community titles in queensland : the body … · the primary object of the body corporate and...

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COMMUNITY TITLES IN QUEENSLAND : THE BODYCORPORATE AND COMMUNITY MANAGEMENT

BILL 1997

LEGISLATION BULLETIN NO 6/97

PETER BARTHOLOMEW

QUEENSLAND PARLIAMENTARY LIBRARYPublications and Resources Section

BRISBANEMay 1997

ISSN 1324-860XISBN 0 7242 7361 1

This Legislation Bulletin was prepared to assist Members in their consideration of theBill in the Queensland Legislative Assembly. It should not be considered as a completeguide to the legislation and does not constitute legal advice.

The Bulletin reflects the legislation as introduced. The Queensland LegislationAnnotations, prepared by the Office of the Queensland Parliamentary Counsel, or theBills Update, produced by the Table Office of the Queensland Parliament, should beconsulted to determine whether the Bill has been enacted and if so, whether thelegislation as enacted reflects amendments in Committee. Readers are also directed tothe relevant Alert Digest of the Scrutiny of Legislation Committee of the QueenslandParliament.

© Queensland Parliamentary Library, 1997

Copyright protects this publication. Except for purposes permitted by the CopyrightAct 1968, reproduction by whatever means is prohibited, other than by Members ofthe Queensland Parliament in the course of their official duties, without the priorwritten permission of the Parliamentary Librarian, Queensland Parliamentary Library.

Inquiries should be addressed to: Director, Publications & Resources, QueenslandParliamentary Library, Parliament House, George Street, Brisbane.Director: Ms Mary Seefried. (Tel: 3406 7116)

CONTENTS

1. PURPOSE ........................................................................................................ 1

2. BACKGROUND.............................................................................................. 2

2.1 ISSUES ARISING FROM THE GREEN PAPER............................................... 2

2.2 THE BUILDING UNITS AND GROUP TITLES ACT 1994 .............................. 3

3. THE BODY CORPORATE AND COMMUNITY MANAGEMENTBILL 1997 ................................................................................................... 4

3.1 STRUCTURE OF THE BILL ......................................................................... 4

3.1.1 Regulatory Modules ............................................................................ 5

3.2 THE FEATURES OF A COMMUNITY TITLES SCHEME ................................ 6

3.2.1 The Concept of a Community Titles Scheme........................................ 6

3.2.2 Development of Community Titles Schemes ........................................ 8

3.2.3 Community Management Statements ................................................. 10

3.3 LOT ENTITLEMENTS .............................................................................. 13

3.3.1 Adjustment of Lot Entitlement Schedule............................................ 14

3.4 THE BODY CORPORATE ......................................................................... 15

3.4.1 Body Corporate General Functions and Powers................................. 15

3.4.2 The Committee for the Body Corporate............................................. 16

3.4.3 Body Corporate Dealings with Assets................................................ 17

3.4.4 Body Corporate Management, Service and Letting Agreements......... 18

3.5 CONTRACTS FOR SALE OF LOTS ............................................................ 20

3.5.1 Disclosure obligations on sale of lots ................................................. 20

3.5.2 Implied Warranties in Contracts for Sale of Lots................................ 22

3.6 INSURANCE ............................................................................................. 23

3.7 DISPUTE RESOLUTION............................................................................ 23

3.7.1 Dispute Resolution under BUGTA 80 ............................................... 23

3.7.2 Dispute Resolution under BCCM ...................................................... 24

BIBLIOGRAPHY ............................................................................................. 25

APPENDIX A .................................................................................................... 27

The Body Corporate and Community Management Bill 1997 Page 1

DATE OF INTRODUCTION: 30 April 1997

PORTFOLIO: Natural Resources

HANSARD REFERENCESECOND READING:

Weekly Hansard, 30 April 1997pp 1136-1138

1. PURPOSE

The principle objective of the Bill “is to provide a legislative framework whichaccommodates the establishment, operation and management of community titlesschemes”.1

The primary object of the Body Corporate and Community Management Bill 1997(Qld) (BCCM) is stated in clause 3 of the Bill as being to

“…provide for flexible and contemporary communally based arrangements forthe use of freehold land, having regard to the secondary objects.”2

The secondary objects are stated in clause 5. They are

(a) to balance the rights of individuals with the responsibility for selfmanagement as an inherent aspect of community titles schemes;

1 Body Corporate and Community Management Bill 1997 (Qld), Explanatory Notes, p 1.

2 BCCM, cl 3.

The Body Corporate and Community Management Bill 1997

(b) to promote economic development by establishing sufficiently flexibleadministrative and management arrangements for community titlesschemes;

(c) to provide a legislative framework accommodating future trends incommunity titling;

(d) to ensure that bodies corporate for community titles schemes havecontrol of the common property and body corporate assets they areresponsible for managing on behalf of owners of lots included in theschemes;

(e) to provide bodies corporate with the flexibility they need in theiroperations and dealings to accommodate changing circumstanceswithin community titles schemes;

(f) to provide an appropriate level of consumer protection for owners andintending buyers of lots included in community titles schemes;

(g) to ensure accessibility to information about community titles schemeissues;

(h) to provide an efficient and effective dispute resolution process.

2. BACKGROUND

The Building Units Titles Act 1965 (Qld) was a legislative initiative allowing thesubdivision of a building into units with different titles. Eight years later the GroupTitles Act 1973 was enacted, providing for the subdivision of lands into lots and acommon area. These two Acts were consolidated by the Building Units and GroupTitles Act 1980 (Qld) (BUGTA 80). BUGTA 80 provides for the development useand management of land and buildings, which are divided and owned as separatelots and common property.3 As a consequence of concerns that arose relating to themanagement of building unit and group title developments, a Green Paper wasprepared by the then Department of Lands to review the law in this area. ThatGreen Paper was released in June 1991.

