Body Corporate FAQs
How does the Body Corporate enforce its Bylaws?
The first step in enforcing the Bylaws is to identify the relevant Bylaw for the conduct in question.
Generally speaking, the Bylaws for a Body Corporate are contained within the Community Management Statement for that Body Corporate. If the Community Management Statement is silent as to the Bylaws, then the Bylaws will be those as appearing in the Body Corporate & Community Management Act.
This is of course subject to some exceptions and the situation can be more complex for some older Schemes or for Schemes that have not registered a new Community Management Statement since the Body Corporate & Community Management Act came into effect in 1997.
Most Schemes will contain at least some invalid Bylaws (usually in relation to things like towing and pets) and if a Bylaw is invalid then it should not be enforced.
Once the relevant Bylaw is identified and the Committee is satisfied that it is a valid Bylaw, the enforcement process is as follows:
- The Committee or the Strata Manager should write to the offender noting the breach of the Bylaw and requesting that the breach cease. This is an informal first step.
- If such letter does not resolve the matter, then the Body Corporate ought to issue a contravention notice to the offender which must comply with the formal requirements set out in sections 182 and 183 of the Body Corporate & Community Management Act. Importantly, the form must comply with the technical requirements in the Act, must be signed correctly and there must be a Committee resolution approving the issue of the contravention notice.
- If after the expiration of the contravention notice the offender still has not addressed the breach of the Bylaw, the Committee can initiate a formal application through the Body Corporate Commissioner’s office. Alternatively it could, if it wished, start proceedings in the Magistrates Court for the failure to comply with the contravention notice (which attracts a penalty of 20 penalty units).
How does the Body Corporate recover unpaid Body Corporate levies?
Each year, the Body Corporate will levy contributions against owners to fund the operation of the Scheme. Unfortunately, a Body Corporate will often encounter some owners who are slow to pay their levies (or who do not pay their levies at all!)
Bodies Corporate are well placed to recover their levies because under the relevant Module applying to the Body Corporate, the Body Corporate may recover its unpaid levies, interest on those unpaid levies (assuming the Body Corporate has passed the necessary resolution authorising the charging of interest) and the reasonable recovery costs incurred by the Body Corporate in pursuing the debtor.
Bearing that in mind, the general process for the recovery of debts is as follows:
- A letter of demand is issued to the debtor providing a period of time for payment failing which the matter will be formally escalated.
- It is not uncommon for there to be a sequence of letters sent as part of this process.
- If letters of demand fail, then the Body Corporate can issue proceedings in the Magistrates Court for the recovery of the levies and related amounts. Please refer to our separate article in relation to the recovery of levies.
What is a Community Management Statement?
A Community Management Statement is a crucial document for a BodyCorporate. It is registered on title for the common property of the Scheme with the Titles Office and it includes the following information:
- the name of the Scheme;
- the Regulation Module that applies to the Scheme;
- the Schedules of Contribution and Interest Lot Entitlements;
- the Bylaws for the Scheme;
- details of any exclusive use allocations, including the relevant exclusive use Bylaw and the exclusive use plans.
A review of the Community Management Statement is an essential part of any consideration of a Body Corporate issue or dispute.
The Community Management Statement can only be amended with the consent of the Body Corporate. The type of consent required depends upon the change being proposed to the Body Corporate and once a change is made, the new Community Management Statement must be prepared and registered on title with the Titles Office. Usually, this is done by a solicitor.
How does a Body Corporate make decisions?
The starting point for Body Corporate decision making is that a Body Corporate makes decisions by way of a resolution passed at a general meeting of owners. Depending upon the relevant decision, a decision of owners might be an ordinary resolution, a special resolution, majority resolution or a resolution without dissent. The type of resolution required for a particular matter is as set out in the Body Corporate & Community Management Act.
The Committee is empowered by the Act to make decisions on behalf of the Body Corporate, and a decision of the Committee is a decision of the Body Corporate. However, the Committee cannot make decisions in respect of all matters. Some decisions, known as restricted issues, can only be made by the Body Corporate. What constitutes a decision on a restricted issue is defined in the relevant module and includes things like:
- decisions approving expenditure over the committee’s spending limit;
- fixing or changing a contribution to be levied by the Body Corporate;
- a decision changing rights, privileges or obligations of the owners of lots included in the Community Titles Scheme;
- a decision that can only be made by resolution without dissent, special resolution, majority resolution or ordinary resolution of the Body Corporate;
- a decision to start a proceeding (not including a proceeding to recover a liquidated debt against the owner of a lot or certain other proceedings).
