What is an Owners Corporation or Body Corporate? Everything you need to know!

What is an Owners Corporation or Body Corporate?

An Owners Corporation or Body Corporate is the legal entity responsible for buildings on subdivided land, such as unit blocks or apartment blocks and that share common property like shared driveways, lifts, gardens, parking areas and more.

The Owners Corporation is responsible for things such as:

·         Repair and Maintenance of all Common Property: All areas that are shared by the residents such as driveways and gardens or lifts.

·       Insurance: This includes insurance for all common areas, the buildings for replacement and reinstatement insurance and includes public liability insurance.

·         Property Rules: The Owners Corporation may have rules around things like the use of common areas and parking etc.

How is an Owners Corporation created?

An Owners Corporation is automatically created when a plan of sub-division is registered that contains areas of common property. If you are a lot owner in a plan of subdivision, you automatically become a member of the Owners Corporation. There is no opting out. Members must comply with their legal and financial obligations to the Owners Corporation.

There are some exemptions to Owners Corporation obligations, such as properties that only contain two lots.

Who is actually in charge of the Owners Corporation or Body Corporate?

This depends on the lot owners of the development. For properties that have a small number of residences such as a unit block with four units, the lot owners may elect to manage the Owners Corporation themselves. This can be determined by resolution passed by the members of the development.

For larger subdivisions such as apartment blocks or properties with a larger number of units or townhouses, it is common for the lot owners to appoint an external Owners Corporation Company to manage the Owners Corporation.

What happens if lot owners do not wish to appoint an external Owners Corporation company?

If the lot owners do not wish to appoint an external company to manage the Owners Corporation, they can manage this themselves. Lot owners must ensure they are all aware of their obligations under legislation including the minimum insurance requirements. Depending on how many lots in the plan, it may be mandatory for an Owners Corporation manager to be appointed.

Whilst lot owners may save on costs by not paying an external company to manage the Owners Corporation, consideration needs to be given to matters such as:

· Repairs and maintenance. How will they be carried out, who will be responsible for organising them or undertaking them, are all lot owners in agreement to the repairs and the costs of the repairs?

· Insurance. Who will be responsible for organising the required insurance, how can lot owners be confident that the insurance is sufficient to cover their building in the event of loss or damage?

· Records. Who will keep the required records for the Owners Corporation?

· Decision Making. Resolutions will need be to be passed between lot owners to determine how things such as repairs and maintenance, common property issues etc are attended to.

· Dispute resolution. What happens if lot owners do not agree and end up in dispute. Is there a grievance procedure in place?

Whilst all lot owners in a property might be in agreement now, this does not mean it will stay this way. Issues can arise that may lead a lot owner to change their opinion or view on factors around how the current Owners Corporation is managed. Consideration also needs to be given to situations where a property owner may sell their lot, and the new owners may not agree on how the Owners Corporation is managed. In certain circumstances, a lot owner can call for a meeting of the owners corporation and put forward a motion to be voted on.

When would an external Owners Corporation Manager be appointed?

Properties with a larger number of buildings appoint an external manager to manage the Owners Corporation. The Owners Corporation Manager will then be responsible for record keeping, organising repairs and maintenance for the common areas, organising required insurances, forecasting a budget, striking a budget, collecting fees from lot owners, ensuring the Owners Corporation is managed in compliance with legislation and more.

Having an external Owners Corporation Manager can alleviate the responsibility from lot owners and assist in dispute resolution.

What are Owners Corporation Fees?

Owners Corporation fees are the fees that each lot owner pays toward things such as insurances and repair and maintenance of common property and things such as common property lighting. It will include the management fees charges by an external Owners Corporation manager. The fees are calculated from a budget and on each lot’s liability.

Striking a budget and calculating fees can get complicated when no external Owners Corporation manager is appointed. Lot owners will need to decide and agree on who will be responsible for collecting the fees from each lot owner and paying the insurance or repair costs. Issues can arise if a lot owner does not pay their share of the fees and there is no previous resolution on how this should be dealt with.

When an external Owners Corporation manager is appointed, they are responsible for collecting fees from lot owners and will be responsible for the collection of unpaid fees from lot owners.

What should buyers check before purchasing?

When purchasing a property, buyers should check the Contract and Vendor Statement for details about any Owners Corporation that applies to the property. Further checks should be undertaken to understand how the Owners Corporation is managed and the total amount of annual fees that each lot owner is required to pay. Buyers will need to factor in these annual costs to ensure they can afford these fees on top of their ongoing purchase costs. Purchasers should also be aware of any previous minutes that may become resolutions affecting their property after settlement.

Buyers should also check their legal obligations to the Owners Corporation to ensure they are understanding what is required of them as a lot owner.

If you are looking at purchasing a property with an Owners Corporation or need assistance with an Owners Corporation or an Owners Corporation dispute, contact our team today!