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The official newsletter of Unit Owners Association QLD

Management and Letting Rights: Another Way There is a continuing debate about the sale of management and letting rights in residential apartment buildings. We often hear horror stories of conflicts between building managers and property owners who usually have conflicting or at least diverging objectives in managing a Written by UOAQ 2010 main account building. Some building managers are professional companies, whilst others are individuals who may have purchased rights with retirement savings, hoping to generate a nice easy income stream for their transition to retirement. In both cases the objectives are probably to maximise income (generally from letting) The enforcement of new pool by safety laws will and minimising their costs restricting be delayed for six months and Queensland’s the services provided under their rights statutory land valuations will be postponed agreements.

building residents the opportunity to purchase the rights, which after some hard work and effort, we were able to achieve. The BCCM Act does not permit a Body Corporate to engage in a business. Therefore it was necessary to float a company to Brisbane purchaseSkyline the management and letting rights along with the manager’s apartment.

Premier announces Key elements of our company common sense measures in constitution are that: • Shareholders can only be owners in aftermath of natural disasters the building who must dispose of for three months in the aftermath of the floods and Cyclone Yasi.

Resident owners on the other hand seek to enhance thebeen value and liveability of “The State has through a terrible time their property, whilst owners and now is not the timeinvestor to stick rigidly to the seek rules.”to secure good reliable tenants who look after their property and pay “This is about giving themovement breathing on time. There is a people growing space they need to concentrate putting embraced by some apartmentonbuildings their lives back together.” not to renew these rights agreements and to tender the management Under legislation introduced on 1 December and letting service provision at the 2010, all dwellings with a non shared pool conclusion of the existing agreements. must have a valid pool safety certificate before a rental agreement can be entered into.

There is an alternative option that It has also been confirmed by Pool Safety has worked that wellthe fordelay us atalso Stradbroke Queensland applies to Tower Villas. Some years ago our Sharedand Pools provided there are units within the complex that are rented out (whether management rights were available for permanent or holiday let). There areour fears sale. The existing owners gave

their shares if they sell their measures could cause delays as the the new apartment. demand for rental properties increases in the • No one owner can hold more than aftermath of the current crisis. 20% of shares • are sufficient shares The There enforcement of new pool safetysuch laws that will be delayed every apartment owner could for six months and Queensland’s statutory acquire least one landat valuations willshare. be postponed for • the market for floods resale threeGiven months in limited the aftermath of the and of theseYasi. shares there are special Cyclone provisions to assist departing State has through a terrible time “Theowners to been dispose of their shares to and now is not the time to stick rigidly to new owners. the rules. This is about giving people the breathing space they need to concentrate Key benefits of the arrangement on putting their lives back together.”

are that: • The company (with input from the Under legislation introduced on 1 December 2010, body corporate) a building all dwellings withemploys a non shared pool mustmanager andpool oversees their have a valid safety certificate be fore performance. a rental agreement can be entered into. • Owners who are shareholders can It has also been confirmed by Pool Safety alsois applies to Queensland ensure that the ourdelay building managed Pools provided thereofare units. to Shared to achieve outcomes benefit

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the owners. Profits from the management and letting business are returned to owners who are shareholders.

Premier announces common sense measures in Issues with the arrangement aftermath of • natural Only around disasters 39% of owners have

taken up shares against our Written preference for 100% participation. by UOAQ 2010 main account • Return on investment is low by Theequity standards - pool safety enforcement of new laws however the lower will be delayed for financial six monthsreturn and is statutory valuations Queensland’s offset by the lack ofland potential conflict be postponed for three months in the willwith a commercially incentivised of the floods and Cyclone Yasi. aftermath rights manager. • Issues with the sale of shares upon State hasapartment, been through a terrible “The sale of an needs careful time and now is not the time to stick rig management and promotion idly to the rules.” to new owners. • “This Additional roles for community is about giving people the breathing space members in taking on the role as they need to concentrate on putting their directors in the company owning the lives back together.” management rights. Under legislation introduced on 1 Decem-

ber 2010,the all dwellings with noncompany, shared However members of athe poolwe must have amost valid of pool cer- in and believe thesafety owners tificate before are a rental agreement the complex, delighted withcan thebeway entered into.isIt has also been confirmed by our building managed and the control Pool Safety Queensland that the delay also we can exercise over the management applies to Shared Pools provided there are standards. So in conclusion we believe units within the complex that are rented out this is an effective and beneficial (whether permanent or holiday let).model. Tony Drake, Chairman Body Corporate Committee, Stradbroke Tower and Villas. Vince Kelly, Chairman Stradbroke. Tower Realty Pty Ltd.

