Worksafe infoline WPH&S Building Certification Review Guidelines for inspection of class 2 to 9 buildings Building access standards for people with a disability Beyond dispute resolution Judge in Pet Justice Unit Owners Association of Queensland Incorporated Policy Supreme Court Ruling Leaves Some Unit Owners Without Rights Rum Contracts and the Tender Process Smoking in Home Units Two-lot schemes regulation 2011 A Cry for Help: Residential Strata Title Insurance Strata Managers – A Cautionary Tale Asbestos Sampling A FREE service that costs Owners PLENTY Caretakers’ Contracts – Add Value to Owners by Not Extending Perversion of the BCCM ACT 1997 The Insurance Issue In North Qld Building memberships

Sponsors

Happy New Year from UOAQ

We appreciate the support of our sponsors to help us do the work we do. To become a sponsor of UOAQ, please contact Paul Cassels on 3220 0959

CTS Management Suite 35, Level 6. “Northpoint” 231 North Quay Brisbane QLD 4000 Telephone 07 3211 4445 Fax 07 3211 4410 Mobile 0419 741 066 Email coralie.mott@ctsm.com.au www.ctsm.com.au

When it comes to entering into service or supply contracts for high value amounts (such as for air-conditioning and lift maintenance, painting, etc) bodies corporates are required by law to seek competitive quotes to ensure fair value for owners. So why is it that under current Queensland legislation fee payable for caretaker remuneration – often the single highest expenditure item a body corporate faces – are not treated the same way and are effectively exempt from this kind of competitive tendering requirement?

Hartley’s Body Corporate Management

Coralie Mott

(BA Dip Ed, Cert IV in BCM)

Director and Body Corporate Manager

Quality Building Management Pty Ltd.

Strata Inspections and Reporting

yourstratamanagement.com.au

Unit Owners Association QLD

Help for Members

Members of the UOAQ are welcome to contact committee members of the association for any help on any body corporate matter.

Disclaimer

Articles contributed to this newsletter are published as a service to members and do not necessarily reflect the opinion or policy of this Association. To contact the committee of the UOAQ for assistance with a body corporate matter please e-mail help@uoaq.org.au

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UnitNews Summer 2013

3 5 6 8 9 10 10 11 12 13 14 16 16 17 18 20 21 22 25 26 27 29 32

“How much would a Politician pay for an endless term in office without ever being tested at the ballot box?”

It stands to reason that the only way unit owners can get a clear idea of the cost they should be paying for caretaking services for their building is for the building caretaking contract to subjected to the same competitive tender process that would apply to any other major service or supply contract. This could occur if a caretaking contract is left to run its contractual life, however the policy of incumbent managers to constantly seek premature extensions (top-ups) of caretaking contracts (often without any premium or renegotiation of contract terms) has the effect of forever pushing this opportunity beyond owners’ reach. When a caretaker enters into an initial contract she or he pays a negotiated “value” for the business based on the contract obligations and term. In many instances, extensions to the contract term will deliver additional value exclusively to the caretaker manager without any benefit to owners. ….. How much would a Politician pay for an endless term in office without ever being tested at the ballot box? I would like to thank our great team of volunteers at the UOAQ and your committee members for all the work throughout the year. From everyone at the UOAQ we would like to thank all our members and supporters including the fantastic Advertisers in the Unit News Online. We wish you a Happy New Year

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Feature Story

At Last a Win for Owners “At last! A Win for Carmel Owners.....”they now have a better Management Rights Contract that costs them less. The Getting of Value and Control for Owners. One of the most often raised issues with the UOAQ’s phone support service to unit owner members is their anguish regarding their inability to exercise any influence in respect of the ever increasing costs affecting the value of their unit investment, with many resigned to the fact that it is beyond their control to do anything about remedying same and revile with despair and disempowerment. This article details that there is an emerging alternative by outlining what actions owners can take to improve their financial lot. But this requires ACTION not INACTION with high conviction owner support of the building’s voluntary body corporate committee prepared to make a difference in unshackling the building from its inherited and entrenched high cost regime. Set out below is a case study outlining how this building with a proactive committee took positive action which has resulted not only in a substantial winding back of costs with resultant potential to substantially reduce levies going forward, but improved on site management. This related to expiring a long term entrenched caretakers’ contract with the attendant high cost regime that caretaker contract extensions perpetuate. Carmel by the Sea (CBTS) – Broadbeach – 125 Lots (52 Holiday Rental, 26 Owner Occupied & 47 Lock Ups. A high profile 4.5 star Beachfront Property). Recent History, Background, Resolve of Body Corporate Committee and Outcome: • Many years ago, the committee resolved that it would recommend to owners that they refuse any extension requests of the Caretaker’s contract and allow it to expire which was supported by very high conviction owner voting overwhelmingly year after year in favour of this initiative. • Well prior to expiry, drafted a more extensive contract with higher detailed work specification than the incumbent developer drafted contract (16 years old). • Submitted to open market tender, including inviting the incumbent Caretaker to tender on an equal basis with other tenderers. • The new high performance contract incorporated the provision of building management services as well as conferring the rights of property management of the letting pool for a maximum three year period with NIL up-front investment purchase by the successful tenderer. • Incumbent Caretaker was paid Contractual Building Management Fees of $214,207 (excl GST) for the 2011 financial year with its contract expiring on 16 October 2012. • Expressions of interest were received from over 50 interested parties, short listed to six serious tenderers, which included four contracts offered for NIL consideration. • A high calibre tenderer was appointed with NIL caretaker remuneration, took up residence in the building 2 months prior and by contract commencement date had received engagement to provide property management services for sufficient lots ready to operate profitably, confident in the further migration of additional lots transferring to the letting pool to further increase its commercial returns.

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• The Committee was able to negotiate the purchase/subdivision of the office from the expiring Caretaker, allowing the new Caretaker to operate from the incumbent office premises, ratified by a motion without dissent as an alternative to building its own separate office on common property which had been previously approved by the Body Corporate. • See Table of Research data below at lines six and seven which outlines the financial impact on owners by changed Caretaker remuneration (Col C), increased No. of Years Sinking Funds Reserves (Col D) and potential reduced levies if full impact of the savings in the caretaker’s remuneration is passed on to owners (Col E). The resilience of the committee with their foresight, tenacity, unity and dedication to the value enhancement for their owners has to be congratulated in the delivery of this industry breaking initiative, that shines the light in setting out the example for the ‘getting of value and control’ on behalf of its owners. What do you think will happen to value of units in this complex? The many doomsayers along the way with significant self interest decrying any likely successful outcome of this initiative have been proved convincingly WRONG. A common question is how can a new Caretaker undertake and perform the building management to a high standard for very reduced even NIL remuneration? There is a simple explanation: • Unlike the purchase of an existing unexpired Management Rights (MR) contract for a large multimillion capital sum, this newly commenced contract has no such capital outlay up front, because under the legislation, a Body Corporate is prohibited from selling same, so no consideration can be paid so no purchase can take place. • Under these circumstances, the tenderer makes the following assessment relating to what is the commercial viability relating to them: What excess business income from the letting pool, less the costs of provision of buildings management is sufficient to provide an adequate net income, allowing only for the need to service working capital investment, not a large purchased multimillion dollar contract outlay? In the case of Carmel, four separate independent well-credentialed tenderers all concluded and offered a NIL remuneration Building Management contract as being appropriate compensation. Were they all wrong? Lastly, the seminars at which the sale of Management Rights contracts is promoted. When the example of the Carmel outcome was questioned by an attendee at a recent seminar, this was discounted suggesting the likelihood that the new Caretaker would fail financially. What the self interest promoters fail to relevantly point out is that as the Carmel model removes any large up front capital investment being necessary, normal commercial returns from the business achieved are adequate. When will the MR marketing operation accept that a NEW NORMAL is coming as demonstrated by the above case study and slippage of the value of MR contracts will accelerate as is already being signalled by owners questioning an alternative that shifts the value in favour of owners? Perusal of the real estate advertising pages shows the extent of Sale of MR contracts where the number of owners in receivership is testament to this emerging realisation of the financial deterioration of this product.

Summer October 2013 2012 UnitNews

3


Feature Story In a separate article, a range of the due diligence questions that should be asked by purchasers of MR contracts might assist prospective purchasers of MR contracts carefully looking before leaping onto the financial merry go round that is Mangement Rights! When approaching the Carmel Body Corporate Committee for comment, this was declined with the information researched limited to their audited financial statements, website (carmelbythesea.net.au) and communications to owners. The table below provides the financial research that supports the case study commented on above. It confirms the average per lot per annum caretaker costs split into the three segments

of MR contracts: No/Low years (Line 1), Standard Module Buildings (Line 2) and Accommodation Module Buildings (Line 3), with examples of a building with good financial performance (Line 4) and conversely poor financial performance (Line 5). These last 2 lines highlight this stark contrast between the low Caretaker costs, higher number of year’s sinking fund reserves and lower levies. Will the market start to seek out buildings that may offer enhanced future value? Keep an eye on those buildings DARING TO BE DIFFERENT by SAYING NO TO CARETAKER EXTENSIONS and REGAINING BUILDING CONTROL BY THEIR BODY CORPORATE.

Table of Research Data

No. Buildings In Data Base Statistics Average

Average Annual No Years Caretaker Sinking Costs Fund P L P A Reserves

1 2 3 4 5 6 7

(C) (D) 830 1,278 1,298 1,144 6.90 1,876 0.94 1,714 4.42 0 5.50

(A) (B) No/Low Years MR Contracts 7 Standard Module Buildings 23 Accommodation Module Buildings 52 Example of a Building with good financial performance Example of a Building with poor financial performance Carmel by the Sea (Previous Caretaker Costs) Carmel by the Sea (Adjusted to New Caretaker)

A free service is provided to financial members of UOAQ to have the ranking of the financial performance of their building and a financial evaluation report provided which is ranked against unidentified

Total Levies PLPA (E)

2,869 5,957 6,694 4,980

benchmarking data of over 100 buildings. Please contact UOAQ to provide this for your building.

“Performance Based” Management Solutions Our Professional Body Corporate Management Service includes:

CTS Management

- Performance Based Management Fees - Maximising Returns on Surplus Funds with Cash Flow Management - Formulating Cost Effective Budgets - Conducting Efficient Meetings - Management of Insurance Quotations & Claims - Extensive Industry Knowledge & Experience - Transparency & Accountability For All Owners

Contact our office for an Obligation Free Proposal 4

UnitNews Summer 2013

Suite 35, Level 6, "Northpoint", 231 North Quay Brisbane Qld 4000 Phone 07 3211 4445 Fax 07 3211 4410 Email info@ctsm.com.au

www.ctsm.com.au Proud Member of:

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Quick News

Information in this fact sheet relates to the Work Health and Safety Act 2011 which applies from 1 January 2012.

Apartment owner occupiers and bodies corporate Units, apartments and townhouses operating under a community title scheme (sometimes also known as ‘strata title’) have a body corporate established to administer the common property of the complex on behalf of the owners of lots within the complex. While most will be owner occupied or leased to tenants, some complexes will vary by: • • •

operating as holiday rental properties having mixed purpose use, for example shops and restaurants on the ground floor of a high rise residential unit block having on-site management to oversee property management and rental.