What factors should a Committee member consider when making Body Corporate decisions?
The overarching obligation of Committee members when making decisions is that they must act reasonably. The meaning of that phrase has been subjected to a significant amount of judicial comment but it can be distilled to the following tests:
- The decision needs to be objectively reasonable.
- Although a logical and understandable basis for a decision is a factor in determining the reasonableness of a decision, the presence of such a basis does not necessarily mean the decision is reasonable as important matters might have been overlooked or discounted.
- What is reasonable is a question of fact, based upon a consideration of all relevant matters in the circumstances of each case.
As you can see, the question of what is reasonable can be complicated. In essence, it can be distilled to the need to consider all relevant facts and balance them to make an objectively reasonable decision. Matters such as personal disagreements, personal prejudices and preferences, and self-interest ought to be disregarded.
(Please note that the question set out above should not be confused with the question of whether objection to a particular motion put to the Body Corporate and required to be passed as a resolution without dissent is unreasonable. That is a different question which is subject to different considerations).
Under what circumstances can a Committee member be personally liable?
Under the Body Corporate & Community Management Act, a Committee member is not civilly liable for an act done or an omission made in good faith and without negligence in performing the person’s role as a Committee member. Whilst that obviously provides some protection to Committee members, it does not extend to circumstances where a Committee member fails to act in good faith or is negligent in relation to a particular matter. Accordingly, Committee members should ensure that they have a general understanding of their obligations and duties as Committee members, an understanding of the Code of Conduct that applies to Committee members, as found in the Schedule to the Act and as copied below. Committee members should ensure that they act generally in a sensible and prudent way.
The Code of Conduct for Committee members is as follows:
- Commitment to acquiring understanding of Act, including this code
A committee voting member must have a commitment to acquiring an understanding of this Act, including this code of conduct, relevant to the member’s role on the committee.
- Honesty, fairness and confidentiality;
1. A committee voting member must act honestly and fairly in performing the member’s duties as a committee voting member.
2. A committee voting member must not unfairly or unreasonably disclose information held by the body corporate, including information about an owner of a lot, unless authorised or required by law to do so.
- Acting in body corporate’s best interests
A committee voting member must act in the best interests of the body corporate in performing the member’s duties as a committee voting member, unless it is unlawful to do so.
- Complying with Act and this code
A committee voting member must take reasonable steps to ensure the member complies with this Act, including this code, in performing the member’s duties as a committee voting member.
- Nuisance; A committee voting member must not –
1. Cause a nuisance on scheme land; or
2. Otherwise behave in a way that unreasonably affects a person’s lawful use or enjoyment of a lot or common property
- Conflict of interest
A committee voting member must disclose to the committee any conflict of interest the member may have in a matter before the committee.
How does a Body Corporate change its Bylaws?
From time to time, a Committee may decide that the Bylaws applying to a Scheme require amendment. That might occur for a variety of reasons, including a change in law, a deficiency identified within the current Bylaws, a desire to regulate new behaviour such as the installation of hard flooring, or a desire to regulate a new recreational facility on common property such as a tennis court, just to name a few examples.
The Bylaws for the Scheme are usually contained within the Community Management Statement for the Scheme. The Committee itself is not empowered to vary the Bylaws, which can only be varied with the approval of the Body Corporate in general meeting.
In summary, the process to change the Bylaws is as follows:
- The Committee (with the assistance of its solicitors) formulates a new Bylaw and puts a motion to amend the Bylaw to the general meeting;
- Assuming the Bylaw does not relate to a change in an exclusive use Bylaw, then the motion to amend the Bylaws must be passed by way of a Special Resolution;
- The motion should also authorise the Committee to endorse and register a new Community Management Statement, including the amended Bylaw;
- Assuming that the motion passes, the Committee will need to instruct its solicitors to register the New Community Management Statement with the Titles Registry;
- The New Community Management Statement must be consistent with the Body Corporate’s consent and must be lodged within 3 months of the date of the general meeting.
The Body Corporate Caretaker wishes to sell its management rights to a new caretaker and has sought the Committee's consent. What should the Committee do?