See Inside the June Edition Surprise Surprise what next See Page 3 Electric Shock Brisbane Skyline See Page 4 Planning for Emergencies Become a See Page 7 Member Today Second Class We Citizens need you help! See Page 8

Quick News

Frances Asks ..

with Frances Ronnfeldt

Frances Ronnfeldt, a Brisbane based Body Corporate Manager hits the pavement to see just how much the general public knows about Body Corporate.

Unit Owners Assocation QLD

This months’s QUESTION-

6th Floor. 333 Adelaide St, Brisbane Q 4000 E P 3220 0959


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

As a unit owner, do you vote at your body corporate annual general meeting? Do you have a question you would like Frances to ask? Email your questions to Subject : Attention Frances

Editor Paul Cassels

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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

Stacey McSporran, 31, Accountant.

Adam Buckley, 41, Bus Operator

Joan Rea, 71, Home Duties.

NO, initially we were never advised the significance of voting so we didn’t but once we worked out how important it was we did start to vote.

YES, to have a say at running the Body Corporate and to look at the financials.

NO, I have owned and lived in units all my life and nothing comes out of it.

ANSWER - The Annual General Meeting for a Body Corporate is the most important meeting of the year, in most cases it is the only meeting throughout the Body Corporate financial year where Owners can propose motions to be considered and even vote. At the AGM owners review the financial position and direction of the body corporate, and even elect the Body Corporate committee for the next year.

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

(BA Dip Ed, Cert IV in BCM)

Director and Body Corporate Manager

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.


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


UnitNews Online June 2011

From the Editor

by Paul Cassels

The issue of Management Rights is generating significant interest from our readers. While many owners in the past have simply waved through most requests from Caretakers to extend their contract/s (generally well before expiry) an increasing number of buildings are questioning this process. In our April edition of Unit News Online, we outlined the position of a committee recommending against a requested extension from its Caretaker which was soundly defeated at AGM and is proceeding to document an alternative course of action, specifically to give control of its building back to owners.

In this edition the owners of a building outline an alternative course of action. They explain how they formed a company to purchase the expiring contract for the management and letting rights and detail how the process is working. In future editions, we will continue to outline some alternatives as owners increasingly seek viable choices to the premature extension of Caretaker’s contracts which precludes options that could be pursued by owners. Under the Code of Conduct of Body Corporate Committee members, they are required to act in the best interests of owners, which needs to be carefully considered when recommending in favour of Caretakers’ extensions.

Quick News

Management Rights sold off-site??

Surprise Surprise what next Many residents at a major Brisbane Apartment complex were recently shocked to learn that the management rights were being sold to a couple who are going to live off-site. Most residents had assumed that the Caretakers were required to live on-site because that’s what the previous Caretakers did. In fact the Caretaking contract did not require the Caretakers to reside within the complex. Many Caretaking agreements require the Caretakers to reside on-site but many do not! The trap for the unwary is that advertising and other matters might lead buyers to assume they are buying into a (new) complex with live-in Caretakers. This may be true to a point; as a commercial arrangement a Developer may sell a residence and the management rights as a “contemporaneous” deal, but the management rights do not require the Caretaker to live on site, and for most, its only when the rights