Does the owner of an individual unit, apartment or townhouse have a duty under the Work Health and Safety Act? An owner or occupier of a unit, apartment or townhouse used for residential purposes does not have duties under the Work Health and Safety Act 2011 (the Act). The only time they would have duties under the Act is if the premises becomes a workplace on a temporary or ongoing basis, for example, when a contractor is engaged to carry out work at the premises. For more information about this situation, refer to the Residential premises fact sheet. Does a community title body corporate have a duty under the Act? Under the Act, a body corporate responsible for any common areas used only for residential purposes is not regarded as a person conducting a business or undertaking (PCBU). However, if the body corporate engages any

worker as an employee, it will be a PCBU and have duties under the Act, to ensure so far as is reasonably practicable: • • •

the health and safety of its workers in the workplace the workplace, the means of entering and exiting the workplace and anything arising from the workplace are without risks to the health and safety of any person the fixtures, fittings and plant are without risks to the health and safety of any person.

In addition, if the body corporate is responsible for common areas used for commercial purposes (for example, shops or restaurants), then it has duties of care under the Act for these areas. Do the body corporate officers have a duty under the Act? Where the body corporate is responsible for common areas used only for residential purposes (and so is not regarded as a PCBU) then officers of the body corporate do not have officer duties under the Act. However, if the body corporate is a PCBU, then the body corporate officers must exercise due diligence to ensure that the body corporate complies with its duties under the Act. For more information on the duty of officers, please refer to the Due diligence fact sheet. Does an on-site manager for a body corporate have a duty under the Act? A body corporate may decide to engage or employ an on-site manager to arrange for

contractors to carry out maintenance and other work on the common property of the residential complex, and/or arrange for short term property rentals. If the body corporate engages an on-site manager as an employee, the body corporate would have the PCBU duty of care under the Act and other applicable duties. In this case, the on-site manager would be a worker for the PCBU and have a worker’s duty of care under the Act. If the body corporate engages an on-site manager to carry out work as a contractor (not as an employee), and the body corporate is responsible for common areas used only for residential purposes, the body corporate would not be a PCBU under the Act. In this case, the on-site manager would have duties of care under the Act, for example, if the on- site manager is selfemployed. Then the manager would have the duty of a PCBU. When a manager lives on-site, the manager may be a resident using their domestic premises to carry out work for the body corporate or there may be a separate office area for managing the complex. For more information Further information on workplace health and safety and the new laws is available at www.worksafe.qld.gov.au or by calling the WHS Infoline on 1300 369 915. For more information on how the Act applies to domestic premises, please refer to the Residential premises fact sheet.

BRISBANE - GOLD COAST - REDCLIFFE Continued from Last Issue Working with owners to create happy, healthy and harmonious communities. enquiries@capitolbca.com.au uoaq.org.au

www.capitolbca.com.au

1300 55 10 19

Summer 2013 UnitNews

5


Feature Story

DON’T DIG YOUR OWN GRAVE IS OWNING A UNIT IN QUEENSLAND KILLING YOU?

6

UnitNews Summer 2013

uoaq.org.au


Feature Story The title to this article was prompted by the oft repeated comment of unit owners: “Owning a unit in Queensland is killing me.” This may be stated as a figurative expression or as a statement of fact. There have been some committee members who have suffered heart attacks from the stress of fights within committee. Or more likely with Resident Unit Managers (RUMs) who want contract extensions, contract renewals or change of management modules to increase their potential contract from 10 years to 25 years. These requests are of course against the best interests of the body corporate, and committee members are bound by their code of conduct to recommend against the requests. Some new unit owners are driven to distraction by holiday rentals when they thought they were buying a residential unit. The use of residential buildings for transient short term accommodation creates both a health and safety risk for occupants of the buildings. Permanent residents in residential buildings used for transient accommodation suffer stress, anxiety and social alienation. This situation is a serious health problem for many unit owners who are unable to escape the environment in the building, and cannot afford to sell and relocate. The first step in buying a unit is of course finding a unit you like, but that is the easy part. Next find what BCA classification the building is, class 2 or class 3. If it is a class 2, it should be a residential building, but check and see how it is being used, or get a written statement from the real estate agent if you are buying off the plan. If it is a class 3 building you know it will be a holiday letting building. Of course that may be what you are looking for if you intend to short term rent. Also check the Development Approval (DA) and local council zoning. There have been some purchasers caught by Council Zoning banning permanent residents. Check the type of title you will get at settlement – for your unit, your parking spaces and common property. If all of that works out and sounds OK, ask what caretaking contract has been sold to the RUM. If it is a 25 year contract – WALK

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AWAY. Otherwise you will be stuck with an annual inflation clause of at least CPI and possibly 5% or greater. This will ratchet your caretaking costs every year for 25 years. You can also bet that the contract will be sold every three years or so, and the body corporate will not have any control over who is appointed as the new caretaker. Then check the Community Strata Plan or Community Titles document. What is your unit’s contribution lot entitlement and does it appear to be fair and equitable compared to the other units? Read and understand the by-laws. Can you keep a pet if you want? The Caretakers contract, see what he is being paid and what annual inflation factor applies. Is the payment reasonable for the duties to be performed under his contract? Then check the body corporate financial state. The Sinking fund provisions and the Administrative fund. If it is an existing building search the body corporate records, look at how many disputes have been lodged and check how much the Body Corporate Manager is being paid and does he have a one or three year contract. What is the unit owner turnover rate – high turnover can indicate an unhappy building or other problems that have not been disclosed. Get an experienced body corporate lawyer to help you. If you are purchasing off the plan or a new building, ask around about the developer and the builder. What was their last project and are the purchasers happy with the product. Is the developer financially secure. Recently there have been some problems with the air space above the building being owned by others thus preventing the building owners ever developing a higher building on the site. Also check the ownership of the land below the lowest basement level. You do not want a train tunnel under your feet. Check the local area flight paths for aircraft arriving or departing the local airport and the potential that they may be changed. All airports are increasing the frequency of aircraft movements and are expanding with new runways. Has the price of the developers last project inflated or deflated – this will give you some idea of value of prices being asked. Now have a building inspection completed – even if it is a new building. • Check the soil the building is being built in. • Check the plumbing standards. • Check the 100 year flood levels. • Is the basement likely to flood? • Are the electrical power rooms high and dry? • Are the other services well designed and disaster proof?

• • •

Are the fire services in compliance with the Building Code Australia and State regulations. Is the building sealed for water leaks – roof membrane of the best quality and flexible paint to the other external surfaces. Does the soundproofing, up down and sideways, comply with BCA and Australian Standards.

How long are the warranty periods for the construction, water proofing, plant and equipment, carpets, painting both internal and external and the elevators. • • • • •

Is the garage venting system running 24/7 or does it have CO2 monitors to turn it on only when needed. Is the basement below the water table requiring pumps to run 24/7 to keep it dry? What is the fail safe system in the event of power failure? Is the bulk water storage on the roof or in the basement? If it is in the basement the body corporate will have to pay to pump the water up to the units. What happens when the electricity supply fails? Does the building run out of water?

Who owns the hot water boilers and storage tanks. You may find it is the energy supply company and the unit owners will have to pay higher energy costs to cover the repayment or rental on the plant. Where is the hot water plant located? If it is on the roof? Pumps will be required to pump all the hot water to the units. Is the building energy efficient. Does it have solar hot water and solar electricity boosting? Is each unit separately metered for • • • • •

electricity gas cold water hot water air conditioning

Of course you will not find a building in Queensland that has all the desirable features listed in this article, but we hope you can find a unit that you like where the building has many of the desirable features. Remember always that when you buy a unit you also buy the building and you must contribute to the running costs. Don’t dig your own grave by buying into a building that has the potential to have excessive repair costs (and maybe a special levy to fix the faults) or excessive running costs that you cannot afford to support with your body corporate levy contribution. Happy unit hunting! We at UOAQ hope this article helps you avoid some of the mistakes that we have made. Remember – do not dig your own grave!

Summer 2013 UnitNews

7


Quick News

The

Forgotten People

• MR contract value determined by open market bidding every three years.

Management Rights (MR) is a contract granted by a developer, and then the Body Corporate (unit owners) to a person or company to perform caretaking and letting agent functions within a Body Corporate and Community Management scheme, for 10 or 25 years subject to the Management Module.

A class 2 building is specified by the Building Code Australia as a residential building. Queensland has allowed these buildings to be used for transient and tourist short term accommodation exposing residents to high fire risk and no access or egress for persons with a disability, contrary to the Disability Discrimination Act 1992 s 23 and Premises Standard.

MR contracts are the largest cost factor and cause of dispute in any BCCM scheme when Caretaker /Letting Agents do not perform to the terms of their contract or try to extend their contract by ‘top - up’ and ‘contract extensions’. This top – up creates a perpetual contract that can be sold for 5 to 5.5 times annual earnings. This expense – often millions of dollars – adds to the cost of unit ownership, and tourist accommodation. The UOAQ policy on all new MR contracts is: • MR contracts must be limited to three (3) years. • MR contract ‘top – ups’ must be prohibited. • MR contract extensions must be prohibited. • MR conversions Standard to Accommodation Module must be prohibited.

These five steps will practically eliminate caretaker/letting agent disputes with bodies corporate avoiding expensive litigation. The 5 to 5.5 times goodwill factor will be eliminated, reducing ownership and tourist accommodation costs. The tender market will determine MR contract value every three years. Class 2 Building Use.

The owners of a building are responsible for ensuring the correct facilities are provided to and within a building. Compliance with legislation is the building owner’s responsibility, but the owner’s compliance authority is removed by BCCM Act 1997 s 180 (3) ‘Limitations for By-laws’ stating: “If a lot may lawfully be used for residential purposes, the by-laws cannot restrict the type of residential use.” This legislation is offensive to the Commonwealth Disability Discrimination Act 1992 exposing unit owners to prosecution. ($25,000.00 fine C v A [2005] QADT 14). The UOAQ policy is that BCCM Act 1997 s 180 (3) must be repealed, and Class 2 buildings shall be used for long term residential purposes only, to protect the safety, health and wellbeing of unit residents, and remove unit owners from potential prosecution. The UOAQ has presented a plan for orderly transition to correct building use. 1. Sir Robert Menzies, 22 May 1942 Jann Stuckey MP Ray Stevens MP John-Paul Langbroek MP Ros Bates MP

Rob Molhoek MP Michael Hart MP Verity Barton MP Jon Krause MP

Mark Boothman MP Michael Crandon MP Alex Douglas MP

ACTION BY ELECTED MEMBERS OF QLD PARLIAMENT

Management Rights | Levy Collection | Dispute Resolution Community Management Statements | Review of By-laws Establishment of Schemes | Construction Defects Lot Entitlement Disputes | Exclusive Use Conveyancing

BODY CORPORATE MATTERS? ENGAGE THE BODY CORPORATE LAWYERS

T: 07 3393 0433

F: 07 3393 0533

mail@herdlaw.com.au www.herdlaw.com.au

8

UnitNews Summer 2013

The Unit Owners Association of Queensland (UOAQ) has been requesting Government for twelve years (Sir Robert’s “Forgotten People”) for equitable legislation for unit owners. The opportunity to put the legislation ‘right’ for the benefit of unit owners and the Queensland tourist accommodation industry is currently before the Attorney General for presentation to Parliament. Every elected member of the Queensland Parliament is urged to acquaint themselves with the issues being considered in the current MR review . The full UOAQ submission to the MR review is available on the UOAQ web site at www.uoaq.org.au The matters contained in the MR review, and body corporate matters generally, are of immediate importance to those members representing high density unit living populations. The existing situation of inflated MR contract prices, where unit owners receive 1 to 2 percent return on investment and caretaker/letting agents and booking agents receive 40 percent is unsustainable. The time to establish a viable economic framework is now. Queensland is the only Australian state to embrace this MR contract regime, that is currently destroying the unit investment industry and tourism accommodation in Queensland.

uoaq.org.au


Article from: Information Services Officer, Advisory Services. Office of Fair and Safe Work Queensland Department of Justice and Attorney-General