2.1 ISSUES ARISING FROM THE GREEN PAPER

The Green paper identified a number of shortfalls in the BUGTA 80 including

(a) Contracts with service contractors, body corporate managers and lettingagents could be entered into by the original developer for long periods withescalation clauses for remuneration to be paid to the contractor. With the

3 Department of Lands, Management Issues & Staged Developments, Green Paper on various

aspects of the Building Units and Group Titles Act 1980 - 1990, Brisbane 1991, p iv.


exception of service contracts, which could be terminated within a 30 dayperiod after the expiration of a three year period, these contracts enteredinto by the original owner could not subsequently be terminated.4

(b) Although BUGTA 80 has provisions preventing the use of proxies by aperson who has a financial interest in the matter voted on, concern wasexpressed about dominant owners or managers influencing body corporatedecisions through the use of proxies.5

(c) BUGTA 80 enables the manager to enter into agreements securing exclusiverights to areas of common property which right would extend beyond theexpiration of the management contract.

(d) There is no provision in BUGTA 80 to enable the body corporate to enterinto agreements to share facilities with another body corporate.

(e) There are no provisions in BUGTA that allow for staged development.

2.2 THE BUILDING UNITS AND GROUP TITLES ACT 1994

In the second reading speech for the BCCM the Minister noted that the consultationprocess that began with the Green Paper led to the passing of the Building Unitsand Group Titles Act 1994 (Qld) (BUGTA 94). However as the Minister stated

…BUGTA 94…was the subject of strong industry and community criticism for itsimpracticality and inflexible response, to very diverse concerns.6

BUGTA 94 was never proclaimed. (Provisions relating to titling will be transferredto the Land Titles Act and all planning elements will be transferred to the planninglegislation.7) The product of more than twelve months further consultation, theBCCM will repeal the Building Units and Group Titles Act 1980 and will provide anew and improved framework for community developments throughoutQueensland. This Bulletin will examine that framework focussing on the operationaland management aspects of Community Titles Schemes.

4 Department of Lands, Management Issues & Staged Developments, pp 11-16.

5 Department of Lands, Management Issues & Staged Developments, p 16.

6 Hon Howard Hobbs MLA, Minister for Natural Resources, Body Corporate and CommunityManagement Bill 1997, Second Reading Speech, Queensland Parliamentary Debates, 30April 1997, p 1136.

7 Department of Natural Resources, Exposure Draft Body Corporate and CommunityManagement Bill and Regulation (Standard Module), Seminar Paper, Brisbane 1997, p 1.


3. THE BODY CORPORATE AND COMMUNITY MANAGEMENTBILL 1997

3.1 STRUCTURE OF THE BILL

The legislation deals comprehensively with the “…raft of issues and potentialproblems…” which relate to community living.8 The approach to the legislation isinnovative. As stated in the Explanatory Notes to the Bill

…the structure is legislatively untested in other jurisdictions; however, theapproach has unanimous support from consulted parties and is being watchedwith great interest by other States.9

Flexibility is central to the approach of the BCCM. In the second reading speechthe Minister outlined the approach of the Bill

The keystone is the establishment of a flexible framework - a framework whichaccommodates different types of development which have differing requirements.

The primary means of achieving this flexibility is through a legislative structurethat comprises an umbrella act, supported by separate regulatory modules thatare tailor-made for specific types of development.10

The advantage of using this approach, rather than having the bulk of the legislationenshrined in the Act, is that it provides flexibility.

The Explanatory Notes state

The various types of projects which are developed under this legislation have theirown peculiar problems and requirements. A single Act would not provide theflexibility to accommodate the varying requirements where fundamentallydifferent solutions are needed.

Advantages for Government arising from the use of regulatory modules are thatadditional modules can be developed as required and Government has the abilityto address a specific problem in a particular type of project without impacting onand creating consequential problems for other types of projects.11

8 BCCM, Explanatory Notes, p 6.


10 Hon H Hobbs MLA, Second Reading Speech, p 1136.



3.1.1 Regulatory Modules

Central to the objective of providing for flexible arrangements for community livingare the regulatory modules provided for in Clause 22. In the second readingspeech the Minister, referring to the flexibility proposed by the BCCM, stated

The primary means of achieving this flexibility is through a legislative structurethat comprises an umbrella act, supported by separate regulatory modules thatare tailor-made for specific types of development.

It is intended that the legislation will commence with four modules in place…

To repeat the mistake of 1994 and formulate an act which could not separate alaw governing 500 room resorts, from that pertaining to a “Six-Pack” or duplexapartment, would be useless.12

This approach is a departure from the current situation where, in the words of theMinister,

…all developments were dumped under one law without consideration of thediffering needs of dwellers and investors in these developments.13

The Minister went on later in the second reading speech to outline the initial fourproposed regulatory modules

The first module [emphasis added] being the standard module, will provide forsignificantly regulated management processes and is designed to accommodatepredominantly owner occupied buildings. It may include developments which area mix of permanent residential and holiday letting.

The second [emphasis added] is the accommodation module, which sets upmanagement processes that are less regulated than the processes under thestandard module. This module is intended for schemes that are usedpredominantly as holiday letting or serviced apartment operation with the needfor accommodation management.

…The third module [emphasis added] deals with commercial projects and isintended for non-residential developments, although some mixed projects may beplaced under it. …

Compared with the standard module and accommodation modules, themanagement processes are further deregulated.

12 Hon Howard Hobbs MLA, Minister for Natural Resources, Body Corporate and CommunityManagement Bill 1997, Second Reading Speech, Queensland Parliamentary Debates, 30April 1997, p 1136.

13 Hon Howard Hobbs MLA, Minister for Natural Resources, ‘Body corporate legislationreleased for public consultation’, Ministerial Media Release, 27 February 1997.


The fourth module [emphasis added] intended for this phase of the project is forsmall schemes. It will only be available for community title schemes which havesix or less lots.

It sets up very deregulated management processes which encourage the owners toself manage. There is no body corporate committee and decisions are made byowners meeting informally.14

The developer will choose the module best suited to the development type at thetime of registering the plan.15 The body corporate can change to a different moduleby special resolution. This can be done by changing the Community ManagementScheme which contains the applicable regulation module.16 The existing schemeswill convert to a standard module however the body corporate can by specialresolution move to a more suitable module.

