****ing body corporates, how do they work?
January 4, 2011 4:07 PM   Subscribe

Australian home owners: please explain to me about body corporates. How much power do they have? And why do the fees vary so hugely?

Am looking to buy a house. Due to budget and location constraints, will probably go with a townhouse. Here in Canberra there are occasionally separate title townhouses on the market, but mostly they have a body corporate.

My understanding of body corporates is hazy at best, and my experience is as a tenant, not owner. I believe they are a committee of home owners in the complex (with some nebulous relationship to a paid property management agency?), and they make decisions about things like whether residents can have pets, how much insurance to get for the building, when to repaint, etc? Is this approximately correct?

One place we looked at a few days ago, we read the body corporate minutes from the past few years' meetings. At one point there was a decision to build carports for all the townhouses, and they charged each owner an extra levy (on top of the usual BC fees) of $3000.

If this had happened while we were owning that townhouse, would we have been able to opt out? What if we didn't want a carport? What if we didn't have a spare $3000? Does this sort of thing happen often? (I.e. the body corporate deciding to improve the property and making everyone chip in extra fees?)

In a similar vein, the body corporate fees for places that we have viewed so far seem to range between $1000 a year and $5000 a year. Why the big discrepancy? Insurance? Maintenance? Incompetence?
posted by lollusc to Home & Garden (8 answers total) 2 users marked this as a favorite
A Body Corporate is a legally constituted entity that is established for the purpose of managing the common areas of multiple dwelling properties e.g. apartment blocks. The members of the Body Corporate are the owners of the properties.

Like any membership organisation, its the membership that elects a committee that is given responsibility for running/overseeing the day-to-day needs.

You have the opportunity at the annual general meeting to nominate for the committee, vote on key decisions like the budget for the coming year etc. The committee then implements them. You should never be in a position where you suddenly get a $3K bill. You will know about it well in advance and have opportunity to challenge decision.

Fees vary for a range of reasons such as size/value of property, the location (insurance varies by location), etc etc I'm sure incompetence may play a part in some contexts! I'd suggest trying to compare similar properties rather than a property in Kingston with a property in Tuggers.

My understanding is that if a decision is made to upgrade carports for example, then you have to pay. You should have the opportunity to challenge/influence this decision, before it is made at the Annual General Meeting.

The ACT government should have some fact sheets or a web site that goes through all this in simple language.

Good luck with home buying!
posted by MT at 4:51 PM on January 4, 2011

Response by poster: Thanks. That's helpful.

The places I'm talking about with fees ranging from 1000-5000 are all in the same suburb and approximately same size. None of them have anything majorly different like a pool or whatever that could explain the difference.

I have read the ACT fact sheets, but honestly they are a bit too basic and don't discuss e.g. extra levies etc.

As for the voting at the AGM, do they go by majority rule, or require consensus, or what? E.g. in the case of the $3000 carports, if there are 10 properties in the complex, and six agree, are the other four screwed? What sort of processes are there for challenging decisions afterwards? To be honest, it's not the thought of "suddenly" getting a $3000 bill without knowing about it in advance that scares me so much as the thought of being powerless if only a minority objects to such a large special levy. And if it's only once every 20-30 years and really unusual, then I can live with that, but if there's something like that every couple of years? That's where I would draw the line.
posted by lollusc at 5:13 PM on January 4, 2011

Best answer: Some of the bodies corporate may have higher yearly fees because they maintain large sinking funds for things like repairs and repainting. I've heard of people who've bought apartments with low fees then a few months later had to pay several thousand dollars for their share of a repaint for the entire complex. You're already doing the right thing by reading the committee minutes.

What sort of processes are there for challenging decisions afterwards?

In theory you could take them to court but this would be a nightmare for everyone involved.

Have you looked at riot-act.com? Try searching it for "body corporate" and you'll find plenty of ACT-specific stories, all in delightful riotact idiom.
posted by A Thousand Baited Hooks at 5:49 PM on January 4, 2011

Response by poster: Those riotact pages are VERY illuminating! Thanks heaps!
posted by lollusc at 7:08 PM on January 4, 2011

There may be a body in the ACT similar to QCAT in Queensland to hear disputes arising from decisions of a body corporate. Such tribunals exist to (allegedly) minimise the cost and time involved in resolving such disputes, although my experience (limited to one current situation I am dealing with by representing my employer in a QCAT matter unrelated to a body corporate) is that they may limit the cost, but at the expense of expanding the time taken to make a decision. An owner would be able to request that a decision of a body corporate be reviewed, although this would only be on the basis of whether the decision complied with the constitution of the body corporate.