Quick News

Worksafe infoline WPH&S “A caretaker, acting on legal advice, has been trying to impose the cost of OH&S costs such as an OH&S plan, traffic management plan, staff training etc onto our BC. Follow-up to Worksafe from a member resulted in the following: An initial call to the Worksafe infoline provided quite a comprehensive response. But on receiving a contradictory view from the caretaker’s legal representatives, I requested a written response via the online WHS Enquiry form. It was a more condensed response, but comparable to the verbal response. The basic proposition put forward that evoked the response was as follows: • I am an owner within a Body Corporate that has no employees. • Under the terms of the BCCM Act, a Body Corporate cannot trade. • Both the Letting Agreement and the Caretaking Agreement envisage a management rights owner that conducts a business. • Under the Caretaking Agreement, the caretaker is responsible for managing the common property. • The Caretaking Agreement does not impose OH&S compliance responsibility on the Body Corporate. • The Body Corporate has never granted rights for any party to use the common property for business purposes. • The Caretaking Agreement provides for the Body Corporate to meet the cost of any specialist services for work to the common property. Does the Body Corporate have any responsibilities under the Work Health & Safety Act, or is it excluded under section 7 of the Work, Health & Safety Act? In the interests of all Qld body corporate owners, I have appended the emailed response from Worksafe. This addresses arguments put forward by lawyers that OH&S is a BC cost. In our situation, we accept that we are contractually bound to bear the cost of work to the common property associated with OH&S standards.” Worksafe Response - 14/3/2012 Thank you for your email regarding the duties of residential strata title bodies corporate under the Work Health and Safety Regulation

Everything Covered? For Professional, Friendly assistance and quotes call

Sinking Fund Forecast Insurance Valuation Builders Warranty Condition Assessments Safety Risk Reports Asbestos Reports Fire Safety Reports And much more

1300 880 466 inspections@qbma.com.au www.qbm.com.au

2011. Certain strata title bodies corporate are excluded from being regarded as a person conducting a business or undertaking (PCBU) under the WHS Act 2011. The exclusion is provided in section 7 of the Work Health and Safety Regulation 2011 (WHS Regulation 2011) as follows; 7 Meaning of person conducting a business or undertaking—persons excluded (1) (2) (3)

For section 5(6) of the Act, a strata title body corporate that is responsible for any common areas used only for residential purposes may be taken not to be a person conducting a business or undertaking in relation to those premises. Subsection (1) does not apply if the strata title body corporate engages any worker as an employee. In this section— strata title body corporate means a body corporate as defined under the Body Corporate and Community Management Act 1997, schedule 6.

The wording of section 7(1) of the WHS Regulation 2011 requires consideration of whether the common areas under the control of the body corporate are used ‘only for residential purposes’. Under this test, it is immaterial how private lots in the complex are being used. The application of the exclusion under section 7(1) of the WHS Regulation 2011, it is irrelevant if: • •

a lot in a strata title residential complex is rented out to a tenant (whether for short term rental or otherwise) rather than being occupied by an owner-occupier; or a lot in a strata title residential complex is used as a home office by the occupant.

In addition, the exclusion for the strata title body corporate under section 7(1) of the WHS Regulation 2011 would still apply if a person is engaged under a contract for service to carry out maintenance, service or repair work at or on the common property for the complex from time to time. In these circumstances, the contractor coming to the complex to carry out the work will have a duty of care under the WHS Act 2011. These activities on their own do not mean that a strata title complex comprised entirely of residential lots is anything other then residential for the purposes of section 7(1) of the WHS Regulation 2011. The alternative view in which legal obligations fluctuate depending upon activities at the strata title complex at a particular point in time would be impractical, difficult to apply consistently and would not be reasonably intended by the legislation.

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Summer 2013 UnitNews

9


Quick News

Building Certification Review Building Certification Review_ Improving building certification in Queensland The Improving building certification in Queensland discussion paper was available for comment until 30 August 2011. The Queensland Government asked for feedback on ways to improve the building certification system in Queensland. The discussion paper outlined a range of measures proposed to improve the efficiency, transparency and reliability of the building certification system. These measures were aimed at:

• • • • •

Making sure Queensland’s buildings are compliant while still being affordable Supporting and strengthening the building certifier’s role Improving building certifiers’ ability to perform their important role within the building system Ensuring that the building regulatory system is effective in deterring conduct that constitutes a conflict of interest or may not be in the public interest improving the enforcement of building regulations.

The paper also canvassed options for improving the disciplinary arrangements for private certifiers and involving key stakeholders in the building certification system. Have your say The Improving building certification in Queensland discussion paper closed for public consultation on 30 August 2011.

Background Building certification involves independently checking and approving building work to ensure it complies with the safety, health, amenity and sustainability standards specified in legislation and building codes. The Queensland Government through Growth Management Queensland is reviewing and improving Queensland’s building certification system to address industry and community concerns. The review will help Queensland’s building certification system efficiently respond to the changes that have occurred in the building industry over the past 10 years, where increasingly complex buildings have been approved against a background of sophisticated codes, planning schemes and pre-building requirements. Please write to your state government elected representative and ask the question what has happened to this review?

Guidelines for inspection of class 2 to 9 buildings The Department of Housing and Public Works has released Guidelines for inspection of class 2 to 9 buildings (2.9 MB). The guidelines provide building certifiers with guidance on how to meet their responsibilities for sufficient inspections under the Building Act 1975 (BA) and the Building Regulation 2006 (BR). A building certifier is responsible for managing the building approval and inspection process with all relevant practitioners. This important role helps to ensure that all aspects of the building work comply with the building assessment provisions of the BA. Building certifiers are required to undertake 10

UnitNews Summer 2013

sufficient inspections of buildings at stages at which the building development approval states the work must be inspected. In practice, this means that a building certifier is required to take a holistic view of a building rather than just consider a single aspect, such as structural adequacy. The BR currently requires mandatory inspections for more simple buildings and structures such as houses (class 1a buildings) and sheds and garages (class 10 buildings and structures). Guidelines are available for these classes of buildings to assist building certifiers to undertake inspections. The BR does not currently provide a similar inspection schedule for class 2 to 9 buildings (which include multi-storey residential buildings, office buildings, shops, public halls and commercial and industrial buildings). These guidelines apply a riskbased approach to the inspection of class 2 to 9 buildings. The guidelines aim to provide practical and effective methods for building

certifiers to meet their statutory duties and obligations. A risk matrix, with examples of suggested application to particular buildings, forms part of the guidelines and complements the risk-based approach to inspections. The guidelines have been developed after extensive consultation with industry stakeholders such as the Australian Institute of Building Surveyors, Housing Industry Association, Master Builders Association - Queensland, Queensland Fire and Rescue Service, Society of Fire Safety - Engineers Australia, The Queensland Building Services Authority and the Local Government Association of Queensland. The guidelines, made under section 258 of the Building Act 1975, take effect from 1 August 2012. They will be an important aid for industry for the certification of class 2 to 9 buildings. Contact the department: For more information, please contact Building Codes Queensland on 07 3239 6369 or free call 1800 534 972.

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Building access standards for people with a disability Changes to the Commonwealth Disability Discrimination Act 1992 (DDA), mean that certifiers and people who are responsible for the design, construction and management of a building must comply with the Disability (Access to Premises - Building) Standards 2010. These standards have been incorporated into the Building Code of Australia 2011 and came into effect on 1 May 2011. The standards apply to building covered by the Building Code of Australia and: • Contain provisions for non-discriminatory access to public buildings for people with a disability • Provide a nationally consistent set of provisions that detail what must be done to provide for non-discriminatory access to buildings for people with disability. Access Panels The Commonwealth Government has recommended that state governments establish specialist bodies - known as access panels that can help building certifiers apply the Premises Standards. These can be used where the applicant wishes to use the unjustifiable hardship provisions or an alternative building solution.Download the statutory guideline ( 179 KB) on using the DDA hardship provisions or alternative solutions with advice from access panels.

Hartley’s Body Corporate Management ‘Looking after all your Body Corporate Needs’

If you need specific advice or assistance on developing an alternative solution under the BCA relevant to access for people with a disability or you would like advice on whether there may be valid grounds for unjustifiable hardship, the following people have advised that they have expertise in access requirements and are available to provide advice. They have agreed to abide by a code of conduct developed by the department and have agreed for their names and contact details to be published. • Bruce Shephard Ph 07 4721 4750 or 0422 207 434 • Mark Anderson Ph 07 3553 3364 • Martin Clark Ph 0400 232 468 • Michael Ryan Ph 07 3356 2486 or 0412 173 378. An access panel may consist of one or more members each with specific expertise in a particular area. The number of panel members to hear a matter and their particular expertise will depend on the matter being addressed. Any access panel established in Queensland is not a statutory panel established under law. Members of a panel are private individuals who are entitled to charge commercial rates for any advice they provide.

■ Financial Management ■ Agendas & Meetings ■ Administration of your Scheme ■ Maintenance ■ Dispute Resolution ■ Compliance

The decisions and recommendations of an access panel regarding unjustifiable hardship and alternative solutions are advisory only under the DDA. While access panels cannot provide certainty that compliance with the DDA has been achieved, the process has been developed to assist certifiers and owners with compliance matters and to assist in responding to complaints. Note that complaints of discrimination may arise under the DDA even where the recommendations of an access panel are followed.

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Written by: Faizal Kamarudin, PhD Student, Law and Justice Research Centre, QUT.

Beyond dispute resolution: Preserving neighbour relations and optimising community Well-being Rapid urbanisation, increases in population and limited land for development are among the factors that are changing neighbourhood patterns around the world today. Due to socioeconomic factors, low density traditional homes with spacious backyards have now been replaced with high density multistorey residential buildings. The dynamic growth of this new type of neighbourhood has developed a new dimension in social aspects of society as well. Unlike the traditional neighbourhood where houses are separated with clear physical boundaries such as fences and foot paths, people living in community titles neighbourhoods are surrounded by others living above and below and on the sides, within the same building. Close proximity living in community titles neighbourhood requires residents to encounter, engage, adjust and accommodate themselves to the presence, habits and practices of their neighbours and coresidents. In order to regulate the conduct and behaviour of strata residents, statutory by-laws are created. A key problem arising in this context, relates to the fact that proprietors in the strata neighbourhood are living in a highly regulated environment. Differences can arise, for example out of minor misunderstandings on usage of public facilities, breaches of the by-laws or due to certain behaviours that disturb the quiet and peaceful enjoyment of other neighbours. For the community titles system to be successful, it requires empowered and actively engaged community members practising mutual trust, mutual respect, shared values, shared responsibilities and liabilities, emotional equity and reciprocity. A strong community must also have the ability to resolve issues effectively and amicably, honour its members generously, create investment opportunities in the community and organise activities that strengthen the spiritual bond among members of the community. Neighbourhood disputes have been identified as a threat to peaceful and harmonious community titles schemes. Community titles neighbourhood disputes can be described as mundane in nature because such conflict may involve neighbour quarrels over petty matters. Disputes in community titles schemes are often based on emotional issues such as pets, odours, noise, use of common facilities and human relations. Emotional issues often impinge on the argument about individual rights and the community rights. For example, individual rights to have pets need to be balanced with the rights of other members to fully enjoy their dwellings peacefully without the presence of pets. Similarly, someone who wants to enjoy listening to their favourite music in private should ensure that the sound of the music does not become a nuisance to other neighbours. One’s own favourite music may not be that of others. Prolonged and unresolved neighbourhood disputes may destruct the sense of community and threaten neighbour relations. While a successful community titles neighbourhood needs members with a sense of community, disputes can have negative effects on many aspects of that sense of community such as the sense of belonging and identification, mutual trust, camaraderie, civility, mutual respect and unity. These different aspects of the sense of community can be considered as the key determinant of community titles neighbourhood functioning and presumably success. In Queensland for example, community titles disputes are governed by the Office of the Commissioner `Management Act 1997 (Qld) (BCCMA). BCCMA has introduced various dispute resolution approaches such as conciliation, mediation and 12

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adjudication, and the Office of the Commissioner for Body Corporate and Community Management reported that 75% of the conciliation process ended up with agreement while 89% of conciliation process did not proceed to adjudication. These figures according to the Office of the Commissioner evidenced the success of conciliation as a preferred solution for community titles disputes in Queensland. While faster, cheaper and simpler processes are commonly linked to efficiency, effective resolution connotes something that is broader than “settlement of disputes.” The quality of the outcome, its sustainability and its relevance in supporting and promoting the basic principles of good neighbourhood and self management in the community titles scheme are also important. Dispute resolution processes in community titles’ schemes in Queensland should further move towards processes directed at preserving and repairing neighbour relations that are being damaged by disputes. These processes should improve communication among the community titles community, promote a sense of community and encourage positive relations and attitudes among neighbours. It is submitted that dispute resolution processes in the community titles’ schemes in Queensland, and other jurisdictions in Australia should embrace dispute resolution approaches that not only achieve efficiency and effectiveness, but most importantly, considers the stressful nature of community titles disputes, and places primary emphasis on the mental health and well-being of the disputing parties. The outcome should also be to preserve neighbour relations and optimise communities’ well-being.