• Clause 22(4) provides that a Community Titles Scheme may have only 1regulation module applying to it;

• Clause 22(5) provides different regulation modules may apply to differentCommunity Titles Schemes within a layered arrangement.

The four regulatory modules are not yet available. Draft Standard ModuleRegulations have been released and some reference is made to them in this Bulletin.

3.2 THE FEATURES OF A COMMUNITY TITLES SCHEME

3.2.1 The Concept of a Community Titles Scheme

The Community Titles Scheme (CTS) is the basic concept for the BCCM. A CTSis defined in Clause 11. A CTS comprises

(a) The Community Management Statement (CMS) which is a documentrecorded with the registrar of titles identifying land (the “scheme land”), and

(b) The Scheme Land.17

14 Hon H Hobbs MLA, Second Reading Speech, p 1136.

15 Department of Natural Resources, Exposure Draft Body Corporate and CommunityManagement Bill and Regulation (Standard Module), Seminar Paper, Brisbane 1997, p 1.

16 BCCM, cl 50 and cl 55(1).

17 BCCM, cl 11(1).


The minimum requirements for scheme land are that it must comprise

• 2 or more lots (Clause 11(2)(a))

• common property (Clause 11(2)(b)) and

• a single continuous area of land (Clause 36(1))

However, Clause 36(3) has the effect that a CTS need not comprise a continuousarea of land if the lots in the scheme are

(a) created under a single plan of subdivision under the Land Title Act 1994 or

(b) in the opinion of the registrar, formed on reasonable grounds, located withinan area that is sufficiently limited to ensure that the scheme can beadministered under this Act efficiently and effectively as a single scheme.

Common Property

Common property for a CTS includes freehold land in the CTS, that does not formpart of a lot in the CTS, as well as service infrastructure that forms part of thescheme land.18 Put simply common property is everything in the scheme other thanthe lot.19 Clause 37 provides that common property is owned by the owners of lotsin a CTS in shares proportionate to their interest schedule lot entitlement.20

When subdividing a CTS additional common property can be created by:

• subdivision of a lot into lots and additional common property21;

• subdivision of a lot to form a new CTS wherein land that does not become alot or common property in the new scheme could become common propertyfor any scheme of which the new CTS is a subsidiary . 22

3.2.2 Development of Community Titles Schemes

The framework established for Community Titles Schemes (CTS) enables them tobe developed in stages. Staged developments are not specifically dealt with in the

18 BCCM, cl 19 provides that some service infrastructure is not common property; BCCM, cl11(2)(b).


20 See paragraph 3,3 below.

21 BCCM, cl 40

22 BCCM, cl 41


BUGTA 80. BUGTA 80 provides for the subdivision of an existing building unitsor group titles plan, incorporating any new owners into the existing bodycorporate.23 However under BUGTA 80 an existing group titles plan can only bere-subdivided by a group titles plan of re-subdivision.24 This restricts theprogressive staging of building construction on a group title.

The proposed amendment will enable staged development involving buildings to beefficiently and effectively handled. The BCCM is aimed at providing flexibility forproject developments consistent with the objective of creating “flexible…arrangements for the use of freehold land…”. The BCCM provides for a CTS tobe developed in a number of ways. These include

• establishing a layered arrangement of community titles schemes asprovided for in clause 28

• • combining existing CTS to create a new scheme as provided for in clause 29

• enlarging the number of lots in a CTS through progressive subdivision asprovided for in clause 30

• • Amalgamating two or more existing CTS to form a single newly establishedCTS as provided for in Chapter 2 Part 11.

These arrangements are examined below.

Layered Arrangements of CTS

A layered arrangement of CTS is formed when a lot in a basic CTS is subdividedinto lots and common property to create subsidiary CTS. Clause 19 of the BCCMdefines the concept of a layered arrangement of community title schemes. Thearrangement comprises

• a principle scheme, comprising its common property and lots; and

• one or more subsidiary schemes, comprising common property and lotsthat have been subdivided from a lot in the principle scheme. Lots in thesubsidiary schemes can be further subdivided to establish furthersubsidiary schemes and thus create the layered arrangement.

Clause 28 of the BCCM provides that

A layered arrangement of community titles schemes [emphasis added] isestablished if a lot included in a basic scheme is subdivided to create a newcommunity titles scheme.

23 BUGTA 80 , Part II-Subdivisions of Land, s10(1)

24 BUGTA 80, s 10(1A).


The configuration of a layered arrangement of community titles schemes isexpressed diagrammatically in Parts 2 and 3 of schedule 1.

Enlarging CTS

Clause 30 of the BCCM provides for the progressive subdivision of lots to createfurther lots in the same scheme. This is expressed in a diagram in Part 4 ofschedule 1.

Combining CTS

Clause 29 provides that a new CTS can be established by combining an existingCTS with

1) other lots that are not CTS; or

2) other CTS; or

3) a combination of 1) and 2).

If two or more CTS are combined to establish a new CTS, all CTS continue to existas CTS. The combination of CTS is expressed in a diagram in Part 6 of schedule1.

Amalgamation of CTS

Amalgamation of CTS is provided for under Part 11 of Chapter 2.

Clause 80 provides that amalgamation of CTS can take place if

• none of the relevant CTS are subsidiary schemes25

• • all of the relevant CTS are subsidiary schemes in the one CTS (scheme A)provided that they are not the only lots in the CTS.26

The process for amalgamation is set out in Division 2 of Part 11 of Chapter 2. Itincludes a requirement in clause 82 that, before any amalgamation of schemes cantake place, the body corporate for every scheme to be amalgamated must agree tothe amalgamation by resolution without dissent. The other approvals required areset out in clause 82. After amalgamation the original CTS would cease to exist asCTS and they would be replaced by a new CTS.27

25 BCCM cl 80(2).

26 BCCM cl 80(3).

27 BCCM cl 79 (2).


3.2.3 Community Management Statements

Under BUGTA 80 the body corporate was constituted upon the registration of therelevant group titles plan or building unit plan.28 Clause 49 of the BCCM providesthat the first community management statement(CMS) for a community titlesscheme (CTS) must be lodged by the original owner on the establishment of thescheme. The person who immediately before the establishment of the CTS is theregistered owner becomes the original owner on registration of the scheme.29 Thedeveloper is the original owner.

