Meek Mercier eNewsletter - Issue 1 (October 2008)

1. Welcome !

Welcome to the first issue of the Meek Mercier Body Corporate Services eNewsletter which we hope you find both interesting and informative, and that in future, you may come to rely upon as an effective way of keeping up to date with ongoing changes affecting your body corporate and community living.

Many of you are receiving this Newsletter following our visit to your scheme in July, August and September, shortly after we commenced our business. The purpose of our visit to your scheme was to introduce ourselves, and to provide information to Resident Managers (and hopefully committee members) about us and our new company, Meek Mercier Body Corporate Services.

We’d personally like to thank all those Resident Managers for the time taken to talk with us and the sharing of your experience when we visited your scheme. Meeting and communicating with you certainly assisted us to gain both a greater understanding of the specific needs of bodies corporate (and how we might address these needs) and of some of the issues and challenges affecting bodies corporate and their Resident Managers. We would again like to thank you for distributing our information brochure to members of your committee.

Just briefly, who are Meek Mercier Body Corporate Services? As our information material and our website (www.meekmercier.com.au) explains, we are a new body corporate management company established in 2008.

Our background is different from most other body corporate managers. We (Richard Meek and Marc Mercier) are both legally qualified, former members of the Office of the Commissioner for Body Corporate and Community Management. We believe our background gives us great experience and a more complete set of skills to handle the role of body corporate management for the benefit of your body corporate.

Through our quarterly eNewsletter, Meek Mercier aim to provide to owners, committee members and Resident and General Managers information relevant for their body corporate and more generally, to community living. In particular, we intend:

• to update and explain legislative changes affecting bodies corporate; 
• to highlight and explain the importance of recent case law decisions affecting bodes corporate;
• to highlight other practical issues or changes relevant to bodies corporate (for example, changes to Insurance or Work Place Health and Safety requirements, and Anti Discrimination Laws that affect bodies corporate);
• in conjunction with our website (www.meekmercier.com.au) to provide a range of resources and tools to owners, committee members and Resident Managers to better understand their roles, rights and responsibilities, and those of others.

To Resident Managers:

We request your assistance in distributing our eNewsletter to committee members in your body corporate by forwarding this email to all the committee members of your scheme.

To Committee Members and Owners:

If you have received this from your Resident Manager and you would like to receive future editions of our eNewsletter directly, we invite you to subscribe now. Please note that you can unsubscribe at any time.

2. Introducing the New Regulation Modules – How they affect you?

On 30 August 2008, the 1997 Body Corporate and Community Management Regulation Modules were replaced, giving way to a new set of Regulation Modules heralding some important and anticipated changes to the previous regime.  These changes emerge following a lengthy consultation process with industry stakeholders and, in accordance with the Statutory Instruments Act 1992 (Qld), a resulting Regulatory Impact Statement (RIS).

In achieving the purpose and objectives of the BCCM Act, the new regulation modules, seek to “ensure owner participation and accountability in the management of the community titles scheme without making day-to-day management of schemes unnecessarily complicated, onerous or expensive” (RIS).

Some changes at a glance:

• All four (Standard, Accommodation, Small Schemes and Commercial) Regulation Modules have been amended;
• The amendments commenced on 30 August 2008;
• The amendments are to a number of key areas including committee eligibility and nominations, transfer fees, expenditure limits by committees and the body corporate for maintenance and improvements, improvements to common property by an owner, and insurance valuations (amongst other changes);
• The four Regulation Modules have been renumbered. For example, former Section 104 of the Standard Module dealing with major spending by the body corporate, is now renumbered as Section 152. We recommend you purchase new copies of the Regulation Module applying to your scheme (or download them here), as all the old section numbers you might remember are now incorrect and will cause confusion if quoted or referred to.

The articles below provide specific details on relevant amendments to the Regulation Modules.

3. Changes to Committee Nomination and Eligibility Provisions

Following amendment of the Body Corporate and Community Management Act 1997 in 2007, this year the Government has made significant changes to the four Body Corporate and Community Management Regulation Modules.