1300 554 165 | info@insuranceguys.com.au

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Quick News The foundation stone therefore is that By Laws must be reasonable (given each unique set of circumstances) & associated conditions within a by law or imposed by a Committee if any, must have a rationality or underpinning justification in a way that requiring pets to be under 10KG does not. So it might be for example, a very large dog of a certain placid breed, may be acceptable if its owner was on the ground floor & it never was taken within the common areas of the interior of the building. Regrettably, owners with self interest in mind, will sometimes (usually?) have the greatest of difficulties in understanding the pedantic legalese subtleties that the adjudicators use to determine “reasonableness on its merits”!

Judge in Pet Justice There have been several adjudications about pets & despite some buildings banning pets, recent adjudications establish precedent as to an entitlement to keep a pet on the grounds that it is a normal domestic activity & so a Body Corporate has no power to abolish such activities. The adjudication (attached) makes invalid some conditions of pet approval that many buildings have - for example a pet must not be more than 10KG. The argument is the condition is arbitrary & without any underlying justification & possibly not able to be practically enforced. There is also the continuing catch cry that every case must be considered on its merits.

There are some fine points in this argument/adjudication, but the absence or invalidity of “arbitrary” criteria means there is likely to be a lack of clarity in By Laws & in fact add to disputation because what is reasonable often covers quite a range of grey & especially when such decisions are made by a layperson Committees of variable insights, skills & knowledge. The adjudicator seems to recognise this problem when he comments. “I have some sympathy for the body corporate because the more it tries to regulate by defining parameters, the more likely it is to fall into the error of creating by-laws which will be held to be unreasonable.” It follows therefore that a legitimate set of By-Laws will now be a set of vague motherhood statements & increasingly one can only find out what is reasonable on its merits by asking an Adjudicator! Post Script; Is it then reasonable that residents vote unconditionally to extend management rights without testing the market or considering alternative possibilities? Can these decisions be ruled as invalid because the action is unreasonable and quite obviously arbitrary? ;-)

Leary & Partners OAM DUniv

Caretaker Duties Valuations and Tenders Are you a member of a body corporate and concerned about the level of remunera-tion paid to your resident unit manager? • Exclusive body corporate law practice

Does your body corporate wish to call tenders for the caretaker duties? Our company has prepared numerous valuations of Caretaker Duties for buildings from Port Douglas to Coolangatta. We have experience with large hotel style com-plexes of three hundred units right down to small boutique developments of less than fifty units for both valuations and a calling of tenders.

For a fixed fee quotation or to discuss these specialist valuation services call us on 1800 808 991 or email enquiries@leary.com.au

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• Over 30 years experience • Former first tier law firm partner • Quality leagal services at a reasonable price

Fellow of the Australian College of Community Association Lawyers

07 3218 7378 P 0418 190 658 M gary@mystrata.com E

Level 7, 127 Creek Street, Brisbane Q 4000 garybugden.com

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Feature Quick News Story

With thanks to Mr Tony Drake

Unit Owners Association of Queensland Incorporated Policy: Rates for Apartments in Queensland Preamble The Unit Owners Association of Queensland calls on all Queensland Councils to remove differential rating including the height (view) taxes on the Gold and Sunshine Coasts and the Brisbane City Council parity factor. The Association urges Councils and Lord Mayoral candidates to adopt the following policy on rates for apartments.

Additonal Supporting Information Existing Charging for Residential Property Owners Property charges are now levied via two processes

Policy

• •

All rating initiatives that promote differential rating which penalises apartments such as height taxes and parity factor are to be repealed as these are inequitable.

Since the water and sewage services are consumed by all residents irrespective of dwelling type then these should remain unchanged.

Rates for apartments are to be set at a level below the rates for single dwelling blocks using the following factors:

Council rates should be changed to align with the proposed policy to recognize the following two key issues discussed in more detail below:

• •

Multi story complexes higher than 3 stories which require lifts: 70% of rates for single dwelling blocks Apartment complexes of up to 3 stories without lifts: 80% of rates for single dwelling blocks

Rationale There are two compelling reasons to provide reduced rates for apartments when compared with single dwelling residential blocks: • •

To provide an incentive to reduce the sprawl of cities and the consequent demand for and expense of extension of city infrastructure and services. To provide an offset for the costs incurred by apartment owners in running their body corporate organisations which are a required part of the amalgamation of multiple rate payers on blocks which would otherwise be used for single or low numbers of residences.

The detailed rationale to support these reasons is provided in the Attachment. Implementation Recognising that these changes have the potential to impact the city budget it is proposed that they be phased in over successive future rate rises. The phasing process would be to quarantine rate increases from apartments from all future increases until the targeted reduction margins are achieved and thereafter use the factors listed in the policy in setting rates. Wayne Stevens President

Council rates levied by the Brisbane City Council for city services and administration. Water and Sewage charges separately levied by Urban Utilities for water supply and sewage services.

• Containing City Sprawl • Recognition of Additional Costs Incurred by Apartment Owners Containing City Sprawl A key issue confronting our urban communities is the increase of city sprawl which generates very significant pressure on council budgets to provide additional infrastructure and extension to council services. This issue is clearly and explicitly recognised in (for example) the Brisbane City Council planning processes and city planning. New City Plan The BCC website indicates that the city plan is currently under review and advises: Developing the new City Plan The review of City Plan is required by the Sustainable Planning Act 2009 (SPA). The new City Plan will better address future challenges such as: • managing our increasing population • encouraging economic growth • the need for more sustainable living (such as minimising vehicle trips and improving access to facilities) • provision of housing choices to improve affordability • planning for resilience to natural hazards such as flooding It will state how and where development can occur and will include planning for the infrastructure necessary to support it. Find out about the different stages in the new City Plan preparation process. Formal advertising of the new City Plan for public comment is expected to take place in 2012. Existing City Plan Throughout the Brisbane City Plan 2000, accessed from the BCC website, there is recurring reference to improving environmental outcomes through increasing residential density and making better

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Feature Quick News Story use of existing infrastructure. For example in Chapter 2 ‘ The Strategic Plan’ at point “3.3 Land use and built environment” reference is made to:

“(b) efficiency – more compact, self contained, smart, networked communities that use and reuse land and other resources more efficiently and restrict urban sprawl.”

This specific element seeks to “Support the preferred pattern of urban settlement established by the Regional Framework for Growth Management for South East Queensland 1998.” The italicised sections above are direct quotes from the plan and are examples of the many, many sections of the plan where reference is made to increasing population density to better utilise infrastructure, avoid urban sprawl, reduce transport cost and time as well as ensure that the farming land adjacent to our city is not gobbled up by more urban sprawl. Coincidently these are all also factors that reduce the councils administration and service provision costs. Thus encouraging urban densification through apartment development reduces councils costs. Recognition of Additional Costs Incurred by Apartment Owners The rate base on a multi dwelling apartment site can be between 6 and 50 times the

rate base that would exist if these site were typical suburban single dwelling developments. However, there are significant additional costs that occupiers of units and apartments face as a result of the aggregation a large rate base on a site which could normally only support a few rate payers. To clarify this point, the Body Corporate Fees for a typical apartment are in the range $3000 to $7000 per annum per apartment - although much more expensive for some apartments. A significant proportion of these costs is associated with the amalgamation of multiple rate payers on this site and includes: • Administration associated with managing the body corporate (which in effect is the equivalent of another small unit of government below the level of Councils). • Cost of services to common areas including: lighting, ventilation and cleaning • Cost for other standard services necessary to facilitate multiple dwellings on the site including: • electricity and maintenance costs of lifts for high rise properties, • extending council mains and pumping for water supply to service all lots in multi story buildings, • fire system maintenance and

legislative compliance costs. These are costs that apartment owners bear that are not borne by suburban rate payers and are a direct result of having multiple dwellings on the one site. If we were to attribute one third of the average Body Corporate costs to these costs then on average apartment owners are incurring an expense of $1,666 per annum to organise to live on a site that generates a very significant additional rate base at only marginal additional cost for the council - noting that the key essential services of water supply and sewage are now separately billed. It is acknowledged a higher proportion of Body Corporate Fees could be reasonably attributed to the maintenance of the common areas and building structure – which is a cost faced by all property owners. No redress is sought for that part of Body Corporate costs. Past Practice Before rate changes in many councils in the mid 2000s, there was a previous recognition by councils of the extra costs to apartment owners. This recognition was reflected in rating systems which charged apartment owners at rates less the standard suburban rates. Thus the change proposed in this policy would in effect reinstate this previous recognition of additional costs faced by apartment owners.

CONSUMER PROTECTION FOR UNIT OWNERS Your Details. Join Today Title

Membership Details I enclose

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Name Phone

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help@uoaq.org.au (07) 3220 0959 Level 6 / 333 Adelaide Street Brisbane Q 4000 GPO Box 2359 Brisbane Q 4000

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Written by: M.Teys

Written by: David Leary FAIQS AFAIM

Supreme Court Ruling Rum Contracts and Leaves Some Unit the Tender Process Owners Without Rights On Friday 29 June 2012, the NSW Supreme Court ruled in the Star of the Sea case that developers and builders have no common law duty of care to unit owners for defective workmanship where statutory home owner warranties apply. There are very strict, and comparatively tight time frames in which owners’ corporations and bodies corporate must commence statutory warranty claims. In some states and territories this is as short as six months from the date of practical completion. As the case concerns common law rights, it applies in all states and territories with home owner warranty schemes. Strata managers and executive committees should take the following action immediately: 1. 2. 3. 4. 5.

Determine if your building defects are structural or non-structural; Determine if your building defects are caused by defective design or defective workmanship; Determine your scheme’s date of practical completion and when the defects were first noticed or noticeable; Determine if a proper home owner warranty claim has been made; Determine if a proper home owner warranty claim has been made within the time limits set by state and territory legislation.

Only a lawyer with expertise in strata titled building defect matters can answer these questions. This is outside of the expertise of both strata managers and building experts. Strata managers and executive committees who do not take legal advice on these matters may be personally liable for negligence. This is very serious and requires your immediate attention.

