Body Corporate

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GUEST OBSERVER
As the saying goes: 
<ul>
<li>there are the things that you know; </li>
<li>the things that you know that you don’t know (the known unknown); and </li>
<li>the things that you don’t know that you don’t know (the unknown unknown). </li>
</ul>
The recent Grenfell Tower fire tragedy in London highlights the potential catastrophic consequences of failing to find out the unknown unknown things and/or failing to take action to appropriately deal with the necessary things once known, such as the condition and performance standards of the materials in the building along with the necessary maintenance obligations of the body corporate.
There has been considerable media attention around the widespread existence of non-conforming building materials and potential devastating ramifications for bodies corporate. This article is aimed at the practical and proactive steps which bodies corporate can take to empower themselves and protect their lot owners and residents.
It is certainly true that the effective maintenance of strata title buildings is a complex affair. The contracts for the construction of the buildings on scheme land are entered into between the developer and the builder, long before the lot owners are ever in the picture. This means that; the lot owners have no input into the selection of materials or the standards of construction, and they are often unaware of the location of essential documents for the proper administration of their schemes, including construction contracts, plans and specifications.
This means that the body corporate and lot owners inherit the building with often unknown building materials; unknown latent conditions and they are unaware of the maintenance requirements for their particular building. This also has a direct effect on effectively budgeting for the future expenditure to properly maintain the building in order to maximise its effective lifespan.
Add to this the fact that there is a high amount of change within bodies corporate, which exacerbates the difficulty in managing vital information about the building. Lot owners sell, body corporate managers can change from year to year, resident managers can sell their management rights and committees often change each year. What this means is that the collective knowledge of all of the people who have been involved in the building is rarely centralised and as a result, key information and documentation is often misplaced along the way or is never obtained in the first place.
We recommend that bodies corporate take control of their information and documentation by implementing a building management document or plan. By the committee working in with the body corporate manager to create a bespoke plan for the operation and management of their building, bodies corporate will be able to identify what they know, what are the known unknown things about the building, and what unknown unknown things about their building (which are generally discovered by expert reports and professional advice). Additionally, this information is to be documented and centralised so that the body corporate does not lose this information as lot owners, body corporate managers, resident managers and committees change over time.
As part of the process of creating the building management plan, it is essential for bodies corporate to know the current (point-in-time) status of their building and documentation. For this reason, we highly recommend engagement of an expert, or team of experts, to enable the body corporate to “catch up” on the history of their building by obtaining all necessary documentation and obtain a status report as to the condition of their building as at today. This information and documentation can then be included in the building management plan and future obligations and expenditure for the building can be informed by this information. Additionally, all new occurrences at the building can be recorded in the building management plan as time goes on so that committees have the information which the need to effectively act on behalf of the body corporate to make decisions within their authority and to properly inform the lot owners in order for them to make effective decisions at general meetings.
Building condition and maintenance is only one of the many things which we recommend is included in an effective building management plan. If bodies corporate know what they know, know what they don’t know, and find out the unknown unknown things, then they are in a much greater position to plan for and make effective decisions on all matters which can have an effect on their building.
Hopefully, such an approach can enable bodies corporate to minimise or prevent financial and physical disasters.
James Nickless is partner of <a href="https://www.clarkekann.com.au/newsroom/combustible-cladding-audit?utm_source=Mondaq&amp;utm_medium=syndication&amp;utm_campaign=View-Original" target="_blank">ClarkeKann Lawyers</a>. 
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j.ballantyne1990-6AQqhLzZaK

Combustible cladding is just one of many essential building owners issues: CK Lawyers