are assigned to a buyer that chooses not to live on-site that they discover an element important to them has evaporated! In theory it should not matter much where the caretaker lives because they have a contract they must fulfill which typically specifies “office hours” and accessibility requirements. Nevertheless for some prospective purchasers the fact that the Caretakers live on-site is an important consideration ... so find out what “on-site management” means; is it a person in the office for 7 hours a day, or is it the Caretakers residing on-site. Management rights that do not have a residential requirement may be more valuable or at least more saleable because they can appeal to a wider market. There are a number of specialist firms (large & small) that manage multiple management rights and even traditional real estate agencies are increasingly seeing merits in owning management rights as a natural adjunct to their business because of the steady income stream on offer. For these types of management rights owners, not having to tie up capital in an on-site residence enhances return on investment and gives a certain flexibility in how Caretaking services can be delivered. Prospective apartment owners must read the fine print because (a) Developers don’t seem to say in their advertising the proposed Caretaker is living on-site, but this may not be the case in the future, (b) Incumbent Caretakers will sell the management rights if a good price comes along and not worry about what comes after and (c) I wager not many (any?) conveyancing lawyers think to tell their buying clients that the Caretaking contract does not require the Caretaker to reside on the premises irrespective of what may be happening in the short term.

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June 2011 UnitNews Online


Quick News

Electric Shock Some unit owners will get a shock when their existing electric hot water system needs replacing. If their property is located in a reticulated gas area, they will discover that existing houses and townhouses (class 1 buildings) must replace their failing or failed electric hot water system with an approved greenhouse efficient hot water system. Owners will be subject to this regulation where the gas distributor can install a connection from the gas mains line to the property boundary at no cost to the property owner. If this is the case you will be required to install a greenhouse efficient system; namely gas heating, heat pumps or a solar system. These systems will incur additional set-up costs because; •

The replacement systems are all required to be located outside, (when electric hot waters systems are invariably located within the dwelling).

In the case of gas heating, the owner must pay for gas reticulation from a point on the boundary to the gas heating unit.

The conversion costs will vary with the

structure and layout of each dwelling. Some conversions will cost more than the norm, and the new heating equipment may be further away from usage points than considered desirable. This may sound like an unnecessary extra cost, but for the most part unavoidable. Townhouse owners with a strata title have already run into frustration due to apathy, short sighted selfishness & bureaucratic hurdles. The regulators have forgotten that even a modest townhouse strata title complex can cover a large area, so bringing the gas line to the most distant unit can cost many thousands of dollars. If you are unlucky enough to own that most distant unit, and are the “pioneer” with need to replace your electric hot water system, you may discover that the Body Corporate Committee and fellow owners are not interested in assisting with the cost, even though it may benefit all or a significant number of other unit owners. To compound the problem you may then face difficulties in the external placement of either a gas heater or a heat pump, with objections regarding the aesthetic impact or practical aspects such as impeding walkways. This can result in less than ideal placement of the plant resulting in additional costs & compromising the heating system efficiency. Unit owners struggling with this issue have found a recent change


in regulations, ruling that environmental equipment cannot be prohibited merely on aesthetic grounds, is not entirely helpful because the regulation seems to apply only to solar hot water systems or photovoltaic cells, and not gas heating or heat pumps. In the face of high costs and rejections regarding placement, some unit owners are finding that complying with these new regulations is quite challenging! You can only imagine the frustration of a unit owner in the face of fading or no hot water supply!! Presumably, if you are complying with the law and the spirit & intent of the regulations, no Committee should unreasonably decline a request regarding the placement of heat pumps or gas heating unit. Nevertheless, as the years go on there are invariably going to be some battles royal over the trade-off between aesthetics, engineering practicalities & costs. As it now stands, some (many?) unit owners will be channelled towards heat pump systems. This may not be in the best interests of the Body Corporate, or the optimal solution, because heat pumps generate noise similar to an air conditioning unit. Logically, if you are a Body Corporate impacted by these regulations, a review should be undertaken so that a policy framework can be developed and problems identified and resolved ahead of the need for individual unit owners to convert their existing electric hot water systems. It might be easy for Unit Owners, in these hard times, to dismiss any contemplation of assisting with gas reticulation that provides no personal benefit in the short term. However, until the Owners understand the costs, pros and cons of the technologies on offer they should avoid a “knee jerk” refusal to a request to share costs.



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UnitNews Online June 2011

Quick News In the same vein, looking at placement of external heating plant in a leisurely and considered time frame may prevent problems at a later date. Many units in a Body Corporate may have obvious and convenient places for placement of plant, but there will invariably be a handful of units that have special challenges in this regard. These people need to have a reasonable & fair solution available to them. The wider Body Corporate has to realise retro-fits do not always result in aesthetically convenient outcomes.