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If the caretaking and letting contracts for your complex are nearing the end of their term, it is a good time to consider your options before automatically extending the existing arrangements. Our company has arranged for the calling of tenders for a number of schemes of varying size and complexity in recent months. This has allowed the bodies corporate in each scheme to gain maximum benefit from arms length market competition. In three schemes (two in Brisbane and one in Sydney) the caretaking contracts were tendered. Two had existing caretaking contracts in place, and the offers received from competing tenderers were substantially less than the price paid under the previous contracts. We are currently involved in a third scheme on the Gold Coast where the contract has lapsed. The evidence (based on temporary fill-in contractors) is that the savings will be in line with the aforementioned schemes – that is around 35% - 40% less than is currently paid. In each case, when asked for their preferred contract term, the committee members opted for three years. This effectively means that the contracts are non-saleable contracts for service. Bodies corporate are often surprised to learn that there are contractors interested in these types of contracts. Our experience is that there is no shortage of reputable caretaking contractors wanting to tender. If your scheme has parallel letting and caretaking contracts in place, and you wish to continue with this arrangement, it may be possible to receive tenders that provide even greater savings for the body corporate. This can occur due to the reduction of costs that accrue from not having to finance the purchase of the letting and caretaking contracts, as is the case in a standard commercial transfer. In a competitive arms length tender, these savings will be represented as lower costs to the unit owners in both the letting and caretaking contract charges. When is it appropriate for your body corporate to take advantage of its option to tender the caretaking contract , you will need to check your agreement, and if necessary, seek independent legal advice. Most of all, flag the contract renewal date. Automatically extending the existing contract is seldom a good idea. Reputable caretakers will always be happy to submit a tender for the ongoing provision of caretaking services. The difference is that in a free market competition, the body corporate stands to benefit by testing the true value of the services being provided. It is our experience that many small schemes that were set up by developers to have a resident unit manager, do not need one. These include schemes where the majority of owners do not want the inconvenience of short-term tenants and/or schemes that have such a small number of duties, outside contractors can service their needs adequately. Once again, calling tenders for the provision of these individual services will have the effect of ensuring value for money is received by the body corporate.

David Leary FAIQS AFAIM Leary and Partners

16

UnitNews Summer 2013

E david@leary.com.au P 07 3858 8222

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Written by: Gary Bugden*

Smoking in Home Units A recent overseas court decision and an even more recent New South Wales survey have highlighted an increasing concern about the effects of smoking in home unit buildings. An on-line survey undertaken recently on behalf of the NSW Government sought to identify the issues that most concern people who live in strata and community title complexes. Surprisingly, the issue of smoking in home units generated more comments than any other single topic in the survey. The report to Government stated that the “overwhelming majority of correspondents strongly objected to being subjected to second hand smoke in strata buildings and demanded that smoking be banned from communal areas and open air balconies”. The Government is understood to be considering such a ban, although no commitment has been made in this regard. During the course of that survey being undertaken, a battle was raging in British Columbia and Canada, before the Human Rights Tribunal. The applicants, who lived in a 39 unit complex, experienced second-hand smoke entering their unit as a result of other residents smoking tobacco and marijuana on the patios and decks below. They alleged that the condominium

corporation failed to accommodate their complaints adequately or appropriately because they refused to enforce existing by-laws or make a new non-smoking by-law. The Tribunal found that the applicants were physically and psychologically vulnerable and that they were treated by the condominium corporation and its managers with “what can best be termed a patronizing or benign neglect for a period of almost three years”. The condominium corporation was held liable and ordered to pay damages. Although this case was based on the human rights of the applicants, North American commentators agreed that there was potential for the condominium corporation to be held liable to the applicants on the grounds of “negligence”, because it failed to act to protect the unit owners. The legal system in British Columbia is based on English common law, as is the Australian system, and Australian Courts often consider Canadian decisions, particularly on questions of negligence. Both of these recent events are timely reminders for bodies corporate to consider the health and wellbeing of unit residents when

it comes to the effects of tobacco smoking (and marijuana smoking, if that fits your building) on common property and unit balconies. There is nothing in the standard (Schedule 4) Queensland by-laws that enables a body corporate to address the problems of cigarette smoking. Even by-law 6 which regulates behaviour likely to interfere with the peaceful enjoyment of a unit or common property is of no use – because it only applies to the behaviour of “invitees” and does not apply to the behaviour of owners or occupiers. Section 167 of the BCCM Act prohibits the use of a large amount of common property in a way that causes a nuisance or hazard, and it could be argued that smoking may in some circumstances fall within that prohibition. However, it would be preferable for the body corporate to make a new by-law to deal specifically with the issue. Because by-laws can regulate the use and enjoyment of both common property and units there would be no problem with the introduction of a by-law that regulated or prohibited smoking on common property and on balconies or patios of units. There are various options as to the extent of restrictions that may be applied by such a by-law.

* Gary Bugden OAM DUniv is an author and Brisbane lawyer who practices exclusively in body corporate law. E gary@mystrata.com W www.garybugden.com

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Feature Story

Two-lot schemes regulation 2011 The Body Corporate and Community Management (Specified Two-lot Schemes Module) Regulation 2011 (the Two-lot Module) commences on 28 February 2012. This fact sheet provides information on the application of the Two-lot Module. However, it is not a comprehensive guide. Please consult the legislation for in-depth information about the regulations.

• All co-owners of a lot have entered into the lot owner agreement, provided it complies with the provisions of TLM, s5(3). (TLM, s5) Owner’s representative The owner of a lot may be represented by an authorised person. A person is a representative if:

Simplifying two-lot management

• •

The objective of the module is to make the day-to-day management of two-lot community titles schemes less complex for owners.

The person representing the owner must give the owner of the other lot:

Applying the Two-lot Module

• •

References below are indicated as (TLM, s(number of section)) for the Two-lot Module and as (BCCM Act, s(number of section)) for the Body Corporate and Community Management Act 1997.

The Two-lot Module applies: • if there are only two lots in the scheme • if the community management statement (CMS) for the scheme identifies that the Two-lot Module applies • to a community title scheme (CTS) if the lots are residential lots. The Two-lot Module will not apply: • if there is a letting agent for the scheme • if the scheme is part of a layered arrangement of community titles schemes. Note: • The body corporate for a scheme under the Two- lot Module is comprised of the owners of the two lots. • A residential lot is a lot that is used for residential purposes including short or long term leases for residential accommodation. Exceptions Provided the scheme meets the above provisions, the Two- lot Module may still apply even if the lots are not residential. For the Two-lot Module to apply, one of the following conditions must be met: • •

the lots were intended to be residential but are not, and the first CMS specified the Two-lot Module as the applicable module; or the lots in the scheme were, but no longer are, residential lots. When they stopped being residential lots, the CMS indicated that the Two-lot Module applied, and each subsequent CMS indicated that the Two-lot Module applied. (BCCM Act, s111C)

Lot owner agreements Unlike other regulation modules where decisions are made either at committee or general meetings, a Two-lot Module body corporate make decisions by lot owner agreements. • • •

Lot owner agreements must be in writing, contain evidence of agreement date and detail agreed matters. The owners of the lots in the scheme must sign a written agreement. If the agreement is an electronic communication, there must be evidence of approval or consent of the owners. An electronic communication must be consistent with the Electronic Transactions (Queensland) Act 2001. 18

UnitNews Summer 2013

the person is a guardian, trustee, receiver or other representative authorised to act on the owner’s behalf; or the person is acting under a power of attorney given by the lot owner and is not the original owner, except if acting under a power of attorney given under sections 211 and 219 of the BCCM Act.

a copy of the instrument that authorises the representative capacity; or satisfies the other owner of the person’s representative capacity, and their residential or business address, in writing. (TLM, s7)

Note: • A person representing the owner of a lot has the functions and powers of the owner, and may do anything the owner may do, or is required to do, under the Act in relation to relevant body corporate matters. • A relevant body corporate matter means a matter related to the carrying out of the functions given to the body corporate under the Act or the CMS. A person representing an owner of a lot has authority to act under the instrument by which the person is authorised to act as representative. (TLM, s9) Engagement of a body corporate manager or service contractor The body corporate may, by a lot owner agreement, engage, or amend the engagement of a person as a body corporate manager or a service contractor. An engagement must: • • • • •

be in writing state when the term begins and ends state the term of any right or option of extension or renewal of the engagement state the functions the body corporate manager or service contractor is required to carry out; and state the basis for calculating payment for the services.

Note: • The term of engagement of a body corporate manager or a service contractor must not be more than one year. • The body corporate may, by a lot owner agreement, terminate a person as a body corporate manager or a service contractor. (TLM, ss11 - 18) Agreed body corporate expense An agreed body corporate expense is an item of expenditure that the body corporate has decided to incur, by a lot owner agreement. Certain expenses will automatically be agreed body corporate expenses, such as:

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• • • •

an item of expenditure that the body corporate is required to incur under the Act, or the regulation a statutory order or notice given to the body corporate an order of an adjudicator judgements or orders of a court or an order of the Queensland Civil and Administrative Tribunal (QCAT). (TLM, s23)

Contributions • Each owner of a lot is liable to pay a contribution for an agreed body corporate expense. The contributions must be proportionate to the contribution schedule lot entitlement of the lot, except if the contributions are for insurance or any other matter. In that case, under the Act or the regulation, the liability attaching to each lot is calculated differently to the lot’s contribution schedule lot entitlement. • Contributions for insurance are generally based on the interest schedule lot entitlements; however, there are some exceptions noted under the ‘Insurance’ section below. • Contributions must be paid on or before the date fixed by a lot owner agreement, a statutory order, an adjudicator’s order, or a judgment/order of a court or QCAT. • If no date has been fixed, the contribution must be paid on or before the date stated in the contribution notice for an agreed body corporate expense. (TLM, ss24 and 25) The notice of contribution •

If the body corporate or a lot owner receives a notice of an agreed body corporate expense (see above), the lot owner may give the other lot owner a contribution notice. The contribution notice must state the total amount of the expense payable by the body corporate and the proportion of the total amount to be paid by

• •

each lot owner. Additionally, the contribution notice must state the date on which payment is due. The date must be no later than the date stated in the notice of the agreed body corporate expense. However, if the notice does not state a date for payment, the date should be at least 30 days from the day the other lot owner receives the notice. If an owner of a lot gives a contribution notice, it must be given as soon as practically possible, after the notice of an agreed body corporate expense is received. (TLM, s26)

Payment and recovery of contributions and associated amounts Section 27 of the Two-lot Module introduces two new terms − the defaulting owner and the contributing owner: • A lot owner is a defaulting owner if they do not pay a contribution by the due payment date. • A lot owner is a contributing owner if they do pay a contribution by the due payment date. • A contributing owner may pay a contribution on behalf of the defaulting owner. • The contributing owner may recover the amount from the defaulting owner, as a debt. This includes any penalty and any reasonable costs incurred by the contributing owner. • If the contributing owner does not pay the defaulting owner’s contribution, the body corporate may recover the amount, including any penalty and any reasonable costs incurred by the body corporate as a debt. The contributing owner may start proceedings on behalf of the body corporate to recover the contribution and other prescribed amounts. (TLM, s27)

“Performance Based” Management Solutions Our Professional Body Corporate Management Service includes:

CTS Management

- Performance Based Management Fees - Maximising Returns on Surplus Funds with Cash Flow Management - Formulating Cost Effective Budgets - Conducting Efficient Meetings - Management of Insurance Quotations & Claims - Extensive Industry Knowledge & Experience - Transparency & Accountability For All Owners

Contact our office for an Obligation Free Proposal uoaq.org.au

Suite 35, Level 6, "Northpoint", 231 North Quay Brisbane Qld 4000 Phone 07 3211 4445 Fax 07 3211 4410 Email info@ctsm.com.au

www.ctsm.com.au Proud Member of:

Summer 2013 UnitNews

19


Premium has gone up from

15,237.69 to $37,139.18

$ Residential Strata Title Insurance FNQ Letters to the Editor help@uoaq.org.au

($21,901.49 increase)

I have received a quotation to renew the Residential Strata Title Insurance coverage for the unit complex I live in in Cairns.

one insurer offering a full residential strata insurance package in Northern Australia being Strata Unit Underwriters (SUU) for property valued at greater than $5 million.