Definition of a Community Management Statement

A CMS is defined in clause 13 of the BCCM as a document that identifies land andthat contains the information required by the BCCM, in particular, as required byclause 57(1). The required information must include

• the name of the scheme, the body corporate and the name and address of theoriginal owner30;

• which regulation module is applicable to the scheme31;

• the contribution schedule and interest schedule for the lots included in thescheme32;

• the by-laws if they are to be other than the by-laws set out in schedule 2 ofthe BCCM33;

• the details of any proposed progressive development or layered arrangementof the scheme.34

The regulation module applying to the CTS may also require the provision ofcertain information in the CMS.

28 BUGTA 80, s 27

29 BCCM, cl 14 (1)

30 BCCM cl 57(1)(a).

31 BCCM cl 57(1)(b).

32 BCCM cl 57(1)(c) and (d).

33 BCCM cl 57(1)(d).

34 BCCM cl 57(1)(e); cl 57(1)(f).


Effect of Registering a Community Management Statement.

Clause 53(2) provides

(2) The community management statement for a community titles scheme isbinding ona) the body corporate; and

b) each member of the body corporate; and

c) to the extent that paragraphs (a) and (b) do not apply to bind a personi) each person who is a registered proprietor of a lot included in the scheme;

and

ii) each person who is a registered proprietor of common property; and

d) to the extent that paragraphs (b) and (c) do not apply to bind a personi) each person who is the occupier of a lot included in the scheme; and

ii) each person who is an occupier of common property.

The purpose of this provision is to bind all these persons to the by-laws and lotentitlements which are part of the CMS.35

The CMS has effect once recorded by the registrar of titles (the registrar).36 Amember of the public will be able to do a search of the CMS at the office of theregistrar of titles to obtain information regarding a particular development. By asearch of the CMS any person will be able to ascertain a range of information aboutthe development including whether a development will be staged, whether there willbe single or multiple bodies corporate and the type of management regime that willapply to the bodies corporate.37 The registrar will give the CMS a “uniqueidentifying number” which will be endorsed on the title for each lot.38 This willfacilitate a search of the CMS however the validity of a CMS is not guaranteed bythe registrar. Clause 48(2) provides that a CMS is not an Instrument under theLand Title Act 1994 (Qld) and so the indefeasibility provisions of that Act do notapply to the CMS.39


36 BCCM, cl 53(1).

37 Gary F Bugden, ‘Big changes on the way for common interest subdivisions’, UrbanDeveloper, Autumn 1997, pp 14-15.

38 BCCM cl 58(1).

39 Land Title Act 1994 (Qld), see Part 3 division 2; Part 9 division.2; BCCM, Explanatory Notes.


Clause 54 provides that prior to recording a CMS, it must be endorsed by the localgovernment for each area in which the scheme or land is, or is proposed to belocated.40 Although Clause 54 authorises a local government to refuse to endorsethe CMS for inconsistency with “…a lawful requirement, or an approval given…”under the Local Government Planning and Environment Act 1990 (Qld) (LGPEA),a planning scheme under the LGPEA, or “…an instrument having effect under …”the LGPEA, it does not require a local government to refuse endorsement in thesecircumstances (Clause 54(4)).

Recording of a new community management statement

An existing CMS cannot be amended, however, a new CMS may be recorded for aCTS. 41 Clause 51(1) provides that a request to record a new CMS must accompanyany new plan of subdivision affecting a group titles scheme. This provision ensuresthat current information about changes in progressive development, or changes tolot entitlement are accurate.42

The purpose of requiring a new community management statement is to ensurethat there is always available, at a single [emphasis added] point of reference, themost current and up-to-date information about the community titles scheme. Thisinformation is necessary for both lot owners and prospective purchasers of lots.43

The body corporate can only consent to the recording of a new CMS by resolution“without dissent” except if the change to the CMS involves

(a) differences in by-laws (other than a difference in exclusive use by-laws) or

(b) the identification of a different regulation module to apply to the scheme

in which circumstances the consent may be in the form of a special resolution. 44

The BCCM provides some other exceptions to these requirements in clause 55.

40 BCCM, cl 54(1).

41 BCCM, cl 50.



44 BCCM, cl 55(3).


3.3 LOT ENTITLEMENTS

Under the BUGTA 1980 the lot entitlement for each lot in a group titles plan wasascertained using the same proportion as the unimproved valuation of the lot was tothe valuation of the combined unimproved values of all the lots contained in theplan.45

Under the BCCM the lot entitlement46 consists of two component entitlements asdefined in the CMS these being the

1. contribution schedule lot entitlement; and

2. interest schedule lot entitlement.47

The BCCM provides that the contribution schedule lot entitlement is the basis forcalculating

a) the lot owner’s share of amounts levied by the body corporate, unless theextent of the lot owner’s obligation to contribute to a levy for a particularpurpose is specifically provided for in this Act (BCCM) and

b) the value of the lot owner’s vote for voting on an ordinary resolution if a pollis conducted for voting on the resolution.48

The interest schedule lot entitlement is the basis for calculating-

a) the lot owner’s share of common property; and

b) the lot owner’s interest on termination of the scheme, including the lotowner’s share in the body corporate assets on termination of the scheme; and

c) the unimproved value of the lot, for the purpose of a charge, levy, rate or taxthat is payable directly to a local government, the Commissioner of Land Taxor other authority and that is calculated and imposed on the basis ofunimproved value. 49

Services supplied to the owner or occupier of a lot, that are capable of separatemeasurement are billed to the owner or occupier directly.50