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This is an issue that will be with us for quite a while as electric hot water systems have been able to be installed in gas reticulated areas as recently as 2006.

• We list businesses that

Those unit owners that do have electric hot water systems might be inclined to consider ways to extend the life of the system. Electric hot waters systems – usually a “set and forget” item can often have their life extended with judicious maintenance. If you are so inclined, this should be discussed with you registered plumber.

Last but not least, remember if you are about to buy a unit in a class 1 building (typically a townhouse) that has electric hot water generation, you may also be acquiring the contingent liability to switch to greenhouse efficient heating at some future date. The cost of which in some circumstances might amount to many $1000’s of dollars.

• •

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June 2011 UnitNews Online


Quick News

Lot Entitlement Adjustments – Making sense? By Robert Herd, Principal Herdlaw – The Body Corporate Lawyers The Body Corporate and Community Management and Other Legislation Amendment Act 2011 was assented to on 14 April 2011. This legislation has radically altered the Lot Entitlement Adjustment Process from the previous position under the Body Corporate and Community Management Act 1997. The new provisions restrict the adjustment of Contribution Lot Entitlements for a scheme to the following: • Pursuant to a resolution without dissent passed by the Body Corporate (s47A); or • Pursuant to an order of a specialist adjudicator or of QCAT (s47B) if • There has been a material change in the scheme necessitating a change to the contribution schedule lot entitlements; • Or for a scheme established after 14 April 2011 an owner considers that the contribution schedule lot entitlements are not consistent with the “deciding principle for the scheme”

The Relativity Principle is that the lot entitlements must clearly demonstrate the relationship between the lots by reference to 1 or more particular relevant factors. The Relevant Factors are • • • • •

how the community titles scheme is structured; the nature, features and characteristics of the lots; the purposes for which the lots are used; the impact the lots may have on the costs of maintaining the common property; the market values of the lots.

For existing schemes the changes to the legislation will limit the prospect of any successful adjustment of the Contribution Lot Entitlement schedule in QCAT or by Specialist Adjudication to situations where there has been a material adjustment to the scheme. This in theory should reduce the number of disputes brought before QCAT or before a Specialist Adjudicator for adjustment of lot entitlements for schemes that were established prior to 14 April 2011.

The “Deciding Principle” is set out in section 46A. Contribution Lot Entitlements must be set in accordance with either the “equality principle” or the “relativity principle”.

If you would like more information or advice on how this change may affect you contact us.

The Equality Principle is that the lot entitlements must be equal, except to the extent to which it is just and equitable in the circumstances for them not to be equal.

Herdlaw – The Body Corporate Lawyers p (07) 3393 0433

Planning For Emergencies Graphic Design, Branding and Identity



Showboats Media Online 6

UnitNews Online June 2011

Is Your Building Up To Standard? Heavy Fines & Court Action for Non-Compliance • Are you confident that your emergency planning and procedures are up to standard? • Does your building conform with all of the revised requirements of AS3745-2010 (Planning for Emergencies in Facilities) as released by Standards Australia in November of 2010? • Are you aware that you can end up on the losing end of a costly court battle should your building be found to be non-compliant? The revised edition of AS3745-2010 which was released at the end of last year specified new minimum requirements for emergency planning. It has already been seen that non-conformance to these new standards can result in lengthy and costly court actions. Therefore, it is vital that your strata-body conduct a detailed review of your emergency planning and procedures to ensure that you are completely up to date with all of the new standards. What are the current minimum requirements? Standards Australia have stipulated several new and much more stringent minimum requirements which are essential for the owners corporation, property and facility managers to conform to. The article details the emergency planning framework and new requirements which have been introduced under the AS3745-2010, plus any overall obligations of building managers and tenants to plan for emergencies. Some of the minimum requirements include: An Emergency Management Plan, Evacuation Diagrams, Emergency Evacuation Training. New requirements will definitely mean commercial and residential properties will have to update current Fire & Emergency Safety procedures and training!

Quick News

Body Corporate Managers – Fees Being Charged Traditionally body corporate management fees consist of:- -

Base management fee – usually quoted as $X/lot/annum = $Total /annum Disbursement fees – can be a fixed fee $X/lot/annum or charged on an actual basis. Disbursement fees cover all of the outgoings (such as photocopying, phone calls, faxes etc) as well as any extra labour costs that are needed for tasks carried outside the specified duties of the Administration Agreement.