This premium has gone up from $15,237.69 to $37,139.18 ($21,901.49 increase) which is being offered through SUU and underwritten by CGU Insurance.

Based on this quotation and talk around Cairns in general, it would seem that little progress is being made to address this issue and stop the skyrocketing premiums. There have been no major or significant natural weather disasters in the last 12 months, and as such there is no justification with this increase.

Our existing strata insurer, QUS has declined to renew our insurance program for the coming year. This is due to the insurer, Calliden having withdrawn from issuing property insurance in Northern Australia. This withdrawal by a major strata insurer is extremely disappointing and disconcerting as there is now only

20

UnitNews Summer 2013

When will the Politian’s start to listen in QLD. Please write to all State members and beat the drum for our North Queensland unit owners.

uoaq.org.au


uoaq.org.au

Strata Managers – A Cautionary Tale If your insurance is arranged by a strata manager, they are likely receiving some form of commission for arranging your insurance. We have had many clients comment on conflicts of interest and also express concern that they feel the interests of their strata manager receiving a commission, are put before our body corporate and unit owners interests. The Insurance Guys disclose all fee’s and commissions upfront and have many insurers who can issue alternative quotes if your current insurer is no longer competitive. Our duty to you is to provide the best offer each year and not just deal exclusively with one or two insurers. Here are some common tactics our clients have told us their strata manager has engaged to try and lock them in to arranging their insurance:

- - - - -

Insurance policies fall due just before an AGM - This gives the impression that as the policy has renewed and unit owners are unable to place insurance until the policy ends. Most insurers will refund the unused portion of your premium if you decide to take up another quote and cancel your current cover mid-term. This information is displayed in their policy wording. If your insurance is due before an AGM, you may also consider moving a motion to make sure it is due after your AGM so that it is easier each year for unit owners to move motions in relation to your insurances and make changes where appropriate. If your strata manager comments that the policy they are recommending has better coverage than an alternative we have recommended, ask them to advise what about the policy is better. Some of our clients have expressed how their strata manager makes similar comments, but are unable to substantiate further. If your strata manager has the opportunity to see quotes we have provided and our quotes are more competitive (or lower than the renewal offered last year), it is likely they will take our quotes back to their insurer to match or offer slightly cheaper so they can continue to receive a commission. If your current insurer has been overcharging you in the previous years, you should consider if in principal they are given the opportunity to continue doing business with you and see other quote options? Some of our clients have also advised their strata manager has further threatened to not provide claim service if the insurance is not arranged through them. We offer a complete claims service as part of arranging your insurances and all we need is someone to arrange access to your property to let trades people in to do repairs if you claim. We have also heard from our clients, where strata mangers threaten an increase of property management fees if insurance is not placed via them. If your strata manager is threatening an increase in fees, it may be worthwhile considering getting quotes from other property management companies to manage your property.

As we do not get the opportunity to see other insurance quotes issued, we are accountable each year to ensure you have the best possible policies at competitive premiums. Whilst there are good strata managers out there who are truly looking out for the best interests of their clients, we provide this information as more of a cautionary tale for you to assist you in your decision. If your current policy is the most competitive, you can choose to appoint us to manage your current policy to avoid any conflicts of interest, this is at no extra cost to the body corporate.

yourstratamanagement.com.au

COMMUNITY LIVING SOLUTIONS Reducing Costs & Increasing Value for Unit Owners

PROUD SUPPORTER OF UOAQ uoaq.org.au

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Summer 2013 UnitNews

21


Quick News A very quickly summary of the Regulations follow. 1. 2. 3. 4. 5. 6. 7.

Any workplace constructed prior to 2004 must identify all asbestos on site. Where a complex has any commercial component including short term rental accommodation, they are classed as workplaces. An Asbestos Register and Asbestos Management Plan must be developed when asbestos is identified. A review of the Management Plan and the condition of the asbestos materials are required at least each 5 years in accordance with the recommendations based upon a risk assessment of the asbestos materials. Where strata complexes contain only long term residential units, there is no requirement to undertake an asbestos audit. All legal opinion recommend that all strata complexes comply with the Regulations even if they only contain long term residential units. QBM strongly recommends that all strata complexes comply with the Regulations even if they only contain long term residential units.

Most people are now fully aware of their obligations and the legal recommendations to obtain and asbestos audit on all complexes. However, there is much debate over the need to take samples to proved if a material actually does contain asbestos.

ASBESTOS SAMPLING Comparing Apples with Apples

There still seems confusion within the Strata industry concerning the new Model Work Health and Safety Regulations introduced on 1 January 2012. This is more so for the asbestos regulations.

Presented by QBM w p

qbm.com.au 1300 880 466

Below is a summary of the implications of not taking samples to proved if asbestos is present. 1. 2. 3. 4. 5. 6. 7.

If samples are not taken then all materials that could contain asbestos MUST be assumed to contain asbestos. If asbestos is present of assumed, an Asbestos Register and Asbestos Management Plan must be produced. The Register and Management Plan must be held on site. There is no legislative obligation to take samples as long as all suspect materials are assumed as containing asbestos. By not taking samples, material that is highly unlikely to contain asbestos must be assumed as containing asbestos. The cost of maintaining a complex that contains asbestos (or assumed to contain asbestos) is much higher than if there is no asbestos present. Ongoing costs of re-assessments and updates to the Register and Management Plan are incurred even though the materials assumed to contain asbestos is actually clear.

Everything Covered? For Professional, Friendly assistance and quotes call

Sinking Fund Forecast Insurance Valuation Builders Warranty Condition Assessments Safety Risk Reports Asbestos Reports Fire Safety Reports And much more

1300 880 466 inspections@qbma.com.au www.qbm.com.au

Quality Building Management Pty Ltd.

QBSA ACT Licence No. 109408a0

22

UnitNews Summer 2013

Strata Inspections and Reporting

uoaq.org.au


Quick News Below are some direct price comparisons to highlight the cost implications of not testing suspect material for the presence of asbestos. The clear recommendation is to ensure that all complexes constructed prior to 2004 obtain an asbestos audit, and that samples are taken of all suspect materials. 19 Lot BFP complex - 1 positive sample Company

Asbestos Audit

Register

Management Plan

Samples

Sample result

Year 2 Review

Total Cost

Company who takes samples

$605

Included

$179

1 sample @$40

Positive

$512

$1336

Other company who do not take samples

$618

With Management Plan

$298

No samples taken

All must be assumed as positive

$618

$1534

19 Lot BFP complex - want samples to prove if materials on site contain asbestos

Company

Asbestos Audit

Register

Management Plan

Samples

Sample result

Year 2 Review

Total Cost

Company who takes samples

$605

Included

$179

1 sample @$40

Positive

$512

$1336

Other company who do not take samples plus 3rd party contractor to take samples

$618

With Management Plan

$298

No samples taken

All must be assumed as positive

$618

$1824

1 sample @$40

$250

19 Lot BFP complex - 1 negative sample Company

Asbestos Audit

Register

Management Plan

Samples

Sample result

Year 2 Review

Total Cost

Company who takes samples

$605

Included

Not required as sample was negative

1 sample @$40

Negative

$0

$645

Other company who do not take samples

$618

With Management Plan

$298

No samples taken

All must be assumed as positive

$618

$1534

Cost comparison when maintenance works are to be undertaken. 19 Lot BFP complex - 1 negative sample Company

Asbestos Audit

Register

Management Plan

Samples

Sample result

Maintenance works on area contain assumed asbestos materials

Year 2 Review

Total Cost

Company who takes samples

$605

Included

Not required as sample was negative

1 sample @$40

Negative

$5250 (they know the material does not contain asbestos)

$0

$5895

Other company who do not take samples

$618

With Management Plan

$298

No samples taken

All must be assumed as positive

$7250 (they must get an asbestos removalist as the material is assumed to contain asbestos)

$618

$8784

The clear recommendation is to ensure that all complexes constructed prior to 2004 obtain an asbestos audit, and that samples are taken of all suspect materials. Call QBM/AAI Now on 1300 880 466 • Protect your health • Protect your investment • Save Money

uoaq.org.au

Summer 2013 UnitNews

23


CONSUMER PROTECTION FOR

UNIT OWNERS

Who’s Eating your Pie.. err k a 0 e rerett4a,k,22220 a C Ca$$224

Community Power $8,884

35%

35%

Minor Expenses $4,190 Fire Control $4,842 Minor

Expenses $4,190

14% 14% 13%

9% 6% 7% 8% 8% 6%

Community Power $8,884

9%

BCM Charges $5,282

R & M - Lifts $5,282

BCM Charges $5,282

We would like to acknowledge our sponsors throughout 2012. We appreciate your continued support.

Your Details. Join Today Title

Membership Details I enclose

Name of complex

Name Phone

Total units in Complex

Mobile Email Address Postcode Postcode

State

Hartley’s Body Corporate Management

R & M - Lifts $5,282

Insurance $5,282

help@uoaq.org.au (07) 3220 0959 Level 6 / 333 Adelaide Street Brisbane Q 4000 GPO Box 2359 Brisbane Q 4000

Management Pty Ltd.

yourstratamanagement.com.au

7% 8% 8%

Insurance $5,282

CTS Management

Quality Building Strata Inspections and Reporting

13%

Fire Control $4,842

Building Services $9,590

Building Services $9,590

State

$60

Membership Type Building Format Plan

UnitNews Summer 2013

Standard Format Plan

Direct Deposit/EFT: Bank MACQUARIE BANK BSB 182-512 Account 9 6135 3547 Name UNIT OWNERS ASSOCIATION OF QUEENSLAND INC

Join Now

24

$55 (If over 60 years and you live in a unit)

uoaq.org.au

EST.