45 BUGTA 80, s 19.

46 BCCM, cl 44(1).

47 BCCM, cl 44(4) and cl 44(5).

48 BCCM, cl 45(2).

49 BCCM, cl 45(3).

50 BCCM, cl 45(4).


3.3.1 Adjustment of Lot Entitlement Schedule

Adjustment of the lot entitlement schedules can be effected by

1. Order of the Court51 or

2. Agreement of two or more lot owners 52

Adjustment by court order

If an owner of a lot exercises his or her right to apply to the District Court for anadjustment of the relevant contribution lot entitlement, the court must make anorder in accordance with the following principles:

(1) In respect of contribution lot entitlements, that they -

…be equal, except to the extent to which it is just and equitable in thecircumstance for them not to be equal.”53

(2) In respect of interest lot entitlements, that they-

…reflect the respective market values of the lots included in the scheme…except to the extent to which it is just and equitable in the circumstances forthe individual lot entitlements to reflect other than the respective market valueof the lots. 54

If as a result of an application to the District Court an adjustment of a lotentitlement schedule is ordered, the body corporate is required “as quickly aspracticable” to lodge a new CMS with the registrar reflecting the adjustment.55

Adjustment by agreement of lot owners

Clause 47 allows two or more lot owners to change their lot entitlement byagreement. In order for such agreement to be effected

• the total combined lot entitlements of the subject lots is not affected56 and

51 BCCM, cl 46.

52 BCCM, cl 47.

53 BCCM, cl 46(3)(a) and cl 46(4).

54 BCCM, cl 46(5).

55 BCCM, cl 46(8).


• any registered mortgagee or lessee of the relevant lots has to have consentedto the change57

• the body corporate must be notified in writing of the change58

When the lot entitlement is adjusted either by agreement of lot owners or order ofthe court, a new CMS must be lodged with the registrar reflecting the changes.59

3.4 THE BODY CORPORATE

When a Community Management Scheme is established, a body corporate is createdand it is the body corporate for the Community Titles Scheme.60 Membership of thebody corporate is constituted by the owners of all lots in the CTS.

3.4.1 Body Corporate General Functions and Powers

The general functions of the body corporate are set out in clause 87, these are to:

(a) administer the common property and body corporate assets for the benefit ofthe owners of the lots included in the scheme; and

(b) enforce the community management statement (including the by-laws affectingthe common property); and

(c) carry out the other functions given to the body corporate under this Act andthe community management statement.

The general powers of the body corporate extend to those powers “…necessary forcarrying out its functions …”.61 The BCCM provides examples of these generalpowers including the power to

(a) enter contracts; and

(b) acquire, hold, deal with, and dispose of property; and

(c) employ staff.

56 BCCM, cl 47(1)(b).

57 BCCM, cl 47(1)(c).

58 BCCM, cl 47(1)(d).

59 BCCM, cl 45(8) and 46(2).

60 BCCM, cl 31.

61 BCCM, cl 88(1).


3.4.2 The Committee for the Body Corporate

Where a Committee for the Body Corporate (the Committee) is required to beconstituted under the regulation module, it must be composed in the way providedfor in the regulation module.62 A decision of the Committee is a decision of thebody corporate.63 The procedures and powers of the Body Corporate Committeewill be contained in the regulation module applicable to the CTS.64 Clause 93provides that the regulation module may contain provisions about the conduct andprocedures at meetings of the committee of the body corporate.

Proxy Voting for Body Corporate and Committees of the Body Corporate

There have been concerns expressed about the use of proxy votes, by managers anddominant unit holders, to exert a controlling influence over the body corporate atCommittee meetings.65 It is possible under the current legislation for absenteeowners of rental property to feel that if they do not give their proxy vote to themanager, then their interests may be affected to the extent that the manager hascontrol over the rental of their property.

BUGTA 80 provides some limitations on the exercise of proxies. For exampleSection 50A of BUGTA 80 prohibits any person from voting as a proxy on amotion which concerns a prescribed arrangement and in which he/she has afinancial interest.

The BCCM provides for the regulation module applying to a CTS to provide for theuse of proxies by the committee of the body corporate (Clause 94) or the bodycorporate (Clause 95). For example the Draft Standard Regulations haveprovisions about the exercise of proxies. Draft regulation 65(4) contains a similarrestriction to that currently contained in section 50A of BUGTA 80. It prevents aperson from exercising a proxy on a motion for a resolution for the engagement of aservice contractor or a corporate manager or the authorisation of a letting agentwhere the person holding the proxy has a financial interest in the matter. Otherrestrictions on the use of proxies in the Draft Standard Module Regulations, include:

1. A limitation on the number of proxies held by one person to

62 BCCM, cl 91

63 BCCM cl 92.

64 BCCM, cl 93.

65 Department of Lands, Management Issues & Staged Developments, Green Paper on variousaspects of the Building Units and Group Titles Act 1980 - 1990, Brisbane 1991, p 16.


• proxies from owners of more than 5% of the total number of lots forschemes of 20 lots or more; and 66

• one proxy for schemes of less than 20 lots.67

2. A limitation the use of a proxy if a co-owner of the lot for which the proxy isgiven is present at a meeting.68

3. A limitation on the duration of proxies. Proxies will lapse at the end periodprescribed in the proxy. The period of the proxy cannot extend past the endof the body corporate’s financial year.69

4. Limitations on the use of proxies by original owner as follows

• The original owner may exercise a proxy only on certain issues whichare set out in regulation 65(3)(b) of the BCCM

• The period for which the original owner can exercise a proxy cannotextend beyond one year.70

Clause 267(3)(a) provides a penalty for the misuse of a proxy.