Are you aware that the average base management fee for body corporate managers has not increased AT ALL over the last 15 -20 years? So, how have body corporate management companies survived over all of these years? Disbursement fees- these are heavily relied upon to supplement income. It is not unusual to see these fees exceeding the total of the management fees for complexes being managed. This is why it is critical for all Treasurers (or Committees) to check the body corporate manager’s itemized recovery statements to verify that the work recorded (and charged for) has actually taken place. Even if the body corporate manager has quoted a fixed fee for the disbursements these ONLY apply to the specific duties as listed in his ‘Schedule of Duties’- any work performed outside these duties will be additionally charged.

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Many companies rely on the following revenue streams to supplement their income:- - - - -

Insurance commissions; Commissions from contractors or associated suppliers; Electricity billing; Water billing; Preparation of Sinking Fund Forecasts

The above commissions are mostly charged on a flat percentage of the associated fee- something that cannot possibly be related to ‘a fee for service’. WHAT IS THE BEST WAY FORWARD? It is time for all body corporate managers to charge more realistic base management fees and to charge more reasonable rates for all ‘outgoings’. WHAT OTHER PROFESSION’S FEES HAVE NOT INCREASED AT ALL OVER THE LAST 15-20 YEARS?

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June 2011 UnitNews Online


Feature Story Notice. Then if the contravention is not corrected within 14 days another EGM must be called to approve by secret vote the issue of the termination notice. Why is an EGM required for the Body Corporate to issue a Code Contravention Notice under BCCM Act s139 when the Committee can issue a Remedial Action Notice under AM84C?

We are hostages of the agreements allowed by the BCCM act signed by the developers

Are Unit Owners Second Class Citizens? 14 APRIL 2011 - Continued from Last Issue Building Use BCCM Act section 180(3) removes the rights of the body corporate to determine if they want a full residential building or a holiday letting building. But the body corporate is responsible for running and maintaining the common property (AM s157). In effect the permanent resident owners subsidise the letting pool owners because the BCCM Act prohibits the body corporate from charging the letting pool owners extra maintenance contributions. BCCM Act Section 180(3) is contrary to the Building Code Australia (BCA) requirements for Class 2 building use. The Body Corporate is responsible for ensuring that their building complies with safety standards and the DDA, but this is impossible for

a Class 2 building (permanent residential) being used under Section 180 as a (short term) accommodation building. The BCA requirements are recognised in every state of Australia – except Queensland. Again the Unit Owners are stripped of self determination – second class citizens. Caretaking Contract The requirements to terminate a bad caretaker/letting agent are spread over both the Act and the Regulation. Under AM s84c the body corporate committee must vote to write and issue a Remedial Action Notice (default) notice. But under BCCM Act s138, 139 the Body corporate must hold an EGM and obtain a secret vote (ordinary resolution) to approve the issue of a Code Contravention

There are two different requirements to win the vote. Under the (AM) Reg. s84 an ordinary resolution is required. Under the BCCM Act, s.138 the vote at the first EGM must be by secret ordinary resolution, and the vote at the second EGM must be by secret majority resolution. Why the difference? Section 138 and 139 are clearly designed to discourage any body corporate from attempting to terminate a Caretaker or Body Corporate Manager. Division 8 of Part 2, Chapter 3 at s.137 says:“The provision of a letting agent authorisation or service contract providing for its transfer or termination are void to the extent the provisions are inconsistent with this division.” The Body Corporate Caretaking contract or Letting Agreement is made retrospectively void. This is blatantly contrary to the LEGISLATIVE STANDARDS ACT 1992 SECT 4 that requires that new legislation: “does not adversely affect rights and liberties, and impose obligations, retrospectively. If the body corporate wins the vote for default of code of conduct, under BCCM Act s.138 the letting agent is given a transfer notice, but the Caretaker/letting agent has nine months to sell his business before he must vacate the building.(Imagine how much damage he can do to the building in nine months!) Also, if the contract has less than seven years to run, the body corporate must, extend the contract to a minimum of nine years. Thus the caretaker/letting agent who is

