Body Corporate

08/07/2020 0 By indiafreenotes

A body corporate is a legal entity created when land is subdivided to create common property and lots, and is registered to establish a community titles scheme. The scheme can be a duplex, a residential unit block, a high rise accommodation complex, a shopping complex, or a residential suburb, or a business park. Every owner of a lot in a community titles scheme is automatically a member of the body corporate.

Purpose of a Body Corporate

A body corporate exists to manage the issues of necessary and mutual interest to all the owners. These matters are:

  • Physical property issues
  • Issues related to people living together

Physical property includes gardens, common building structures and shared assets such as recreation clubs and tennis courts.

When people live together issues may include behaviour, noise and parking. Anything where the actions of one particular resident may impact on another.

Legislatively, bodies corporate perform only a limited purpose. They must:

  • Administer the common property and the body corporate assets for the benefit of the owners of lots included in the scheme
  • Maintain common property to the extent it is in structurally sound condition
  • Enforce the community management statement (including by-laws affecting the common property)
  • Carry out other functions given to the body corporate under legislation, such as keeping records about its operations, meetings and owners.

The body corporate is not legally able to do anything other than fulfil these mandatory responsibilities. In performing these duties, the body corporate can enter into contracts, employ staff and generally deal with property. Unlike a commercial company, it cannot conduct businesses, such as a letting agency, tour operation or restaurant.

However, the body corporate may engage in any business activities necessary to properly carry out is functions (eg. investing funds).

Financing of Body Corporate Financed

Contributions (otherwise known as levies) are received from every lot owner of the body corporate and are pooled to maintain the community and common areas. The size and frequency of the contributions required to properly run the body corporate are decided by all owners at the annual general meeting.

There are two types of contributions set by the body corporate:

  • The contributions to the administration fund.
  • The contributions to the sinking fund.

Body Corporate Make Decisions

Decisions are made by owners in two ways:

  • At a meeting of all the owners (a general meeting)
  • At a meeting of the committee for the body corporate

No individual acting in isolation can make a decision.

Common property

Most bodies corporate have “common property”. This usually includes the driveway, facilities such as a laundry, gym or pool and also the open space on the property. This common property must be managed and have liability insurance so that it serves only the purposes intended and doesn’t expose the body corporate to unnecessary legal risks.

Insurance – the critical aspect of body corporate management

The body corporate normally pays for one insurance policy that covers full replacement insurance for all the buildings and adequate public liability insurance for the common property. When you own a unit in a property with a body corporate, you need to be absolutely certain that all building and liability risks are covered for the property particularly when walls, facilities and services are shared. In the event of an insurance claim there is only one company to deal with and no doubt as to who will pay a claim. As a member of a body corporate you do not have to have a separate policy for building insurance if the Body Corporate has a policy. This arrangement is normally more economical than a member buying their own insurance and you are assured of adequate public liability insurance for the common property. Having adequate public liability cover for the common property is critical as a wide range of people have access to it and accidents often result in significant claims not to mention the legal expenses. Members are still required to have insurance for their own contents and also public liability cover for car spaces and for visitors on their property.

Operate of body corporate operate

Bodies Corporate managed by Ace Body Corporate Management have an individual bank account for each body corporate. The manager is normally the sole signatory to that account under delegation from the members of the body corporate. An annual general meeting is held at the beginning of each financial year of the body corporate. This meeting sets the budget and addresses any concerns of the members. This sets the “contributions” which the members have to pay each year. The amount contributed by each member is worked out based on a table included in the plan. Other meetings may be held if required by the members. The main component of the budget is usually the insurance premium that covers the buildings and public liability risks. Other components are the caretaking, grounds maintenance, repairs, common lighting, maintenance of essential services and the manager’s fees. Bodies corporate vary in the extent to which funds are accumulated in body corporate account. Many operate on a small margin over the normal annual operating costs while others plan ahead and accumulate some funds for major works such as painting, guttering replacements, fencing, paving etc. Should a major unbudgeted cost occur without sufficient funds in the bank, it is normal practice to establish a special levy to pay for that particular works.

The Body Corporate is responsible for ensuring full reinstatement insurance is in place for buildings together with insurance for public liability. It is also responsible for the maintenance of services that connect into the building and to ensure there is adequate public lighting and for the general upkeep of the exterior of the buildings and the common grounds. It is responsible for the upkeep of all common items such as car and pedestrian security gates, intercoms and public lighting

The Body Corporate insurance covers damage and consequential damage to the building itself and all fixtures within the units. The insurance is for reinstatement of buildings but does not cover normal wear and tear, but it does cover legal liability on the common property. Damage to carpets within a unit is specifically excluded. It is highly recommended that Landlord’s insurance be taken out to cover carpets and legal liability within tenanted units and car park lots. Owners and tenants must have their own contents and public liability insurance for their own units.

Provides continuity of management processes and record keeping for the body corporate. Without a professional manager, problems can arise with frequent changes in voluntary members who undertake the duties, resulting in different standards of record keeping and potentially inadequate or missing records.

Ensures body corporate legislative matters are being adhered to

Resolves disputes and provides an objective approach to dealing with members’ concerns or disputes. While disputes are rare, some situations can cause conflict; including tenanted units, parking, noise, adjacent developments etc. An objective, professional body corporate manager can assist in these situations.

Looks after body corporate administration and handles day-to-day paperwork and requests from solicitors etc. Organises annual and special general meetings including minutes, facilitates setting of budgets, collects members’ contributions and maintains a complete set of financial statements.

Administers insurance and deals with brokers and directly with insurance companies as necessary to obtain the most effective and economical coverage for the body corporate. Submits claims, schedules repair work and processes claims paperwork. Provides advice and options to members in relation to public liability issues. This ensures that necessary processes are undertaken for insurance cover and record keeping against possible future claims for public liability.

Administers the maintenance of body corporate facilities and essential services – obtains quotes and schedules works as required to ensure that the body corporate is maintained in good condition and presents no dangers to visitors or members. Schedules essential services reports as necessary and reviews compliance with current legislation.