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GUEST OBSERVER
Dealing with the aftermath of a storm is difficult for everyone affected.
It is particularly difficult for Bodies Corporate because they must also deal with upset lot owners, dispossessed tenants, and damage caused to common property. But where exactly does a Body Corporate’s obligations start and end? Dealing with a flooded foyer is one thing, but what happens when the roof of your apartment complex has been blown away?
What does a Body Corporate do then?
Be Proactive, Act Promptly 
In the aftermath of a storm, a Body Corporate should be proactive. It should notify its manager and insurers without delay. Ideally, the Committee for the Body Corporate should get someone on site as soon as possible to assess any damage, and circulate a notice to lot owners and tenants asking them to report any damage.
If a lot owner or a tenant reports any damage to a Body Corporate, it is extremely important for the Body Corporate to act promptly. The worst mistake a Body Corporate can make is to do nothing or leave it to their lot owners to deal with.
In MAGOG (No 15) Pty Ltd v The Body Corporate for the Moroccan [2010] QDC 70, the Court found that Bodies Corporate have a duty to repair and maintain the common property in good condition, including, to the extent that common property is structural in nature, in a structurally sound condition. The Court also found that, where a Body Corporate fails to meet these obligations, they may be liable for any property damage caused as a result, as well as pure economic loss if that loss is reasonably foreseeable.
In other words, when a storm damages common property and that damage causes consequential damage or loss to a lot, the Body Corporate may be responsible. If a Body Corporate does not, it places itself at risk of being sued, as occurred for the Body Corporate for the Moroccan. That is why being proactive and acting promptly is so important.
Have Insurance  
When it comes to insurance, the saying is that it is better to have it and not need it, than need it and not have it. The same applies to Bodies Corporate. But with Bodies Corporate insurance is often a statutory requirement. Generally, Bodies Corporate are required to insure for its full replacement value:
a. the common property;
b. all Body Corporate assets;
c. each building in which a lot is located; and
d. common walls between adjoining lots.
In addition to this, Bodies Corporate must ensure that their insurance policy meets with certain minimum requirements. Generally, this requires an insurance policy that:
a. covers damage, such as storm damage, to the greatest practicable extent;
b. covers the costs of reinstating or replacement of insured buildings, including the cost of taking away debris, to the greatest practicable extent; and
c. provides for the reinstatement of property to its condition when new.
Therefore, before a storm strikes, Bodies Corporate must ensure that they have the proper insurance in place. This will not only help them discharge their statutory obligations but also help protect them and their lot owners when they need it the most.
Know who is responsible for the Excess
Having insurance is one thing. Paying the excess is another. Generally, a Body Corporate is allowed to purchase an insurance policy even though an excess may be payable on that policy. For an event affecting only one lot, the owner of that lot is liable to pay the excess unless the Body Corporate decides it is unreasonable in all the circumstances for the owner to bear the liability. For an event affecting two or more lots, or one or more lots and common property, the Body Corporate is liable to pay the excess unless it decides it is reasonable in all the circumstances for the excess to be paid for by:
a. the owner(s) of a particular lot; or
b. the owner(s) of a lot and the Body Corporate.
What this means is that if a storm causes damage to only one lot or even a handful of lots, the Body Corporate may require the affected owner(s) to pay the excess.
A similar situation was considered recently in the matter of The Point Coolum Beach [2014] QBCCMCmr 285 (4 August 2014). In this case, the Applicant was the owner of a lot that suffered water damage. The water damage was covered by the Body Corporate’s insurance, but a $20,000 excess was payable. The Body Corporate considered that it was reasonable in all the circumstances for the Applicant to bear the liability for the excess, and the Adjudicator who heard the case agreed.
The Adjudicator considered a variety of factors before ruling in favour of the Body Corporate, but particular emphasis was paid to the fact that:
a. the Body Corporate properly acquired its insurance in accordance with motions heard at annual general meetings;
b. the Body Corporate manager fully informed all lot owners, including the Applicant, that the excess payable in the event of water damage was $20,000; and
c. the Committee properly identified that the event only affected the Applicant’s lot and considered that it was reasonable for the Applicant to bear liability for the excess.
Therefore, when a Body Corporate purchases insurance, it is not only important that this is done properly, but that lot owners are fully informed of any excesses payable following an insurable event – such as a storm. By doing this, Bodies Corporate could save themselves the expense of hefty excesses, much like the Body Corporate for The Point Coolum Beach which effectively saved itself $20,000.
Conclusion
The first step for Bodies Corporate dealing with storm damage is to be prepared. They should have insurance and make sure lot owners understand how those policies work – particularly when it comes to the payment of any excess.
In the aftermath of a storm, a Body Corporate should be proactive and act promptly.
Mario Esera is senior Associate, Piper Alderman and can be contacted <a href="https://www.piperalderman.com.au/publications?article=8337">here.</a>
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jonathanchancellor-7SQnKwU6yx

Property 101: Bodies corporate and storm damage

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The current laws governing residential and commercial buildings in Queensland are overly onerous and out-of-step with lawmakers’ objectives, according to a leading litigation lawyer. 
The Queensland government called for submissions regarding administrative and procedural issues arising from The Body Corporate and Community Management Act 1997 (Qld). 
In his submission, Slater and Gordon Litigation Lawyer David Greene said the current regulations are placing a large burden on bodies corporate across the state. 
“A growing number of Queenslanders live and work in buildings governed by this regulatory framework, which is failing to strike a balance between individual rights and democratic decision making,” Mr Greene said. 
“For example, some decisions currently require unanimous agreement, including potentially sustainable infrastructure proposals such as solar panels, water saving devices and wind generators. 
“Securing the agreement of every lot owner is onerous and counter-productive, especially when you consider that most sustainable infrastructure increases the value and longevity of the building, as well as reducing cost of living for residents.” 
However, Mr Greene also stressed the importance of ensuring every lot owner has a voice in the process. 
“In my opinion, there is no better safeguard to protect the minority interests of lot owners than their ability to challenge the reasonableness of a decision by the body corporate” Mr Greene said. 
“The current legislation allows for such challenges, but parties should not have to put up with the uncertainty and expense of utilising those procedures every time they fail to obtain unanimous support for a proposal. 
“Instead, the introduction of a special resolution for certain decisions (those presently requiring unanimous support) would provide an adequate layer of support and protection by balancing individual rights with the need for community consensus.” 
Recommendations to improve the effectiveness of Queensland’s body corporate laws 
1. Remove the onerous requirement for unanimous support and replace with a requirement to obtain a special resolution for certain decisions. 
2. Improve the dispute resolution provisions (including lot boundary disputes) and building and maintenance issues by requiring the original owner to hand over the development approval, the certificate of classification, the fire safety plan, the building contract and any other contracts which the body corporate is a party to for the site at the first AGM. 
3. Protect schemes from external influence and proxy voting by maintaining secret ballots to appoint a body corporate manager. 
4. Prevent ‘gaming’ of the system in small schemes that struggle to find sufficient numbers of lot owners willing to serve on a committee, by having the appointment of a body corporate manager as default, with an option to establish a committee as an alternative. 
5. Broaden the scope of the dispute resolution provisions, but ensure sufficient protections are built in to ensure concurrent litigation is not running in the Commissioner’s office and a Court. Concurrent litigation could become a legitimate strategy for a developer to undermine the ability of the body corporate to obtain a relatively inexpensive, easy and quick resolution to a dispute. 
Slater and Gordon Litigation Lawyer David Greene’s full submission to the Property Law Review Issues Paper is available <a href="https://media.slatergordon.com.au/s3fs-public/submission.pdf" target="_blank">here</a>: 
 
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