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UnitNews Online June 2011

Feature Story in default of his code of conduct and has been allowed 9 months to sell his contract is given a bonus of an extended contract as a reward for his bad behaviour. If the contract was down to its last year or two this bonus for breach of code of conduct is worth about $1.0M to the caretaker, and that is another $1.0M that the body corporate must continue to fund by way of the caretakers salary. When this provision of the Act was questioned at introduction in 2003, the then Minister stated that the minimum 7 years was required by the banks and financiers to fund the purchase of Caretaking/ Letting contracts. No right thinking person could claim that the rights of the unit owners are being protected – again the conclusion must be that the unit owners are the second class citizens. Protection of Financier BCCM Act s126 provides that if a caretaker is terminated, the financier can take over the caretaking contract. No consideration for the body corporate, but absolute protection for the financier. If the Caretaker does not own the caretakers unit in the same name as the caretaking contract, the person owning the unit must enter into a Deed agreeing to sell the unit if the caretaking/letting rights are transferred. But BCCM Act s 116 that requires the deed, requires transfer of the unit title in accordance with Section 8 of the BCCM Act. That is the section that gives the caretaker 9 months to get out. Clearly the interests of the unit owners are secondary to the financier and the caretaker. Unit owners are again second class citizens. Terminating a Body Corporate Manager The provisions of BCCM Act sections 138 and 139 apply to the termination of a Body Corporate Manager: but, all the associated constraints make it almost impossible to achieve. However, under the standard contract used by CTIQ members, if the Body Corporate Manager wishes to terminate a contract with a body corporate, only 30 days written notice is required. Under normal contract terms both parties have reciprocal termination rights. Body Corporate managers do not have to be licensed, do not have to pass any probity checks and do not have to have a trust account.

Jo-Jo’s, Jo-Jo’s, cnr cnr of of Albert Albert & & Queen Queen St, St, Brisbane Brisbane

Conclusion Sadly, in examining the BCCM Act and the regulation modules, the UOAQ could not find one single illustration where the unit owners were given precedence over other competing interests. In addition to specific sections of the Act detailed above, unit owners are not granted: • Bulk water pricing. Most unit developments have one supply point, one water meter and distribute the water through body corporate owned and maintained pipes using body corporate owned and maintained pumps. But each unit owner is charged for water supply.

• Protection from exploitation by local councils on rates and charges. Many unit building sites are assessed at higher unimproved capital value than the total of the single building sites from which they were created. The rate in the dollar of unimproved capital value for units is higher than the rate in the dollar for single residential dwellings. Units are charged higher rates per height in the building or some other unfathomable so called equity rating system. All of the above when combined result in much higher rates for units, albeit that they make less demand on council services on an equivalent per occupant basis. For example every unit in a building is charged a garbage collection fee but the total building garbage is collected from one point; not 50 or 100 points required for single residential dwellings. • Equitable rating for secure self contained garden estates that are maintained by the body corporate at the owners’ expense. The local government continue to charge rates as if they were maintaining the roads, curbs, drainage, gardens and services. Effectively the owners are double charged.

• Levy calculation. The final indignity for all unit owners is that the State Government has now removed the body corporate right to determine how their body corporate contribution schedules are calculated and applied. Effectively giving the developer carte blanche with the choice of three methods of determining the contribution schedule. Based on past evidence the contribution schedule will be based on what is best for the developer to sell his units – not what is fair and equitable for the body corporate.

Are unit owners second class citizens?

based on the evidence above – they sure are.

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Jo-Jo’s,cnr cnrof ofAlbert Albert & Albert Queen& St, Jo-Jo’s, & St,Brisbane Brisbane Jo-Jo’s, cnr of St, Brisbane7:30am-11am). Jo-Jo’s, cnr of Albert &Queen Queen Queen St, Brisbane Jo-Jo’s, cnr of Albert & Queen St, Brisbane

Clearly this does not provide an appropriate level of consumer protection for owners and intending buyers of lots included in community titles schemes?

Enjoy all your

June 2011 UnitNews Online


Quick News doors or windows. The warranty period for these defects is 6 months from the date of “Practical Completion”.


Builders Warranty Periods Is your Builder responsible?

