Differences with Commercial Owners Corporation Management

Differences with Commercial Owners Corporation Management

“Differences with Commercial Owners Corporation Management” is something we’ve wanting to cover for a while now. A lot of businesses in Victoria actually work out of buildings that are managed by commercial owners corporation managers.

  1. Less Emotional & (Hopefully) None of the Issues of Residential Owners Corporations.
  2. Some Additional Operating Costs.
  3. Insurance Premiums for Commercial Owners Corporations.
  4. Commercial Tenants Pay for Outgoing Including OC Levies.
  5. Tax Implications for Management of Commercial Owners Corporations.

Let’s take a closer look as to what it means when you own or rent in a commercial owners corporation.

 

1. Less Emotional & (Hopefully) None of the Issues of Residential Owners Corporations.

Residential owners corporations are people’s homes and issues will invariably be a lot emotive when they arise. There was an owners corporation in South Yarra, Melbourne that ended up spending $120k on legal fees all because of a dispute relating to a barking dog…

Commercial real estate in Melbourne – offices, shops, and industrial units are generally part of an owners corporation. For the most part, owners and Committee Members in commercial owners corporation are more concerned about running their businesses than the dramas of owners corporation disputes. This can often make the managing owners corporations a bit easier for commercial owners corporation managers.

 

2. Some Additional Operating Costs.

For the most part, the operating budget of a commercial owners corporations will be similar to that of a residential owners corporation in that there will still be the cleaning costs, insurance, repairs & maintenance, common utilities, and management costs.

However, there can be costs that run higher for commercial owners corporations such as more regular cleaning, higher lift servicing costs due to higher usage, routine window cleaning, and higher electricity costs due to lighting and signage.

Additionally, commercial owners corporations might other also have costs such as a concierge and increase facilities management requirements.

 

3. Insurance Premiums for Commercial Owners Corporations.

Insurance premiums are generally correlated with building values and risk factors. Commercial owners corporations – especially if there are industrial operations – can sometimes have higher insurance premiums. For example, years ago we worked with a building where there was a business that manufactured surfboards and the insurance companies viewed the presence of surfboard resins as a higher fire risk.

It’s also interesting to note that even in a residential building, if there’s greater than 50% of lots being used for short-stays, some insurance companies might deem the building to be commercial in nature.

 

4. Commercial Tenants Pay for Outgoing Including OC Levies.

Commercial owners corporations in Victoria generally entails the tenant paying for the outgoings as part of the lease agreement.

Commercial real estate outgoings include council rates, water rates, and owners corporation fees.  The definition of whether a premise is a commercial or retail lease differs from state to state. Some commercial leases are covered by the Retail Leases Acts 2003 (Victoria), with Section 29 defines outgoings for which the tenant is required to contribute.

In some buildings and commercial leases, it can be that ‘outgoings’ are not passed to the tenant as part of the lease agreement, i.e. when the entire building is owned by one party.

What is interesting is that in commercial owners corporations where the tenant pays for the owners corporation levies, they still are not entitled to a say in the running of the building (i.e. generally not invited to the AGM nor have voting rights).

Further resources:

a. Victorian Small Business Commissioner

b. LegalVision

 

5. Tax Implications for Management of Commercial Owners Corporations

If all or the majority of occupants in a commercial owners corporations are GST registered businesses, should the owners corporation register even if they are below the GST threshold for registration?

In a residential owners corporation, registering for GST when you don’t have to generally doesn’t make sense as the lot owners don’t get the GST back. There are also the added administrative costs of preparing and lodging BAS returns.

In commercial owners corporations, being GST registered would mean that the owners/tenants would get the GST back and the owners corporation would also get the GST back on invoices that it pays.

 

Strata Management Consultants

Having a competent and professional commercial owners corporation manager on your side means that you can focus on your business rather than owners corporation matters.If your manager isn’t performing and you’re thinking about changing commercial owners corporation managers, choosing the right manage is important.

Have a read of this article for one example of where did things didn’t go right – Don’t Trust a One-man Band with Your Money (or Owners Corporation Management).

Strata Management Consultants specialises in not only advising and guiding Committees on how to change commercial body corporate management companies but have also carefully vetted every management company we work with. Find out more about the value of having a Strata Consultant working for you here, or feel free to get in touch on 1300 917 848 or via email at office@strataconsultants.com.au.

 

Differences with Commercial Owners Corporation Management in Victoria? – Content Copyrighted 2020 by Strata Management Consultants

 

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