3.4.3 Body Corporate Dealings with Assets

Clause 43(3) provides that a body corporate can acquire and dispose of assets. Abody corporate can hold an interest in property as tenants in common with the bodycorporate of another Community Titles Scheme but property cannot be a bodycorporate asset for more than one CTS.71 This would enable a body corporate toacquire recreation facilities for the use and enjoyment of the owners and occupiersof the lots in a CTS. The regulation module applying to a CTS will provide theway in which a body corporate will be able to deal with body corporate assets. Forexample, regulation 95 of the Draft Standard Module Regulations authorises thebody corporate to acquire a freehold interest, a leasehold interest and a licence orconcession in, or related to, land for the use and enjoyment of the owners or

66 BCCM, draft reg 62(4)(a).

67 BCCM, draft reg 62(4)(b).

68 BCCM, draft reg 64(2).

69 BCCM, draft reg 63(f).

70 BCCM, draft reg 65(3).

71 BCCM, cl 43(2).


occupiers of the lots in a CTS. Under the Draft Standard Module Regulationsbodies corporate will not have the power to mortgage or create a charge over suchassets.72

Body Corporate Power to Acquire Additional Common Property

Under BUGTA 80 a body corporate can acquire land contiguous to the schemeland and incorporate it with the common property, however a body corporate can’tcreate further common property by acquiring a lot included in the scheme.73

Clause 39 provides for a body corporate, to acquire and incorporate landcontiguous to the scheme with common property by resolution without dissent.74

Clause 39 (1) provides for the body corporate to acquire lots in the CTS andinclude them with common property.75

3.4.4 Body Corporate Management, Service and Letting Agreements

Service and letting agreements

There is no provision existing under BUGTA 80 to restrict the body corporatemanagers from entering into agreements with service contractors or letting agentsfor payments of a premiums for the granting of a service contract or a lettingauthorisation contract.

The BCCM contains provisions that regulate the conduct of a body corporate whenit is entering into agreements with service contractors or authorisation agreementswith letting agents. Clause 107 provides for the regulation module applying to aCTS to regulate the engagement of a person as the body corporate manager orservice contractor or the authorisation of a person as a letting agent. Clause 102 ofthe BCCM prohibits the body corporate from accepting payment or the conferral ofa benefit in return for

• the engagement of a person as a service contractor or

• the authorisation of a person as a letting agent for the scheme.

72 BCCM cl 43(3). There is no provision permitting the Body Corporate to mortgage or create acharge over a Body Corporate asset.

73 BUGTA80 s.21(1)(a)

74 BCCM, cl 39(1)(a).

75 BCCM, cl 39(1)(b).


Clause 103 provides that the engagement of a person as a service contractor for aCTS must not result in the payment of an amount or the conferral of a benefit on thebody corporate in excess of the services that the service contractor is engaged tosupply. Clause 104 provides that the body corporate may not demand a benefitfrom a person who is authorised as a letting agent for a community titles scheme. Ifa benefit is payed contrary to the provisions of either Clauses 103 or 104 then thebenefit may be demanded as a debt, by whoever paid the benefit76

There has been some concern that developers can enter into arrangements with bodycorporate managers, service contractors and letting agents that bind bodiescorporate for many years. These agreements may have terms that are favourable tothe interests of the developer rather than the body corporate. The incomingpurchasers who constitute the body corporate are bound by this agreement.77 In theDraft Standard Module Regulations there are provisions limiting the term ofengagement of certain persons as follows:-

• to 3 years for the engagement of a body corporate manager;78

• to 10 years for the engagement of a service contractor or letting agent.79

Clause 289 of the Bill has the effect that the term limitation period applying underthe Draft Standard Module Regulation would apply to contracts entered into on andfrom 24th October 1994. The reason for this provision is that, since the introductionof the ill fated Building Units and Group Titles Act 1994 (Qld) it has been industryknowledge that legislation limiting these contracts was intended to be enacted.Business agreements have proceeded on this knowledge.

Other dealings concerned with a person’s engagement as a body corporate manager,service contractor or authorisation as a letting agent for a CTS have been dealt within the Draft Standard Module Regulations as follows

• The engagement of a person as body corporate manager, service contractorand the authorisation of a person as a letting agent for a CTS must be in aprescribed form or the relevant engagement or authorisation will be void.80

76 BCCM, cl 104

77 Department of Lands, Management Issues & Staged Developments, Green Paper on variousaspects of the Building Units and Group Titles Act 1980 - 1990, Brisbane 1991,p 13.

78 BCCM, draft reg 118.

79 BCCM, draft regs 119 and 120.

80 BCCM, regs 116 and 117


• Regulation 122 of the Draft Standard Module enables the transfer of aperson’s interest in the engagement as a body corporate manager, servicecontractor or letting agent for a CTS, subject to the approval of the bodycorporate.81

• Termination of the engagement or authorisation for certain misconduct orfailure to carry out duties under the engagement or authorisation.82

The body corporate is taken to have had power on and from 4th May 1994 to giveauthorisation to a person as a letting agent. On 4th May 1994 the High Court83

decided that a body corporate would only have power to enter into lettingagreements if it was specifically provided for in the body corporate by-laws. Clause288 removes doubt as to whether a body corporate has power to enter into thesearrangements. The effect of clause 289 is that these arrangements will be validatedfor contracts with letting agents from the date of the High Court decision.

3.5 CONTRACTS FOR SALE OF LOTS

3.5.1 Disclosure obligations on sale of lots

Disclosure Provisions under BUGTA 80

Section 49 of the BUGTA 80 requires that the original proprietor give to thepurchaser of a lot, a pre-contractual statement that discloses certain informationconcerning the lot. The information must include details of lot entitlements and thedetails of any prescribed arrangement. A Prescribed arrangement is an agreementor arrangement, between the body corporate or the registered proprietor, regardingone of a number of matters set out in section 7 of BUGTA 80, in respect of anexisting or proposed Building Units or Group Titles Plan.

Failure to provide this information, or provision of inaccurate information allows thepurchaser to cancel the sale contract within 30 days of the purchaser first becomingaware of the sellers breach, providing the purchaser has been “…materially

81 BCCM, reg 122.

82 BCCM, reg 123.

83 Humphries and Another v The Proprietors “Surfers Palms North” Group Titles Plan 1995Respondent (1994) 179 CLR 597 (1994) 68 ALJR 479, (1994) 121 ALR 1 FC 94/022.


prejudiced…” by the non-disclosure.84 However, any such notice by the purchasermust be given within 6 months of the purchaser becoming the proprietor of the lot.85

This provision applies only to purchases from the original proprietor.

