There is a growing trend in Australia and around the world towards community living. There are benefits to this type of lifestyle as you retain your privacy yet do not have the responsibilities you have with private property. The majority of properties set up for community living have an association that takes on ground maintenance and car parking, corporate insurance and the management of all parts of the property for common use.
When there is a division of property for multi-unit development, a managing body with the role of managing common ownership of parts of the property is set up. This Body Corporate can also be known as an Owners Corporation, Strata Community or Scheme that has become incorporated.
There are several terms relating to body corporates that will be valuable to understand. They include:
Lot – The term ‘lot’ refers to the unit or townhouse purchased, including the car space and storage area.
Lot Owner – The person who purchases the lot or dwelling that is part of the body corporate.
Common Property – Common property refers to all the areas not included in any ‘lot’. These areas are owned jointly by all the lot owners, and it is the responsibility of the body corporate to manage them.
Body Corporate – The body corporate comprises the owners in the strata scheme. People who purchase a lot become members of the body corporate and, as such, have a part in the decision-making process.
Community titles scheme – This is a scheme where you can privately own a part of a building or land area as well as having a share in common property and facilities with other owners.
Strata Scheme – This term refers to a collection of buildings where people own a part or ‘lot’. A lot usually refers to an apartment. There is also common property in a strata scheme, and all the owners have shared ownership of the common property.
What Is A Body Corporate?
A body corporate can be likened to a company as there are similarities between the two. In both, there are a collection of shareholders and a board of directors. The company owns the assets in the same way as the body corporate is responsible for common property. Within a body corporate, there are individual pieces of property along with common property. These individual pieces of property are owned by the owners themselves and are where they live. The body corporate owns the common areas, including garden areas, swimming pools, roads and footpaths, playgrounds, and the like. Each of the property owners holds a proportion of the shared property.
The body corporate or owners corporation provides buyers with more affordable property with a shared cost for the property’s maintenance.
All Body Corporates have legislation that regulates them, and these regulations govern any changes in property ownership. There are many types of corporate bodies, including double-storey villa units, attached/conjoined townhouses, apartment blocks, and mixed developments that combine residential and commercial buildings.
A Property Owners Role
Each property owner becomes a member of the body corporate when they buy their property. They leave the body corporate if they sell their property and the new owners become members. If an owner rents the property to a tenant, the owner remains the corporate body member; the tenant does not. That is why it is often called the owner’s corporation.
The body corporate takes on responsibility for the members’ compliance, financial interactions, insurance, and essential services requirements. Generally, the duties fall to the office bearers of the body corporate. However, some engage a professional body corporate manager to oversee strata insurance, look after administrative tasks, and manage all common areas’ caretaking.
The body corporate:
a. Is required to follow set guidelines so that those living in the complex can do so harmoniously.
b. Is tasked with ensuring common areas are maintained pleasingly.
c. Ensures painting, any installation of air conditioning units, awnings etc., are undertaken in collaboration with the Body Corporate.
d. Manages and maintains the common property.
e. Decides what is to be paid by each of the owners to ensure the body’s operations.
f. Organises insurance on behalf of the owners.
g. Controls and manages the common areas and corporate assets.
Common Areas And Common Property
The common areas are the shared areas of the property. The body corporate manages these areas, and the body corporate ensures they are covered by liability insurance.
Common areas include such things as:
b. Laundry Areas
c. Gyms and swimming pools
d. Open spaces and garden areas.
Insurance is a crucial aspect of corporate management. It is essential to be aware of the insurance policy of the body corporate and what it covers. Many strata community bodies pay for an insurance policy that provides total replacement cover for all the buildings plus public liability for the common areas.
Owners need to ensure that all buildings and liability risk are covered, including their dwelling, walls, and shared facilities and services. Members of the association/corporate body shouldn’t require a separate building insurance police if the strata insurance covers individual properties. Most corporate bodies arrange the group’s insurance because it is more economical than each member getting individual insurance.
It is advisable to seek advice from the strata insurance advisor concerning any items you have in common areas. You need to know how much compensation you would receive if something happened to the items. You also may not consider the insurance adequate.
Although the body corporate is likely to have insurance for all the buildings, owners will require their contents insurance and car insurance. They may also need liability insurance for their car spaces. Gaining advice is advisable.
For owners who rent out their property, they may consider the need for income insurance if they cannot gain an income from the property.
Body Corporate Manager
The body corporate and community manager provides management continuity and is also the record keeper for the community. They have the role of delivering dispute resolution and providing objectivity when dealing with members’ concerns and complaints. They can be required to deal with such things as friction over parking, noise complaints, use of common areas and developments.
The body corporate manager’s role is to provide the corporate body with quality administration whilst handling the daily paperwork and incoming requests. They organise and manage meetings, seek contributions from members, organise the most effective and economical strata insurance and deal with the insurance companies, and oversee the setting of budgets. The manager organises and supervises repair work, oversees and submits insurance claims, and provides general advice to members.
The overseeing of maintenance is the role of the manager along with essential services. They will seek quotes for work required on common areas and ensure these areas are well maintained. They perform the role of liaising with any workers on the property including, gardeners and tradespeople.
Body Corporate Levies
All lot owners are required to pay body corporate levies or fees. These fees meet the financial commitments of the body. The amount to be paid by each lot owner is set at the Annual General meeting, and lot owners are notified of their contribution.
Levies are divided into two funds, an administrative fund utilised for expenditure that occurs regularly. Regular expenditure includes payments to service contractors like lawnmowers and maintenance and repairs to common property. The second fund, the sinking fund, is like a future provision fund where money is saved for future needs, such as painting or purchasing new asset items.
Do Your Research
If you are looking at a dwelling that is part of a complex and run by a body corporate, it is advisable to do your research before purchasing. You can ask to review the body corporate records and ask questions about financial matters, common land, insurance, and how the body corporate is run. You can request to see the books for the administrative fund that will show you everyday expenses related to roads and ground maintenance. Looking at the sinking fund will tell you what money has been put aside for capital expenses. Reviewing these things will provide you with information on the financial responsibilities associated with purchasing an apartment or unit.
A body corporate, created when land is subdivided to establish a community title scheme, is a legal entity. All the owners of lots have ownership of their area and, as such, become part of the body corporate. It is the body corporate’s responsibility to manage the common areas and have input into the running of the community.
Frequently Asked Questions
1. If you own a unit in a strata community, do you have to attend corporate body meetings?
You do not have to go to meetings; however, it is encouraged as a strata scheme does operate more efficiently if those who own lots become involved in the community’s running. It is during the annual general meeting that levies are set and that the committee is elected. It is the elected members that take on a significant role in management.
2. Do I have to pay corporate body levies?
Yes, you must pay body corporate levies as the contribution made by lot owners ensures that the body corporate has sufficient funds to undertake required tasks and meet financial commitments. The funds are used to manage comment areas and for insurance. They can also use them to pay a manager.