1978 uoaq.org.au


uoaq.org.au

A FREE service that costs Owners PLENTY UOAQ now provides a service to assist Queensland Unit Owners to improve the quality and cost of their Body Corporate Administration contracts through better tendering practices and to counter alternative services being offered which purport to offer a free service but charge exorbitant fees to tenderers with the Body Corporate Committee being unaware of these undisclosed and embedded costs. Just as the saying goes – ‘there is no such thing as a free lunch’, “Clearly an independent and impartial service was needed so UOAQ stepped in to fill the void,” said UOAQ treasurer Bob Boundy. Many Body Corporate Administration contracts come up for renewal each year and must be dealt with at the AGM so Body Corporate Committees are often dealing with the issue late in the year and at a time when many other issues compete for their attention. This can leave the appointment of the Body Corporate Manager in their own hands, having a vested interest in retaining the work on a ‘flow on’ basis rather than having their contract go to open market tendering – in any other industry this is called a clear conflict of interest. It is not in the interest of BC Managers to point out the significant advantages to owners in testing the market value of their Administration contract in the open market so they may not raise the matter until it is too late to go to market and the incumbent’s name is put forward by motion in the Notice of AGM by default, generally without an alternative even being offered with Committees being too time poor to take any alternative action. Some Managers have exploited this situation even further by writing into their contract that they must be paid in advance making any subsequent challenge over costs more problematic. They do not give owners an option to pay after service delivery and when raised

Remember if someone offers you a deal that sounds too good? It probably is!!! UOAQ helps building owners tender for improved Administration Contracts.

by discerning owners or committees, the catch all phrase of “its industry practice” is used as a defence. “Rorting in any other industry” Unfortunately for owners this dubious practice is making it more common in the industry for BC Admin rights contracts to have advance payments written in to them. When UOAQ looked at the availability of commercial services to assist Bodies Corporate with tendering their Administration contract the result was alarming. It found companies offering what they call a “FREE” service but which in fact locks a successful Body Corporate Administration Manager into large up front fees that are so high as to be unviable, and to fund such payments are then introduced to a financier to borrow the funds to pay these significant fees ahead of the cashflow from receipt of the fees from the Body Corporate. These fees can be as high as 2.5 times the basic fee. So where a BC Managers annual fee is $10,000, they would pay $25,000 to be allowed onto the tender list. What Body Corporate Administration Manager can afford to pay away 2 ½ years out of their 3 year’s fee income to take on the work. As all tenderers pay this extreme fee, this is disguised as being FREE to Bodies Corporate as it is the BC Manager who pays the fee, but this is a less than transparent process. Ultimately it is owners who pay either directly or indirectly, as the high embedded fees are passed on in the tendered fees with the service provider organising the tender being the winner. Wise Body Corporate Committees recognise that their incumbent Administration Manager has a conflict of interest and arrange for independent testing of their contracts each year. This needs to be started around three months prior to the AGM so that there is time for Tender Preparation, Calling for quotations, Assessment of tenders, consideration and formulating a recommendation to owners which are the steps in the process that the UOAQ follows to provide a considered recommendation to go with AGM documentation that must be in owners’ hands 21 days prior to the meeting. This is provided at a quoted but token cost of the other ‘FREE’ services on offer.

BRISBANE - GOLD COAST - REDCLIFFE Continued from Last Issue Working with owners to create happy, healthy and harmonious communities. enquiries@capitolbca.com.au uoaq.org.au

www.capitolbca.com.au

1300 55 10 19

Summer 2013 UnitNews

25


Quick News

Caretakers’ Contracts

Owners Motion for next General Meeting - Owners to consider alternative Caretaking & Letting arrangements.

ORDINARY MOTION - That the body corporate does not prematurely extend the caretaking and letting agreement ahead of their expiry date and instead requires the committee to investigate alternative options two years before the expiry of the current contract and report back with a comprehensive analysis of the various options available to the next general meeting of owners.

4. There is no obligation on owners to extend existing contracts, as the incumbent Caretaker should have achieved full value of its purchase by the time they expire, given that no future extensions can be mandated in advance at time of purchase. In fact the legislation provides a finite period for the original term of the contract, so they were always intended to terminate at expiry.

– Add Value to Owners by Not Extending.

Caretakers’ Contracts – Add Value to Owners by Not Extending. Extensions to caretaker’s contracts are becoming a divisive issue in buildings where the interests of the two parties are in conflict. Caretakers prematurely request extensions influenced by what best suits their own commercial interests: the longer the term, the greater the value and this lifts their security value supporting their bank accommodation, potentially reducing their debt repayments over a longer period, none of which confer any benefit on owners. Owners benefit by not extending contracts and undertaking the course of action as set out in the draft template motion and explanatory Schedule below. The UOAQ www.uoaq.org.au encourages unit owners and committees to be proactive in lodging this motion at their next general meeting that flags the potential to reduce future costs. Explanatory Schedule: Instead of only considering a request to extend the incumbent Caretaker’s Caretaking and Letting Contracts prematurely, the committee should be empowered to consider the alternatives that will otherwise be available and potentially beneficial to the Body Corporate.

A summary of some of the reasons to allow the incumbent Caretaker’s contract to expire and consider the alternatives of entering into an entirely new agreement are as follows: 1. Quality of the Contract Document. There is no opportunity to amend or rewrite the current contract (without the Caretaker’s consent) which may be somewhat out of date and bland or ambiguous in the specification of the obligations of the contractor. Commencing with a new agreement and precisely specifying the obligations of the contractor to be incorporated in the contract can improve the expectations of the parties. 2. Open Market Tender: This process provides a fair basis for the market value of the contract to be assessed. An efficient, incumbent Caretaker, if invited to tender, would have the best opportunity to be successful, having home ground advantage and best building knowledge of the complex compared to other tenderers. 3. The caretaker’s cost is generally the largest single annual administration expenditure of the complex at around 35+%. Given the obligations of the Body Corporate Committee to act in the best interests of all owners, how is it reasonable to allow this large expenditure to continue and never be reviewed, only indexed upwards? Whilst a relatively new approach, bodies corporate that have allowed the previous contracts to expire and entered into new agreements have made very significant cost savings, whilst maintaining high calibre management, and achieved a significant reduction in owners’ levies.

5. The financial / banking arrangements of the Caretaker should not be a higher consideration than the rights of owners. Owners have the right to let the existing Caretaker’s contracts expire and then enter into new arrangements. 6. Granting a new contract, to commence immediately on expiry of the existing contract, means there is no large up-front payment by the successful applicant, so Owners will have a wider choice of applicants, that is not limited to their financial capacity to buy an existing Caretaking contract, but more importantly on their likely future management performance. The old process of extending existing contracts puts value in the hands of the Caretaker but never reduces the body corporate’s costs. 7. Shorter duration contracts limited to three years which are purely performance based, become far more feasible under this scenario, which reduces performance risk. 8. The Unit Owners Association of Queensland (www.uoaq.org.au) fully endorse the policy of Sustainability in CTS schemes in Queensland.

yourstratamanagement.com.au

COMMUNITY LIVING SOLUTIONS Reducing Costs & Increasing Value for Unit Owners

PROUD SUPPORTER OF UOAQ 26

UnitNews Summer 2013

{

RESULTS ORIENTATED WEB DESIGN & MARKETING

}

Branding and Identity danhancock.com.au

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uoaq.org.au


Feature Story

Perversion Of The BCCM ACT 1997 For many years (even before 1997) the Queensland Resident Accommodation Managers Association (QRAMA) (recently changed to ARAMA Queensland) has exercised a disproportionate influence over the content and drafting of the Body Corporate Community Management Act 1997 (BCCM Act). This influence by ARAMA has been possible due to the under representation of unit owners. This disproportionate influence has resulted in the BCCM Act being totally unbalanced, discriminatory (against unit owners) and biased (against unit owners). That is, perverted from its primary objective of “balancing the rights of individuals with the responsibility for self management.” NOT - control and management by minority vested interest groups! During this period where ARAMA had control and influence they have been happy to follow the conciliatory approach: “All parties have their point of view and for the past 10 years have collectively worked together to seek to establish a more professional approach on all matters impacting within the strata and community title industry, to deal with day to day matters as well as the longer term issues.”

Hartley’s Body Corporate Management ‘Looking after all your Body Corporate Needs’

However, as soon as any opposition to their vested interests appears to be gaining traction, there is an abrupt change in attitude: “In recent weeks there has been a significant rift in the relationships, as many of the old shibboleths and self interests of parties have again been given prominence in the public arena and a very serious “them and us” situation has recurred. A call has been made to ignore the rights of other stakeholders and destroy their investment.” ( This of course refers to the “Say No” campaign elucidated below) ARAMA continues: “I am very concerned that a hostile minority within the largest group of stakeholders is potentially threatening the asset viability of their colleagues, by the selfish tunnel vision approach to what is now a national industry, not a cottage industry.” ARAMA then resorts to their old tactic of misrepresenting the facts: “Provision of services costs money but destruction of a structure that was in place and agreed to when each owner purchased their lot is a very short-sighted approach that destroys benefits as well. “ The facts are that there is no move to change the “structure” that was in place when the unit owners purchased. The unit owners are simply being alerted to one of their few remaining rights under the Act. ARAMA implies that it is treasonable for unit owners not to commit themselves to an extension of a contract that commits the unit owners, and their successors, to future debt while having no escape from the contract; all without benefit to the unit owners.

■ Financial Management ■ Agendas & Meetings ■ Administration of your Scheme ■ Maintenance ■ Dispute Resolution ■ Compliance

The ARAMA author is unquestionably an extremely articulate, eloquent and convincing writer, however, to those with an intimate knowledge of the BCCM Act, his arguments are obviously defective and misrepresentative of the facts. ARAMA represents a small vested interest group of building caretakers and letting agents who are totally reliant on the investment of unit owners, who collectively own the buildings that

uoaq.org.au

Summer 2013 UnitNews

27


Quick News the caretakers are employed to maintain, and in which they are given the rights to conduct a unit letting business. The unit owners are the only group who contribute financially to the ownership and maintenance of their building, and yet under the BCCM Act they are not permitted to recoup any of their expenses from the sale of the caretaking or letting rights. ARAMA currently claims to have some 900 members managing 43000 units with a property value in excess of $12 billion. To put these figurers into perspective these 43000 units valued at $12 billion are totally owned and funded by the unit owners – not ARAMA. ARAMA further claims that their members generate $330 million in holiday letting and $290 million in long term letting. Again putting these claims into perspective, the unit owners through their investment in unit buildings generate this income. Not ARAMA! This income would be available with or without ARAMA, but it would not be available without the investment of the unit owners. Compared to the 900 members claimed by ARAMA (Australia wide) there are some 380,000 unit owners in Queensland alone. This fact should ring the warning bells for any political party. The foregoing is but a small example of the misconception of the unit industry proliferated by ARAMA. One other is that their members bring expertise and qualifications to building management. To a limited extent this may be correct. However, many caretaker/letting agents are mum and dad operators who are buying themselves a job and a lifestyle. They have obtained a limited real estate licence, have never previously managed a building, have no hospitality training and no engineering knowledge of the building systems and facilities. For the first 12 months of their employment they are more of a liability than an asset to the unit owners, and after two years they are looking to sell and move into retirement. Compare ARAMA members’ qualifications to those of the Hotel Motel Accommodation Association (HMAA) many of whom hold tertiary qualifications in hospitality, tourism, building management, accounting or engineering. These are professionals who make a life long career in the hospitality, tourism and building management industry.

1300 554 165 | info@insuranceguys.com.au

We specialise in insuring buildings over $2million, by providing: An online quoting system that allows you to provide quote information in minutes. Access up to 7 strata insurance companies (including insurers who do not deal with the public). Advice about your existing insurance program and recommendations where we feel your current cover is inadequate. Online quotes get a 25% rebate of commission directly back to your Body Corporate insurance premiums. Professional management of claims.

Go to www.insuranceguys.com.au to get a quote!

