A lot owner from QLD is looking to purchase a villa or duplex and is wondering what is covered by body corporate. Frank Higginson, Hynes Legal provides the following response.
Question: I’m looking to buy a villa or duplex in a small strata scheme. Can they make their own rules or is there any Queensland government legislation about what is covered by body corporate?
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I am looking to buy a duplex or a villa in a small complex up to six units.
Can they make their own rules or is there a Qld government legislation in the regard of the items eg. plumbing, electrical, roof repairs, fencing. What is covered by body corporate?
I am confused as the sellers claim the body corporate only pays for the building insurance and gardening. Does this sound right?
Answer: This is the difference between sales patter and legal detail.
Lots in small schemes are often sold on low body corporate levies and the absolute minimum for levies is insurance. After that what is needed depends on what the common property is.
In this one there is some gardening. There would also be (probably) whatever common infrastructure (pipes etc), driveway, letterbox, roof (it is a supporting structure for both lots) and so on.
The body corporate’s obligations to maintain these things is absolute. A body corporate cannot contract out of that obligation. But the maintenance of them is very likely capital in nature, which is what a sinking fund does.
Self managed strata
If this building is self-managed (like lots of small ones are), it wouldn’t surprise me if the levies are just for insurance and gardening and there is no sinking fund, which means that if (and when) any of those other things need work, owners have to be hit up for it as 1/6th of whatever that now urgent cost is.
So in short:-
- The act sets out the rules for how these things must be maintained;
- If the budgets are not properly managed now, there can be surprises at the end.
But you also never know if the agent is just doing the usual sales pitch without seeing any of the detail and it is all in fact built into a proper sinking fund budget which does form part of the levies!
This post appears in Strata News #182.
Read next:
- Buying Strata: 7 Questions to Ask
- Buying a Strata Property? Be Aware There Are Two Types of Buildings
Frank Higginson
E: [email protected]
P: 07 3193 0500
W: http://www.hyneslegal.com.au
Visit our Renting / Selling / Buying Strata Property OR FactSheets: Strata Legislation QLD
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Frank H., good points. Buyer beware!
When buying, check with people who are liable for what they represent (like solicitors) not with sales / marketing lingo. It is also advisable not to refuse to do the body corporate search and have the report explained to you. The costs of such due diligence is small fraction of your total investment, and may uncover hidden traps – financial or personal – which you may not want to deal with.
If i had a dollar for each time i heard “we should have done this or that” or “I really did not understand that being an owner requires involvement” – I would be driving different colour Tesla each day ;-).
Education and knowledge is important in not having to do “crash course on strata” once you are committed [edit by admin].
Jana Koutova
UOAQ Executive Officer
I agree completely, even if it is a small scheme or a two lot scheme there are still some important points to confirm especially before you purchase. Knowing whether its a Standard Format Plan or a Building Format Plan will also give you a great head start on responsibilities of maintenance of the Body Corporate.
One issue that I see on a regular basis with the insurance in a two lot scheme is an issue with the name of the insured or sometimes there are even 2 separate policies and not one of them covers public liability. The Insurance must be in the name of the Body Corporate. A bigger problem arises when the insured in the Lot Owner selling, The policy must be cancelled as it can not be transferred, and the other Lot owner may not be able to do anything about it as they are not listed as an authorised representative.
Even if there are no records to search, obtaining this basic information is very important.