This article proposes to consider two of the changes:

• Committee nomination and eligibility provisions; and
• Resident Unit Manager Transfer Fee requirements.

Nominations

Previously, the legislation was interpreted that an owner of more that one lot was nevertheless only entitled to one nomination for membership of the committee (either him/herself or another). The rationale for this was to prevent an owner of several or a majority of lots from occupying a majority of committee positions. For example, an owner of 4 of 10 lots could nominate only once for a position on the committee, notwithstanding the significant ownership of lots.

The amendment (section 17 of the Standard Module // section 18 of the Accommodation Module) allows an owner of more than one lot to nominate more that one nominee for the committee. The number of possible nominations depends both on the number of lots in the scheme, and the number of lots owned by the person seeking to nominate. For example:

• If there are fewer than 7 lots in a scheme, or an owner owns 2 lots in the scheme, then the owner may nominate a maximum of 2 persons for the committee;
• If there are 7 or more lots in a scheme, and an owner owns 3 or more lots in the scheme, then the owner may nominate a maximum of 3 persons for the committee.

The table below reflects the above bullet points:

Except in very small schemes, the amendment preserves the intent that an owner with more than one, or a majority of lots, in a scheme cannot control a majority of committee positions. This assumes that the body corporate fills and thereafter maintains the maximum number of committee positions.

Eligibility

In addition to the above changes to the nomination provisions, there has also been a change to the provisions governing eligibility for nomination to the committee. Both the Standard (section 10) and the Accommodation (section 11) Modules have been amended to provide that:

• A member of the body corporate (ie an owner or nominee of a corporate owner); or
• A person nominated by a member of the body corporate,

is not eligible to be a voting member of the committee if the member (the nominating owner) owes a body corporate debt at the time when the committee voting members are chosen (ie at the time the meeting to elect the committee is held).

A body corporate debt is a defined term in the modules and is limited to specific items; namely contributions or instalments thereof, a penalty for not paying a contribution, or another amount associated with ownership of the lot. This means that for a nomination to the committee to be valid and effective, the member nominating must not be in arrears within the definition of a “body corporate debt”.

4. Amendments to the transfer fee provisions affecting resident managers

The re-numbered section numbers for these amending sections are:

• Standard Module (SM): Sections 123 – 127 inclusive
• Accommodation Module (AM): Sections 121 – 125 inclusive

The amendments replace the previous (discretionary) "3-2-1" sliding rule on the imposition of transfer fees on the sale of management rights by the Resident Manager. The previous period of three (3) years from the initial contract date during which the transfer fee was potentially payable (at the discretion of the committee) has been reduced to 2 years from the initial contract date (the prescribed period (s.125 SM or s.123 AM)). Specifically:

1. If the transfer occurs in the first year after the initial contract date, a transfer fee of 3% is payable.
2. If the transfer occurs in the second year after the initial contract date, a transfer fee of 2% is payable.

The second major change is that payment of the transfer fee is no longer at the discretion of the committee or body corporate. It must be charged, and is payable unless (s.126(3) SM or s.124(3) AM):

1. the sale of the management rights is by the financier exercising a power of sale; or
2. the transfer is because of genuine hardship that was not reasonably foreseeable by the manager at the time of the initial contract date. 

Importantly, s.127 SM (s.125 AM) now places a positive obligation on a resident manager claiming that a transfer fee is not payable, because of either of the above two reasons, to:

1. advise the body corporate of this claim in writing when seeking approval for the transfer; and
2. give the body corporate all information and documents relied on by the manager to support the claim.

Finally, to avoid ambiguity in the application of the new provisions, a definition of “initial contract date” has been included, quote:

initial contract date, for an engagement or authorisation of a service contractor or letting agent, means the earlier of—

(a) the day the service contractor or letting agent entered into the engagement or authorisation; or

(b) if the engagement or authorisation is a replacement or renewal of an engagement or authorisation of the service contractor or letting agent—the day the service contractor or letting agent first entered into any engagement or authorisation that has been continuously replaced or renewed.