Voting at an AGM or any other meeting would be governed by the constitution of the body corporate and decisions regarding expenditure may not have to be discussed at an AGM, but could be decided by a simple majority at an ordinary general meeting or, possibly, by a sub-committee that has been authorised to make such decisions. Before buying a property where a body corporate is involved, I suggest checking on the decision-making processes used to get an idea for any nasty surprises you may get down the track.

The cost of contributing to a body corporate will also depend on such factors as the age of the complex, which will determine to some extent the amount of maintenance required and how well the 'sinking fund' has been managed over the years. A good body corporate will plan many years ahead and allow sufficient funds to accumulate well before major maintenance is required. Even things like the type of building can dramatically impact on maintenance - a three-story building will cost a lot more to repaint that a single-story one, for example, because of scaffolding costs. A complex with extensive gardens will need more money for maintenance than one with no or minimal gardens etc.

If you do decide to buy into such a property, make sure you attend body corporate meetings - many owners don't, meaning that a relatively small number of people can make decisions on the part of all. My experience is that, unfortunately, the sort of people who end up running body corporates are not the sort of people you want making financial decisions on your behalf. While people are invariably lazy about getting involved, someone who does so can marshall support from other owners when needed. If you don't attend, you have no (moral) right to complain about decisions later.
posted by dg at 8:05 PM on January 4, 2011

There may be a body in the ACT similar to QCAT in Queensland

That would be ACAT.
posted by GeckoDundee at 8:21 PM on January 4, 2011

Best answer: >You should never be in a position where you suddenly get a $3K bill. You will know about it well in advance and have opportunity to challenge decision.

That's all very well, but what if the Body Corporate has previously agreed to the charge, and then you buy the unit/townhouse? You would have to pay, and have no say in the matter. But the solicitor or whatever handling the purchase should investigate that kind of thing and inform you before you complete. They should also check into the funding, and inform you if it's under-funded/under-insured, which means the fees are likely to go up or other problems are likely to occure. It's all very well to object to $3,000 for carports, but what if it's $3,000 for a new roof after a hailstorm?

> As for the voting at the AGM, do they go by majority rule, or require consensus, or what?

Majority, yes. But larger units get more votes, which may not have occurred to you. The more square footage you own, the more votes you get. Also, if you haven't paid your strata fees up to date, you don't get to vote.

As for the variations in fees? Apart from the factors already mentioned, some strata management agencies (and you don't actually legally need one, you can manage the whole thing by yourselves if you put in the effort) are unscrupulous and exploitative. When we moved into our place we were with an agency which charged $1 every time they sent an email. They had mysterious "database fees" which as far as I could see were a made-up fee for having an office with computers. They charged outrageous administration fees and their service was shocking. I can't begin to tell you the horrors of being stuck with a bad strata management agency, or trying to get free of them and move to a better one. You don't know, man, you weren't there! Ask around. Talk to other owners.

Disclaimer: all my experience is based on NSW, not the ACT.
posted by AmbroseChapel at 4:08 AM on January 5, 2011

@Ambrose, it's not always by majority; if the development is large enough, there will be a committee, made up of the property manager and some of the owners. Decisions are sometimes made by the committee despite what the owners want, IF few other owners (apart from those on the committee) respond to notification of upcoming committee decisions.

All owners are notified about upcoming decisions before a committee meeting, and have an opportunity to vote yes or no. You just have to be aware that some committees attract power-hungry individuals or those with a vested interest.

A body corp I was in in Penrith had several owners on it whose properties always seemed to require repairs. A body corp I'm in in Brisbane had a committee member (who lived outside of Brisbane) who proposed that she be flown to Brisbane 3 times a year for committee meetings!

Other things to look out for: additional facilities attract additional maintenance and insurance fees, especially pools, lifts (elevators), gyms and so on.
posted by flutable at 8:35 PM on January 5, 2011

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