This article discusses body corporate water meter loans, explaining whether a body corporate can legally offer loans to help lot owners install individual water meters and what conditions may apply.
Our body corporate is encouraging lot owners to install separate water meters. Can they incentivise this by offering a loan?
We have a situation where the Body Corporate committee wants to put water meters into each individual lot but some can’t pay for it upfront. To try to convince these owners to approve the installation (which is on each owner’s private lot) there have been rumours that they will be “helped” to pay presumably by the Body Corporate.
I am speculating that this will be some sort of loan from the Body Corporate. Is this legal? If so, what are the procedures and limitations? I can’t find anything in the laws or searching on the internet about this.
It is not uncommon for bodies corporate to want to encourage lot owners to buy and install their own water meters
Individual water meters are a great way to ensure that the ‘user pays’. It has however only relatively recently become standard development practice for individual meters to be installed.
Older schemes may have anything from 1 meter for both all lots and common property, though to almost (but not quite) complete coverage; i.e. 1 lot = 1 meter.
Where there is complete coverage, s195 of the Act provides that the lot owner is liable to pay for the water their lot consumes if it is separately measured, charged to the lot owner and charged other than based on the value of the lot; i.e. kilolitres consumed.
In schemes where there is less than complete coverage, s196 of the Act provides that each lot owner is liable to the utility provider (e.g. Unity Water), for water consumed in the community titles scheme, pro-rata their contribution schedule lot entitlement.
Lot owners with water tanks or who consume less water are often, understandably, dissatisfied with this arrangement. Fortunately, there is an alternative. Under s196(4) of the Act, the Body Corporate can take on liability for owners or occupiers. The Body Corporate then pays the utility provider and recoups the money from the owners or occupiers.
That can be done in two ways. Firstly, through the normal (administrative fund) contributions. That may be appropriate where no lots have meters and all lots are similar.
The second method, however, is for the Body Corporate to raise a water levy:
- for lots which have a meter – based on the water use; and
- for lots that don’t have a meter – either in equal shares, or pro rate the contribution schedule lot entitlements of the lots who don’t have meters.
Given those advantages, it is not uncommon for bodies corporate to want to encourage lot owners to buy and install their own water meters. It is not for the Body Corporate to do this, in the normal course, because individual meters benefit individual lots, and not the Body Corporate.
Bodies Corporate may borrow funds (for example see s171 of the Standard Module) but there is no direct regulation of the Body Corporate loaning money. The Body Corporate must not be in the business of loaning money (s96 of the Act) but it may invest monies not immediately required for its purposes in the ways that a trustee may invest trust funds (s96(2) of the Act).
Accordingly a prudent, compliant Body Corporate could, after taking legal and financial advice, invest funds not immediately required, by offering loans, with appropriate interest and other terms, to lot owners for the specified purpose of installing a water meter for their lot.
Indeed, the Body Corporate could arrange for multiple installations, to secure a favourable rate, after obtaining the relevant lot owners agreement (see s210 of the Standard Module), including to pay for the installation by entering into the loan arrangement.
This post appears in the November 2021 edition of The QLD Strata Magazine.
Michael Kleinschmidt
Stratum Legal
E: info@stratumlegal.com.au
P: 07 5406 1282
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