Shandit Pty Ltd are proudly corporate authorised representatives of Insurance Advisernet Australia Pty Ltd. Authorised representative number 424246

28

UnitNews Summer 2013

The perverted influence of ARAMA on the BCCM Act has resulted in caretaker/letting agents becoming a protected species beyond the control of the unit owners. This has made their position in the small business community unique. Unlike normal small business operators whose success or failure depends on their energy and business ability, caretaker/letting agents can totally fail in their positions as caretaker and letting agent, but the unit owners cannot terminate their employment and must continue to pay them even when they fail to perform their duties. This protected status of caretaker/letting agents has resulted in the rights to their business being grossly overvalued by any measure of normal small business worth, and this in turn has led to some adjudicators claiming that to sack them for breach of contract is too severe a penalty given the value of their rights. ARAMA has further extended its perverted influence by convincing the Government that caretaker/letting agents should not pay a penalty for early termination of contract after two years. Also again, notwithstanding that the Objectives of the BCCM Act in part state: • “to ensure that bodies corporate for community titles schemes have control of the common property and body corporate assets they are responsible for managing on behalf of owners of lots included in the schemes; “ • “to provide bodies corporate with the flexibility they need in their operations and dealings to accommodate changing circumstances within community titles schemes” ARAMA “successfully reversed the draft proposal that the (building) office must be on common property”. (ARAMA Newsletter December 2007). This effectively removes control and flexibility from the Body Corporate and gives control to the caretaker/letting agent. Control of the office is essential to management and control of the building. This action by ARAMA clearly demonstrates ARAMA’s vested interest approach in arguments to Government legislators, its total disregard to the objectives of the BCCM Act and total disregard of the interests of building unit owners. The unit owners are starting to raise their concerns with the BCCM Act and unjust practices that have been perpetuated by ARAMA for far too long. One example of this is the ‘Say No’ campaign being run by the Queensland Unit Owners Association. This campaign educates unit owners and committees that they can ‘say no’ to caretakers demanding extensions to their contracts. ARAMA is crying foul and publishing information to discredit the unit owners. The extensions to contracts are worth millions of dollars to caretakers, but under the BCCM Act the Body Corporate (unit owners) are not allowed to profit. The injustice is obvious. If the BCCM allowed the Body Corporate to sell the extensions, then there may be some justice in the system. The developers are allowed to sell caretaking and letting agent contracts! Why not the Body Corporate? Clearly the Queensland Government has allowed itself to be influenced by a vested interest group that has usurped the objectives of the BCCM Act for its own gain and to the detriment of the unit owners of Queensland. Considering the projected growth in unit ownership, there is an urgent need for the Government to consult with informed representatives of unit owners who understand the unit industry, the BCCM Act and the complexities of legislative drafting and standards. Such a group exists, and is willing to give freely of its time and energy in establishing a level playing field in the ownership and management of residential and accommodation units in Queensland. If the Government acts in the public interest it should consult the major stakeholder by accepting this offer, the writer is prepared to liaise with the members of the group and the Government to formulate a working party to review the BCCM Act and associated Regulations.

uoaq.org.au


Quick News Subject:

North Queensland Insurance

This affects you and all your owners and clients!!

Re:

The Insurance Issue In North Qld

My name is Margaret Shaw and I have been fighting the insurance increases for the last 18 months. I have now set up an on-line petition and I’m asking you, and all the people you can reach to get on-line and sign it. The petition can be found at www.change. org/queenslandinsurance asking for support. It goes to insurance companies, the Insurance Council of Australia, State and Federal Government Treasurers etc. Basically, I think this is my final fling. I don’t want to give up but if this doesn’t get a response from the Insurance Council of Australia, and Federal and State Governments, then I think I’ve run out of ideas. I’m one of the fortunate ones who can afford to pay my bills, but there are so many who can’t and the majority are mostly older people in retirement villas and units, and those on fixed incomes. The people emailing me after several articles in the papers of Townsville, Mackay, Rockhampton, and on ABC radio 630 are just telling horror stories.

This Affects All Property Owners In North Queensland. The ongoing problem with insurance in North Qld is going to affect everyone, no matter what type of property they own, or where they live in North Queensland.

around 36%, and even in earthquake-torn Christchurch the increase is only 30% for residential properties (up to 80% for commercial). So if the increases are due to reinsurers penalising this area of the world due to Yasi, Japan, Christchurch, as the Insurance Council of Australia would have you believe, why are our increases higher than others? There are so many stories, it’s heart-breaking. These increases are devastating lives and businesses and causing huge mental, physical health and financial difficulties. We want: •

The recommendations resulting from the Cross Party Federal Parliamentary Inquiry held in February 2012 to be actioned in full - in order to help all home owners.

The Insurance Council of Australia to concede there has been market failure in North Queensland.

Please sign the petition, ask for a fair go for North Queenslanders. Please get everyone in your offices to sign the petition, and please send it to all your friends/owners and anyone you can so they can have their say.

As you may be aware, with the support of Warren Entsch MP and Senator Jan McLucas we managed to achieve a Cross Party Federal Inquiry in February this year, the result was nine recommendations of which only one has been actioned and that report was released on 19th October and was a complete waste of time. The facts are: Insurance companies in Queensland are driving homeowners to the wall. Premiums for units, large complexes and resorts in North Queensland have increased by 200-800% - The insurance at Seastar Apartments Airlie Beach where I live (25 units) went from $25,000 to $81,000 in a year. House premiums are beginning to rise rapidly too with houses in the suburbs of Townsville getting renewal notices for $20,000 and Ingham $26,000 (I guess Allianz doesn’t want the business), according to people on the land west of Townsville rural insurance is now close to impossible to get, and Warren Entsch MP notes “We are now getting examples where banks are issuing ‘show cause’ letters – one Cairns guest house had 13 rejections and now cannot meet the requirements of their mortgage.”. House owners can still shop around (but for how long?), strata owners cannot. It’s completely unjustified - many increases are for buildings that have not flooded, have not claimed for any cyclone damage (or minimal claims) in the last five years, and are not affected by bushfires. Also, because there are only one or two companies insuring larger buildings, they charge whatever they like. Even those who got damage require help. Meanwhile, the newspaper reports state that properties in Brisbane which did flood have received insurance premium increases of

uoaq.org.au

Management Rights | Levy Collection | Dispute Resolution Community Management Statements | Review of By-laws Establishment of Schemes | Construction Defects Lot Entitlement Disputes | Exclusive Use Conveyancing

BODY CORPORATE MATTERS? ENGAGE THE BODY CORPORATE LAWYERS

T: 07 3393 0433

F: 07 3393 0533

mail@herdlaw.com.au www.herdlaw.com.au

Summer 2013 UnitNews

29


CONSUMER PROTECTION FOR

UNIT OWNERS

Who’s Eating your Pie.. err k a 0 e rerett4a,k,22220 a C Ca$$224

Community Power $8,884

35%

35%

Minor Expenses $4,190 Fire Control $4,842 Minor

Expenses $4,190

14% 14% 13%

9% 6% 7% 8% 8% 6%

Community Power $8,884

9%

BCM Charges $5,282

R & M - Lifts $5,282

BCM Charges $5,282

We would like to acknowledge our sponsors throughout 2012. We appreciate your continued support.

Your Details. Join Today Title

Membership Details I enclose

Name of complex

Name Phone

Total units in Complex

Mobile Email Address Postcode Postcode

State

Hartley’s Body Corporate Management

R & M - Lifts $5,282

Insurance $5,282

help@uoaq.org.au (07) 3220 0959 Level 6 / 333 Adelaide Street Brisbane Q 4000 GPO Box 2359 Brisbane Q 4000

Management Pty Ltd.

yourstratamanagement.com.au

7% 8% 8%

Insurance $5,282

CTS Management

Quality Building Strata Inspections and Reporting

13%

Fire Control $4,842

Building Services $9,590

Building Services $9,590

State

$60

Membership Type Building Format Plan

UnitNews Summer 2013

Standard Format Plan

Direct Deposit/EFT: Bank MACQUARIE BANK BSB 182-512 Account 9 6135 3547 Name UNIT OWNERS ASSOCIATION OF QUEENSLAND INC

Join Now

30

$55 (If over 60 years and you live in a unit)

uoaq.org.au

EST.

1978 uoaq.org.au


Quick News

UOAQ Building Memberships – Views Of Some Satisfied Building Clients

Paradise Palms, Carrara, Qld: Firstly, let me say, that if you have any reservations about taking up membership with UOAQ, put them aside as I recommend their service with every fibre of my being. Paradise Palms committee has received wonderful support and assistance from no less than three committee members over the time of our membership and each has provided great insight and ideas into our situation. The UOAQ committee has extensive experience to draw upon and willingly provide the benefits of that experience in a mentoring style that is prompt, thoughtful and done in a way that is caring and supportive. I personally don’t think our body corporate committee could have coped through it’s recent ordeal if it wasn’t for the UOAQ supporting and encouraging us with ideas that we hadn’t thought were possible or realisable, and putting us on to others who have likewise been helpful and supportive of our endeavours. The cost of this incredible service is negligible and their service includes finding savings within your accounts to at least the cost of the membership. In our case, interest savings alone covered over double our membership fees. But they didn’t stop there – the UOAQ has found many areas where we can make savings for our owners, and I thought we were running fairly efficiently before they took a look through the books! They also have benchmarks of over 100 complexes so that you can see how your complex rates compared to others of similar size and structure. To me, the UOAQ is part of our team, an invaluable aid and source of information – I believe every Body Corporate should be a member and gain those benefits. Please feel free to contact me about my experiences with the UOAQ if you wish to do so. Tracy Barling, Treasurer, Paradise Palms CTS 23869.

Leary & Partners Caretaker Duties Valuations and Tenders Are you a member of a body corporate and concerned about the level of remunera-tion paid to your resident unit manager? Does your body corporate wish to call tenders for the caretaker duties? Our company has prepared numerous valuations of Caretaker Duties for buildings from Port Douglas to Coolangatta. We have experience with large hotel style com-plexes of three hundred units right down to small boutique developments of less than fifty units for both valuations and a calling of tenders.

For a fixed fee quotation or to discuss these specialist valuation services call us on 1800 808 991 or email enquiries@leary.com.au

Cairns Village Resort, Cairns. UOAQ is the much needed voice in Queensland between unit holders and State/Local Governments and stakeholders in any Community Titles Scheme. Over the past 18 months, UOAQ has offered expert advice and guidance to our body corporate executive committee and individual owners. Our body corporate knows that UOAQ is always there as backup support, informing members of their rights on any issue of concern and has a real passion for helping unit owners in Queensland. Since joining UOAQ our body corporate has peace of mind knowing that the UOAQ team draws on the wealth of experience of their executives with their strong business backgrounds to help us through any matter of concern. Our body corporate would like to thank UOAQ who has guided us with the opening of a higher interest earning bank account which now earns the equivalent of the membership fee for our body corporate each year. This point alone reflects the advice and concern that UOAQ has towards body corporates who are struggling to meet ever increasing costs. It is very reassuring to know that our membership in UOAQ gives our body corporate the confidence of knowing there will always be someone there to guide us on any issue, with their expert service supporting us and all unit owners throughout Queensland. Tony Dalton, Chairman.

uoaq.org.au

OAM DUniv

• Exclusive body corporate law practice • Over 30 years experience • Former first tier law firm partner • Quality leagal services at a reasonable price

Fellow of the Australian College of Community Association Lawyers

07 3218 7378 P 0418 190 658 M gary@mystrata.com E

Level 7, 127 Creek Street, Brisbane Q 4000 garybugden.com

Working for all sector stakeholders Summer 2013 UnitNews

31


UOAQ Building Memberships – Views Of Some Satisfied Building Clients It is just over a year since the UOAQ introduced Building Membership as an additional category to individual memberships. This initiative was taken in order to provide support at the Body Corporate Committee Level which has been recognised by the take up of this membership by a range of buildings representing over 1,300 lot owners in its first year. This recognises the following factors impacting this new service:

help@uoaq.org.au (07) 3220 0959 Level 6 / 333 Adelaide Street Brisbane Q 4000 GPO Box 2359 Brisbane Q 4000

• • • • • •

The major service providers to Bodies Corporate can have different agendas in serving their own individual business interests which sometimes are placed ahead of and in conflict with those of their body corporate clients. Provision of strategy which focuses on end benefits from the perspective only of owners. Experience and background of UOAQ Committee members is widely regarded. As all of committee members of UOAQ are volunteers, the cost of this service is very modest. The expansion of a range of benefits to further enhance the value of building membership. The UOAQ is so confident of its ability to provide financial benefits greater than the cost of Membership that it is able to offer a Money Back Guarantee in respect of its first year of membership, thereby making its costs better than FREE.

See the extracts on the following page from very happy Body Corporate Building Members who have already experienced the quality of support provided.

Unit News Online - Summer 2013  

The official magazine of Unit Owners Assocation Queensland

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