Disclosure provisions under BCCM

Under the BCCM it is proposed that any seller (not only an original owner) mustprovide:

a) a statement pursuant to clause 162(1) setting out certain information in relationto the lot, the body corporate and the CTS.86

b) an information sheet pursuant to clause 162(2) in the approved form whichmust be attached to the front of the contract of sale for the lot.87

Prior to settlement, the purchaser would have a right to cancel the contract if:

• the seller fails to attach the information sheet in the approved form to thefront of the contract 88or

• the seller fails to provide the purchaser with the statement pursuant toclause 162(1) or

• the seller fails to provide an accurate statement and the buyer would bematerially prejudiced if compelled to complete the contract89or

• the buyer has not been able to verify the information contained in thestatement by reasonable efforts.90

If the buyer elects to cancel the contract for either the provision of an inaccuratestatement or the inability to verify the statement, a written notice must be given tothe seller within 14 days of the contract being entered into (Clause 165 (2)).

Similar provisions apply for purchasers of proposed lots..91

84 BUGTA 80, s 49(4c) and s 49(5)

85 BUGTA 80 s 49(5a).

86 BCCM, cl 162(1); cl 162(2).

87 BCCM, cl 162(5).

88 BCCM, cl 162(6).

89 BCCM, cl 165(1)(b)(i).

90 BCCM, cl 165(1)(b)(ii).


3.5.2 Implied Warranties in Contracts for Sale of Lots

Chapter 5 Part 3 of the BCCM implies certain warranties into all contracts for saleof lots. The warranties implied into the contract are contained in clause 179 of theBCCM. They concern defects in the common property and liabilities, undisclosed inthe contract, that exceed “normal operating expenses” to the extent that “…suchliabilities exceed sum of the body corporate funds plus 1 % of the purchase price ofthe lot”92 The Warranties contained in clause 179 are

(2) The seller warrants that, as at the completion of the contract

(a) there are no latent or patent defects in the common property or bodycorporate assets, other than the following

i) defects arising through fair wear and tear;

ii) defects disclosed in the contract; and

(b) there are no actual, contingent or expected liabilities of the body corporate,other than the following

i) liabilities that can reasonably be regarded as normal operating expenses;

ii) liabilities disclosed in the contract.

It is not possible for the parties to contract out of these warranties. If the sellerbreaches any of these warranties the buyer may cancel the contract for the sale of alot by written notice to the seller. Time restrictions on when such written noticemust be given are:

• in the case of a “…proposed lot - not later than 3 days before the buyer isotherwise required to complete the contract;”93

• in any other case “…within 14 days after the later of the following tohappen-

(i) the contract is entered into

(ii) the buyer’s copy of the contract is received by the buyer (including aperson acting for the buyer).”94

91 BCCM, cl 180(2)(b).

92 BCCM cl 179(3).

93 BCCM, cl 180(2)(a).

94 BCCM, cl 180(2)(b).


3.6 INSURANCE

The BCCM provides that the “…regulation module to a CTS may require the bodycorporate to put in place insurance for the scheme.”95 The Draft StandardRegulation Module requires that the body corporate insure to replacement value thecommon property and body corporate assets and any building included in a CTSthat contains two or more lots that have a common wall.96

3.7 DISPUTE RESOLUTION

3.7.1 Dispute Resolution under BUGTA 80

Under the provisions of BUGTA 80 provision is made for the appointment of areferee.97 Applications can be made by

“…a body corporate, a body corporate manager, a proprietor, a person havingan estate or interest in a lot or an occupier of a lot in respect of a parcel,…”98

for the settlement of a dispute relating the performance or the failure to perform “apower, authority, duty or function conferred or imposed by this Act (BUGTA80)…”99 in connection with the land contained in a plan. Further specific powers ofthe referee are enumerated in sections 78 to 94B. An appeal from a decision of thereferee lies to a tribunal constituted under BUGTA 80.100 Appeals on questions oflaw lie from a tribunal to the Supreme Court. There is no provision for mediation orother form of alternative dispute resolution in BUGTA 80.

3.7.2 Dispute Resolution under BCCM

Chapter 6 of the BCCM is concerned with providing for the resolution of disputesinvolving community titles schemes.

95 BCCM cl 146(1).

96 BCCM draft reg 105, 107.

97 BUGTA, s 69

98 BUGTA 80, s 77(1).

99 BUGTA 80, s 77(1).

100 BUGTA 80, s 106; Division 4.


Clause 185(1) of the BCCM establishes the office of Commissioner for BodyCorporate and Community Management (the Commissioner). TheCommissioner is responsible for the management of the dispute resolution processand information dissemination functions.101

Clause 189 makes provision for the appointment of adjudicators for the purposesof hearing and determining applications referred to them by the Commissioner.There is also provision for the Commissioner to refer parties to a dispute tomediation. Mediation can be conducted through the Dispute Resolution Centre orby a specialist mediator.102

Clause 197(1) requires the Commissioner to decide on a case management planfrom one of the following four plans set out in Clause 197(2)

(2) The commissioner must choose 1 of the following initial case managementrecommendationsa) that the application be the subject of dispute resolution centre mediation;

b) that the application be the subject of specialist mediation;

c) that the application be the subject of department adjudication;

d) that the application be the subject of specialist adjudication.

The processes for the dispute resolution centre mediation and the specialistmediation are set out in Parts 6 and 7 of the Bill. The processes for adjudicationand specialist adjudication are detailed in Parts 7 and 9 of Chapter 6 of the Bill .Clause 218 makes provision for the payment of a fee for adjudication to beprescribed by regulation. Adjudicator’s orders can be enforced by filing a copy ofthe order at the Magistrate’s Court.103 Appeals lie, from the decision of anadjudicator to the District Court, on a question of law only.