Written by Andrew Staehr With a large number of developments completed 4-6 years ago before the GFC put a halt on the industry, there is no doubt that many body corporate committees have had to deal with building defects. Many buildings will be coming to the end of their Builders Warranty Period in the coming months and years. Whether your buildings problems are major or minor it is important to understand the process involved to have building defects rectified before the builders warranty expires. It is vital that there is effective communication with your builder when dealing with any defects. When this is not possible, or your builder fails to respond the Building Services Authority (BSA) is available to provide an effective resolution service. The Builder’s Warranty Period and the defects for which they are responsible for are split into 2 Categories: Category 1 – Structural defects As suggested above these are major defects such as roof leaks, subsidence of building, bath or shower leaks or tiles lifting. The warranty period for these defects (ie, the time by which you must advise your builder that there is a problem) is 6 years and 3 months from the date of “Practical Completion”. The date of practical completion is taken from the date that your Certificate of Classification is issued. If you fail to notify your builder of a Category 1 defect within this timeframe, the BSA can not assist you if the builder does not rectify the problem. Category 2 – Minor Defects These are the defects that include hairline cracking of cornice, cracking paths & driveways, scratched surfaces and sticking 10

UnitNews Online June 2011

WHAT SHOULD YOU DO TO HAVE YOUR DEFECTS RECTIFIED? Step 1 – Notify your builder With any complaint, the first step is to raise it with the person responsible, in this case your builder. Assuming they have not gone broke, detail your complaint in writing outlining all of the defects you wish to have addressed. You may also like to provide the builder with independent reports from specialists, such as a structural engineer who may be able to identify defects that the untrained eye may not. Provide your builder with a reasonable amount of time to be able to inspect the problems raised and respond accordingly, generally 14-28 days is appropriate. Some of the questions to ask in your correspondence include: • What methods they intend to use to rectify the problems raised? • In what timeframe do they expect to complete the problems raised? If your builder has gone broke, there is an option which we will outline later in this article Step 2 – Assess your builder’s response If you receive a response from your builder within the timeframe you have specified, assess their response to the matters you have raised. Some of the matters to consider may be: • If they agree to rectify your issues, are you happy with the time frame they are proposing to take to rectify your problems? • Have they agreed to rectify some, but not all, of your issues? Is this acceptable? • Have they disputed the issues raised and refuse to rectify any of them? If you are satisfied with their response and they make good on their promises then this is the best outcome for both parties. If you are not happy with their response, or they fail honour the promises made to rectify the issues raised then don’t delay in moving directly onto Step 3. Step 3 – Lodge a BSA Complaint Form Should the builder’s response be unsatisfactory or if they fail to honour the promises made to rectify the issues raised then don’t hesitate to lodge a BSA Complaint Form. The BSA is there to provide a resolution service when communication breaks down. The complaint form is very straightforward to complete and there are companies who are able to assist you with lodging the complaint form correctly to give you the best possible

chance of being successful. Provided that you have notified your builder of the Category 1 or 2 defects within the aforementioned timeframes, once the complaint form is lodged the BSA will review the documents provided and may conduct a site inspection. After the review and possible inspection the BSA inspector will decide whether the building work is: • a category 1 or 2 defect – BSA will direct the contractor to rectify; or • a category 1 or 2 defect but outside timeframes - no BSA assistance; or • no defects evident - no BSA assistance What if the contractor fails to rectify? • The contractor could be fined $2,000 on the spot and eventually have their license cancelled • Assessments will be made on whether a claim can be made under the BSA Warranty Insurance Scheme to have the defects rectified • BSA will seek to recover insurance costs from the contractor BSA Warranty Insurance Scheme When residential construction work is undertaken by a licensed contractor (in excess of $3,300) insurance is payable to BSA by the contractor. The insurance is designed to cover for any loss in the event: • faulty or defective building work • non-completion (e.g. if a builder goes broke) • subsidence or settlement It is important to note however that this insurance is not available for buildings over three (3) storey’s in height. In summary, the builders warranty is there to protect consumers. The BSA provides an effective resolution service should you not be satisfied with your builders response. Remember: • Communication is vital • Notify your builder of the defects within the relevant timeframes for Category 1 & 2 defects • Use specialist reports to provide you with advise and details on the specific details of the defects if required • If your builder fails to respond to your correspondence - Lodge a BSA Complaint Form • If you are not satisfied with the timeframe that you builder is taking to fix the problem - Lodge a BSA Complaint Form • If you are not satisfied with the method being used to rectify a problem - Lodge a BSA Complaint Form