In our next eNewsletter, we will continue with our series explaining the significant changes implemented by the 2008 amendments to the Regulation Modules.

5. Changes to committee and body corporate expenditure limits

In the recent amendments to the Regulations, significant changes were made to the financial spending limits of both committee’s and bodies corporate in general meeting. The following explanation refers to changes applying to all three modules: the Standard, Accommodation and Small Scheme Modules unless specifically indicated otherwise.

Both the relevant limit for committee spending and the relevant limit for major spending can now be set by ordinary resolution of the body corporate in general meeting. This means that a body corporate must now determine whether to set its own limits for committee and major spending, or either of them, and if so, what those limits should be in each case.

Unless and until the body corporate resolves to set the relevant limit for either committee or major spending, then the statutory limits (the default) are as follows: 

The relevant limit for committee spending: $200 x the number of lots in the scheme;

The relevant limit for major spending*by a body corporate: the lesser of $1100 x the number of lots in the scheme, or $10,000 (or in the case of the Small Schemes Module, simply multiplying the number of lots in the scheme by $1100).

(*major spending is the amount above which the body corporate (including its committee) or an owner submitting the motion, must obtain and submit with the motion a minimum of two quotations in respect of the proposal).

Practically, this means that for any scheme of 9 or more lots, the relevant limit for major spending is $10,000 unless the body corporate, by ordinary resolution in general meeting, sets its own limit for major spending.

6. By-laws: prohibition of “animals” - drafting considerations for body corporates

A recent decision (11 June 2008) by the Queensland Commercial and Consumer Tribunal (QCCT) on an appeal of an Adjudicator’s order (WB Tutton v Body Corporate for Pivotal Point Residential CTS 33550 - the PPR decision) appears to have altered the previously accepted interpretation of by-laws prohibiting owners or occupiers from keeping “animals” on their lot or the common property.

By-laws regarding animals are usually drafted as one of two types: Either prohibited (that is, the intent of the by-laws is that animals are prohibited from the scheme) or permitted (that is, animals can be kept at the scheme, either as of right, or subject to permission being given). Obviously within these broad categorizations, numerous variations are possible to suit particular circumstances. However, broadly a by-law is categorized as one or the other, and this in turn determines how the by-law is interpreted and applied.

The PPR decision considered the validity of a by-law which prohibited the keeping of “animals”. The relevant by-law provided that an “animal” is one that is mentioned or referred to from time to time by the Gold Coast City Council in its local laws “relating to keeping and control of animals”. In the PPR decision, the QCCT considered the question: whether the blanket ban on all defined “animals” effected by the (new) by-law was of itself unreasonable. The QCCT concluded that it was. The QCCT stated:

34         Hence, if in the determination of this proceeding it can be held that the meaning given to “animal” in the new by-law 16.1 is a meaning which makes the particular provision “unreasonable” because it has the effect that an animal such as a gold fish is also the subject of the absolute ban once all “prior” approvals have been spent, it is open to the Tribunal to decide that the provision is invalid as being unreasonable. … .

• Since there is clearly no rational basis upon which it can be said that the keeping of a gold fish in a safe and healthy environment could be a matter which could cause any difficulty to any other lot owner, yet is the subject of an “absolute” ban, the conclusion is fairly open that such a by-law is “unreasonable”.

The basis of this conclusion was that the by-law, in prohibiting all “animals” from the scheme was oppressive and unreasonable, and consequently invalid. The decision has significant implications for the drafting of all existing and future by-laws intending to prohibit the keeping of “animals”.

Conclusions and Implications of this decision: By clear implication, this decision requires that the drafting of any by-law prohibiting the keeping of animals must be undertaken very carefully. In particular, it seems that the by-law must be specific as to the class, type or category of animals sought to be prohibited, or alternatively, that the wording of the by-law should specifically exempt (or permit) the keeping of those animals which could reasonably be said not to cause any difficulty to any other lot owner or to anyone lawfully using a lot or common property. This categorization of itself is subjective. However it now seems clear that a blanket prohibition in a by-law against the keeping of “animals” is liable to render the by-law invalid and unenforceable, and subject to removal from the by-laws.