It is not uncommon for Committees to receive requests of this nature. Caretakers and letting agents may wish to move on for a variety of reasons and must obtain the consent of the Body Corporate as a precondition to selling the management rights.
It is important that Committees undertake proper legal due diligence in respect of the proposed buyer. It is better to try and identify potential issues relating to the new Caretaker prior to the sale proceeding.
The first step that a Committee should take on receiving a request for consent is to request the relevant information relating to the buyer required and permitted under the relevant Module and Agreements. The information requested will vary depending upon the circumstances of the matter but in general terms a Committee will need to consider financial information, business and personal references, the terms of the transfer, and information relating to the buyer’s competence and qualifications.
Generally, buyers will place a significant amount of pressure on Committee members and strata managers to consent to an assignment urgently, but under the Module, the Committee has 30 days to make a decision after the relevant material has been provided (although of course the Committee can make a decision sooner if it wishes).
Once the information has been provided, the Committee in consultation with its solicitors should review the material and then schedule an interview with the proposed buyer.
If the Committee is satisfied with the material and the proposed buyer, the Committee can choose to consent to the proposed assignment. The Committee must necessarily act reasonably in considering the matter.
If the Committee consents, then it will pass a motion at a Committee meeting or more commonly by way of a vote outside a Committee meeting, and then sign Deed of Assignment, after the Deed is reviewed by the Committee’s solicitors. The Body Corporate’s legal and administrative costs relating to the assignment are payable by the Caretaker.
It is important to note that whilst ordinarily a Committee will be empowered to consent to an assignment of management rights, that is not universally the position and it is conceivable that a Body Corporate may have restricted that sort of issue to the Body Corporate at general meeting. The Committee or strata manager should check that issue prior to the Committee voting upon the assignment.
When must a Body Corporate hold its Annual General Meeting?
Under the Module, a Body Corporate must call and hold an Annual General Meeting (other than its first Annual General Meeting) within 3 months after the end of the Scheme’s financial year. The financial year varies from Scheme to Scheme and is dependent upon the date upon which the Scheme was established.
Lot owners must be given at least 21 days’ notice of the general meeting.
Therefore, after the end of a Body Corporate’s financial year, the Committee must move swiftly to ensure that the Notices of General Meeting go out in order to comply with the statutory timeframe for the calling and holding of the General Meeting.
If special circumstances arise such that the Body Corporate is unable to call and hold its General Meeting within the permitted timeframe, a Body Corporate can make an Application to the Body Corporate Commissioner’s office for orders permitting a delayed general meeting. Special circumstances must exist to justify such an order.
How many members must there be on a Committee?
For a Scheme with at least 7 lots, there must be between 3 and 7 voting members on the Committee. The role of Chairperson, Secretary and Treasurer must be filled, although any one Committee member may hold the positions of Chairperson, Secretary and Treasurer.
In addition, the Body Corporate Manager and the caretaking service contractor for the Scheme will be, without the need for any formal election or appointment, non-voting members of the Committee. Obviously, those members are not entitled to vote at a meeting of the Committee.
For small schemes that contain less than 7 lots, the Scheme must have at least 3 voting members on the Committee. The maximum number of voting members for such schemes is the number equalling the number of lots. For example, for a 5 lot scheme, there must be at least 3 but no more than 5 voting members on the Committee.
When should a General Meeting Motion be declared out of order?
Under the Regulation Module, the Chairperson of a General Meeting must rule a motion out of order if the motion (if carried) would conflict with the Body Corporate legislation, the Bylaws or a motion already voted on at the meeting, or would be unlawful or unenforceable for another reason. Also, a motion must be declared out of order if the substance of the motion was not included in the Agenda for the General Meeting (except for procedural motions for the conduct of the meeting or for the correction of minutes).
When ruling a motion out of order, the Chairperson must give reasons for the ruling and must state how the ruling may be reversed by those present at the meeting.
To that end, the persons present and entitled to vote at the meeting may reverse a ruling by the Chairperson that a motion is out of order by passing an ordinary resolution disagreeing with the ruling.
In that manner, the General Meeting can overrule a ruling by a Chairperson that a particular motion was out of order.
However, if ultimately the motion was out of order, the Committee, on Application to the Body Corporate Commissioner’s office, may be able to obtain an order from an adjudicator declaring that a particular motion was out of order notwithstanding that such ruling was overturned by the General Meeting.
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