Archers Body Corporate Management

The Final Thought

Rates for Residential Units I understand that the UOAQ is to continue to press for the removal of the parity factor from our Brisbane City Council rating process. This is a battle that needs our continuing support. At the time the parity factor was introduced our then Lord Mayor promoted it on the basis that apartment owners should pay the same rates as the property owners on ordinary suburban blocks. Apartment owners were unfairly depicted as wealthy individuals bludging on the system who should be forced to contribute equally to the city rate base. Prior to the parity factor introduction, rates reflected a slightly lower rate levy on apartment owners for good reason. That reason being that apartment owners are required to fund their body corporate as a mechanism for placing multiple owners (and rate payers) on a site. By way of example at my apartment complex there are 108 rate payers on a block that in suburbia would support at most 3 ratepayers. Each body corporate levies their own rates to cover a range of costs including: • •

community administration - to enable the multiple rate payers to occupy a common site significantly increasing council rate revenue. provision of services such as: • lighting of corridors and common areas. • water reticulation and fire services in the building. • internal transport - lifts to multiple floors. • cleaning of common areas • collection and consolidation of garbage and recyclables

Implementing practical initiatives for bodies corporate We were recently appointed Body Corporate Managers for a scheme in Brisbane. After completion of our full audit of the records we found that the Committee did not have a thorough checking procedure in place to ensure all maintenance and resolutions that were carried at previous meetings were attended to. Many items were discussed at committee meeting level and following up on issues was not occurring, the Committee were notified, in some instances, when the account for services rendered was presented. The Building Manager was also spending valuable time preparing in-depth reports which could have been reduced significantly. We identified that too much talk was taking place discussing items that could be resolved immediately with a site inspection. In our role as Community Manager we instigated a ‘site inspection’ to be held prior to each committee meeting in order to identify issues and resolve these at the committee meeting. As a standard agenda item the ‘site inspection’ is held before each Committee meeting whereby the Building Manager, the Committee and Community Manager walk around the property, identifying maintenance items, safety items and ensuring that previous items identified have been attended to satisfactorily. Since SSKB have taken over this particular building and introduced the ‘site inspections’ committee meetings are shorter, more decisions are made and relations have greatly improved between the Building Managers and the Committee. A simple yet practical initiative of SSKB to help ensure the Body Corporate is well maintained and everyone is well informed.

Contact Peter Cassels E P 07 5504 2000

These services are analogous to and an extension of those services provided by council to all properties through the city infrastructure and services. However property owners in normal suburban estates do not have to pay an additional fee as we in community titles schemes do for the extension infrastructure necessary to connect to the city services. The body corporate fees also cover maintenance of the building and this is similar to the suburban property owner who has responsibility for maintenance of their property. Therefore we need to consider that a proportion of body corporate fees, but not all, should be considered as a justification for some relief of city rates. Another relevant issue is that our local government policies and pricing are supposed to promote urban density to contain the sprawl of our cities. This is on the basis that it assists to contain significant infrastructure and service costs, avoids the consumption of good arable land and lessens road congestion. Paying increased rates on top of body corporate fees acts as a disincentive to people choosing to live in apartments and encourages urban sprawl. I put these argument to the past Lord Mayor with the suggestion that either he reinstate the lower relative rates for strata title properties or alternatively have the city meet the costs of the maintenance of our building services from council funds. Other than an acknowledgement of receipt of my letter promising a reply, there was no response that addressed the issues I raised. We are now less than a year away from a council election. We need to ensure that this issue is canvassed with the candidates and promote a removal of the parity factor from our rates. Tony Drake, Chairman, Stradbroke Tower and Villas Body Corporate Committee.

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


T: 07 3393 0433

F: 07 3393 0533

June 2011 UnitNews Online


Unit News Online - UOAQ JUNE  

The official newsletter of Unit Owners Association Queensland

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