101 BCCM, cl 186

102 BCCM, Chapter 6, Parts 6 and 7.

103 BCCM, cl 232.


BIBLIOGRAPHY

MONOGRAPHS

• Department of Lands, Management Issues & Staged Developments, Green Paperon various aspects of the Building Units and Group Titles Act 1980 - 1990,Brisbane 1991.

• Department of Natural Resources, Exposure Draft Body Corporate andCommunity Management Bill and Regulation (Standard Module), SeminarPaper, Brisbane 1997.

• Department of Natural Resources, Management Issues and StagedDevelopments, Discussion Paper, June 1991.

ARTICLES

• ’Management Rights Crisis’, Australian Property Law Bulletin, 8(9), May1994, p121.

• Allen D, ‘Units and Group Titles: Advice on new legislation received’, REIQJournal, November 1996, p 12.

• Bugden G F, ‘Big changes on the way for common interest subdivisions’, UrbanDeveloper, Autumn 1997.

• Bugden G F, ‘Body Corporate retains $50,000 premium for management rights’,Australian Property Law Bulletin, Vol 9 1995, pp 227-228.

• Gregory S, Purcell Chadwick W T, & Skelly, ‘Building Units and Group TitlesAct 1980’, Proctor, 15(9), October 1995, pp 14-15.

• Gregory S, Purcell Chadwick W T, & Skelly, ‘Building Units and Group TitlesAmendment Bill 1995’, Proctor, 15(6), 1995.

MINISTERIAL STATEMENTS

• Hon H Hobbs MLA, Minister for Natural Resources, ‘Body corporate legislationreleased for public consultation’, Ministerial Media Release, 27 February 1997.

• Hon H Hobbs MLA, Minister for Natural Resources, Body Corporate andCommunity Management Bill 1997, Second Reading Speech, QueenslandParliamentary Debates, 30 April 1997.


• Hon G N Smith MLA, Minister for Lands, ‘Building Units and Group Titles Bill,Second Reading Speech, Queensland Parliamentary Debates, 27 October 1994,pp 10023-10024.

• Hon G N Smith MLA, Minister for Lands, ‘Building Units and Group TitlesAmendment Bill, Second Reading Speech, Queensland Parliamentary Debates,8 June 1995, p 12243.

LEGISLATION

• Body Corporate and Community Management Bill 1997 (Qld).

• Building Units and Group Titles Act 1980 (Qld)

• Land Title Act 1994 (Qld).

CASES

• Humphries and Another v The Proprietors “Surfers Palms North” Group TitlesPlan 1995 Respondent (1994) 179 CLR 597 (1994) 68 ALJR 479, (1994) 121ALR 1 FC 94/022.


APPENDIX A

• Hon Howard Hobbs MLA, Minister for Natural Resources, ‘Body corporatelegislation released for public consultation’, Ministerial Media Release, 27February 1997.

BODY CORPORATE LEGISLATION RELEASED FOR PUBLIC CONSULTATION

Crucial new legislation for unit owners, managers and developers will be in force by July,according to Natural Resources Minister Howard Hobbs who announced State Cabinet’s approvalthis week to release a draft Bill for public consultation.

The Body Corporate and Community Management Bill seeks to replace the Building Units andGroup Titles Act 1980 and overrides the ill-fated attempt by Labor to replace this originallegislation in 1994.

Mr Hobbs said the last twelve months had been an intense period in which extensive consultationand negotiation had occurred over fundamental elements of the legislation.

“It is hoped, at the end of this additional six week period of public consultation, all parties willhave felt they had the opportunity to contribute to the development of a practical and relevant pieceof legislation that will help to administer the myriad of responsibilities that make up bodycorporate and community management,” he said.

“Nothing has been rushed unnecessarily however my officers have been very aware of the need totreat this legislation with the urgency it deserves, considering the number of individuals anddevelopments left in limbo since 1994 and beyond.”

He said the proposed legislation when implemented would be a national first.

“Other states are looking at Queensland to lead the way in appropriate and workable laws to helpfacilitate the positive growth of this burgeoning lifestyle industry, for all concerned. It is proposedthat this landmark legislation include four regulatory modules which would apply to residential,hotel/accommodation, commercial and six lots or less developments,” Mr Hobbs said.

“Under previous legislation all developments were dumped under one law without consideration ofthe differing needs of dwellers and investors in these developments. This created a situationwherein a “six-pack” establishment had to come under the same regulations as a Gold Coast highrise. This is obviously unresponsive and inflexible for the increasing number of people living inthese widely varying developments.”

He said the legislation aimed at striking a balance between the rights of the owners, managers anddevelopers of unit complexes.

“The consumer protection principles and economic realities that constitute this lifestyle concept areall taken into consideration.

There are significant restrictions on proxy voting opportunities, an infinitely better disputeresolution process and information disclosure provisions to protect unit owners investments.


“Similarly managers and developers who invest heavily in the industry have benefited from a moreflexible and viable framework to promote continued investment and growth opportunities.

“The package contains fair and reasonable policies, most of which will be applied fromcommencement of the legislation expected in July.

“Queenslanders will have the opportunity to learn more about the proposed legislation withseminars scheduled throughout areas of the state that have considerable unit developmentconcentration or vested interest in the legislation.

“In addition to these seminars a comprehensive public awareness campaign will be initiatedthrough the media, real estate agencies and other representative groups to allow interestedQueenslanders the opportunity to gain as much information about the legislation as possible.

“There’s no doubt that on the face of it this legislation is complex, however with a well informedadvisory corps in the Department, and effective information campaign and continuing publicconsultation people will have the opportunity to have their questions answered.”

Mr Hobbs said the draft legislation, including the Standard/Residential Module regulations wouldbe available from Department of Natural Resouce offices from next week.

“Everyone who made a submission to date will receive a copy of the Bill in the mail and copies arealso being made available to state parliamentarians’ offices in the appropriate areas,” he said.

Attached in a comparative analysis of existing and proposed legislative inclusions and a summaryof the fundamental issues.

27 February 1997

community titles in queensland : the body … · the primary object of the body corporate and...

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