‘…the body corporate will take care of it’
We’ve met with and spoken with a lot of real estate agents over the years. Be it in the context of the Committee Meetings or other functions and events. Be it the well-presented sales agents or the details focused property managers – the most common thing that we keep hearing is always ‘the body corporate’ or ‘the body corporate will take care of it’.
But what do they really mean and what are they really talking about?
Body Corporate Management or Owners Corporation Management or Strata Management – Which One Is It?
Let’s start with terminology – and as it is with whether you follow rugby league or the AFL – it is largely dependent on the state you’re from.
Different states in Australia have different strata management legislations and therefore Queensland, NSW, and Victoria will have their terminology.
In Victoria, however, prior to the new Owners Corporations Act coming in 2006/2007, an owners corporation was known as a body corporate. And so it is just as some people will always come to know Mumbai as Bombay, Myanmar as Burma – owners corporation will be get referred to as body corporate.
We’ll even inadvertently or use the term ‘body corporate’ here and there because that’s what the man (or woman) on the 67 tram be more readily be familiar with.
When is there a Body Corporate or Owners Corporation?
Well, this comes back to the Plan of Subdivision. The Plan of Subdivision tells you which property lot you will be buying (or already own).
In Victoria, Strata Plans and Plans of Subdivision can be obtained from Landata (Victorian Land Registry Services).
Plans of subdivisions can show the layout and lots in a given area for houses, townhouses, and apartments. Because a lot sits within a plan of subdivision doesn’t necessarily mean there will be a body corporate or owners corporation involved.
The determinant or rather what gives rise to having a body corporate or owners corporation is whether there is common property shown on the plan of subdivision:
In both of the above strata plans of subdivision – one being a vertical building of apartments and the other a horizontal layout of townhouses – there is common property and therefore an owners corporation.
Whether or not the owners corporation employs an owners corporation manager is entirely the decision of the owners corporation (that is to say the collective voting of all the owners).
When is There a Body Corporate Manager or Owners Corporation Manager?
Another common thing that we keep hearing is always ‘the body corporate is inactive’ or ‘the body corporate is not activated’.
The Plan of Subdivision gives rise to the body corporate or owners corporation – or rather a body corporate / owners corporation is created whenever a plan of subdivision gets registered with the land & titles office.
The body corporate / owners corporation is a legal entity in its own right. It is the entity that owns all the common property (i.e. the land, building, lifts, the roof, gardens, common areas etc).
All owners and subsequent owners are by default members of the body corporate / owners corporation.
When someone says that the ‘body corporate is inactive’, what they’re really saying is most likely that:
- There’s not that much common property to warrant collecting levies from everyone for regular maintenance (i.e. to cover weekly gardening or cleaning);
- The owners corporation hasn’t employed an owners corporation manager or management company employed to manage the common property, set budgets, convene the AGM, collecting levies, oversee maintenance, and manage issues when they arise; and
- When things need fixing (i.e. a new roof or driveway or hot water system) owners will have to contribute the cost on the spot as there’s unlikely been a gradual build-up of funds in anticipation for such things.
Two Major Considerations for ‘Inactive’ or Self-Managed Owners Corporations
Definitely not employing an owners corporation manager can save some costs but like everything there can be other costs or consequences that arise:
Who prepares the Owners Corporation Certificate for the Section 32 when someone goes to sell their apartment or townhouse?
Is there adequate insurance for the building? (i.e. a residential strata insurance policy in place should someone slip and fall in the common driveway).
We’ve seen so many owners corporations (mostly small blocks of apartments and townhouses) without adequate insurance – namely a complete lack of public liability insurance, which of course is a real concern but perhaps a topic for another time.
Need Help Reviewing the Operating Costs for Your Commercial Owners Corporation Management?
Due diligence and choosing carefully 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).
Lastly, Strata Management Consultants specialises in not only advising and guiding Committees on how to change commercial owners corporation 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 firstname.lastname@example.org.
Office Vacancies Hit Double-Digits; Lower OC Levies? in Victoria? – Content Copyrighted 2020 by Strata Management Consultants