Action required by a Body Corporate: Bodies corporate should immediately review their existing by-laws in respect of the keeping of animals. If a by-law prohibiting the keeping of animals exists, and it refers only to “animals”, and is not specific or clear as to which particular types of animals are prohibited, or conversely which may be kept, then the by-law is likely be invalid, and liable to being removed, and any previous by-law reinstated.

The by-law should be redrafted immediately, and submitted to the next general meeting in the form of a motion proposing the body corporate adopt a new community management statement incorporating the re-drafted by-law.

7. What’s new at Meek Mercier …. the Mystrata Forum

In addition to the first issue of our eNewletter which we hope you find both interesting and informative, and that in future, you may come to rely upon as a effective way of keeping up to date with ongoing changes affecting your body corporate, Meek Mercier would like to advise all readers of a significant addition to the Resources and Tools section of our website ; namely the addition of a user forum, the Mystrata Forum. (http://www.meekmercier.com.au/resources-tools.html)

The forum has been developed by Mystrata, a company with which we at Meek Mercier are associated and are happy to recommend to users and visitors to our website. Mystrata is the developer of accounting and management systems for the body corporate management industry, principally Strataware an online accounting and management system used by body corporate managers (including us) to undertake management, financial and operational aspects related to the management of buildings.  

The executive chairman of Mystrata is Gary Bugden OAM. Gary is a significant contributor to the strata industry as his profile from the Mystrata website indicates:

Gary Bugen’s name has been associated with strata titles in Australia since 1973. In the past 30 years he has actively participated in all sections of the industry – as a strata manager, specialist lawyer (former partner of Mallesons Stephen Jaques), academic, development consultant, government consultant, author, commentator and law reformer. The breath and depth of this experience has resulted in him being described as Australia’s leading authority on strata and community titles.

The benefit of the Mystrata forum to users lies in its interactive nature. Rather than simply being a series of FAQ’s (frequently asked questions), the forum allows users who have registered to pose questions related to the operation and management of a body corporate. These questions are then replied to by other users of the forum, or by the forum moderator for that topic. Topics include for example levies and financials, repairs and maintenance, meetings, insurance, committees and by-laws. Even without registering for the forum, users are able to browse all topics on the forum, and to read all posts and reply to those posts.  

We invite all readers of our newsletter to have a look at the Mystrata Forum. Access is available via our website by clicking on the Mystrata Forum icon at the top of the Resources and Tools page or by clicking here:

Once the forum appears, readers can read posts and responses on topics of interest to them. If readers want to post questions themselves, all they need do is register as a user of the forum. Registration is simple.

We consider the Mystrata Forum a valuable interactive resource in providing information on a range of body corporate related topics to interested persons. We invite your use of and contribution to the forum as part of a community of users who, through the forum, gain information of assistance and benefit to themselves, and potentially, as users, are able to provide information of assistance and benefit to others.

8. Help us distribute our eNewsletter!!

If you have enjoyed our eNewsletter and found the articles interesting and informative, we welcome you forwarding our eNewsletter to members of your body corporate committee. The articles are intended for the information and benefit of owners, committee members, and resident managers alike, and will help all parties better understand issues affecting their body corporate. 

To read more about Meek Mercier Body Corporate Services, please click on the uppermost navigation above to view the Meek Mercier website content.

9. In our next eNewsletter!!

Our next eNewsletter, due in early 2009, will include the following articles:

• The Committee Code of Conduct: How it affects you;
• Changes to Expenditure limits for “improvements” by a Body Corporate and Owners;
• Case review: the Body Corporate’s right to recover costs “reasonably incurred” in pursuing an owner for arrears of contributions;
• More information on the recent changes to the Regulation Modules.