How to Manage a Body Corporate Effectively

If you own a property that is part of a strata or body corporate scheme, it’s imperative that the body corporate is managed correctly to ensure everything runs smoothly.?

What is a body corporate?

Created when a unit plan is registered with the Land Titles Office, a body corporate represents all owners of the units in the building. While individual owners own ‘lots’ of the building (the area represented by a unit), the body corporate owns the common areas, for example, any gardens, the foyer etc.

The body corporate is a legal corporation formed under the relevant state’s Act and, as such, has legal obligations, powers and duties to adhere to.

Responsibilities of the owners corporation include:

• Uphold articles and rules of the Act.
• The owners corporation manages the common property including insurance, administration of finance and common funds.
• Ensure all common areas are maintained and in good repair.
• Keep proper records of all meetings, and document decisions and motions.
• Maintain a budget.
• The owners corporation keeps a register of all unit owners and committee members.
• Ensure that all documentation is made available for owners if and when requested.

Where does the money come from?

In order to successfully manage the common areas and maintain the upkeep of the building, the body corporate needs funds. These owners corporation funds for common property maintenance come from the levies that individual owners pay.

The levy amount is decided at each Annual General Meeting. Contributions from the levy go to two different funds.

• The administration fund: covering day-to-day expenses (such as insurance and strata management).
• The sinking fund: covers future expenses managed by the owners corporation (such as large repairs and maintenance).

Levies to the owners corporation are generally paid on a quarterly basis.

When there is extra work that needs to be done, either general levies will increase slightly to accommodate the cost, or a special one-off levy will be required to cover it.

For more information on strata levies, please see this article.

Managing the body corporate properly

Things can go terribly wrong if the body corporate in your property is not managed properly, so much so that it’s a statutory requirement to elect a committee to make day-to-day decisions about the building and generally look after the place.

The committee is appointed (by nomination and election) at each Annual General Meeting, and is generally made up of a Chairman, Secretary, Treasurer, and a number of Ordinary members and non-voting members. There must be at least three voting members.

A good way to think about it is that this committee is like the Board of Directors of a company. They are elected, have wide powers and, provided they act within the realms of the rules, they should be allowed to get on with the job and ensure your building is safe and in good repair.

Just like a Board of Directors, if a committee is dysfunctional or dormant in its property  responsibilities then it’s invariably going to lead to problems for the body corporate.

How does the committee work?

Generally, it’s up to the committee members themselves how they organise their affairs to ensure a smooth running of the body corporate.

Some committees will have regular meetings to attend to regular matters of the body corporate and then special meetings when issues arise, while others may decide to only call meetings in special circumstances.

There is no legal obligation about the number of meetings the committee must hold, however only meetings that are officially called and where minutes are submitted will be recognised under the Act.

There are exceptions to every rule, however, and if required a committee can make a decision via ‘postal poll’. This means the committee can conduct a postal vote, usually arranged by the secretary of the committee or a body corporate manager (if you have one).

So what do you do if the committee is dysfunctional or just doesn’t do anything?

If the situation becomes intolerable and it cannot wait until the next Annual General Meeting, there are options for a resolution, including intervention and mediation with the help of the strata manager. There is also the option of an Extraordinary General Meeting being called to deal with the situation and terminate the powers of one or more of the committee members. It is here where a new committee would be voted on.

The benefits of having a strata manager

As part of their powers, the body corporate may appoint an external manager for strata scheme management. These are generally called strata managers or body corporate managers, and they assist in the administration for the building.

If the body corporate manager is being paid by the body corporate, they must hold a license under the relevant state legislation.

The body corporate may delegate all or some of its powers to the strata manager, and this must be outlined in an agreement between the committee of the body corporate and the external manager.

The strata manager becomes a guide on how to make the best decision for the particular property, and often knows the best service people in the area if required.

Having a strata or body corporate manager can also be a huge help when it comes to the day-to-day running of the place.

Their duties can include:

• Secretarial requirements: Dealing with owners’ queries and concerns, keeping records, taking minutes at meetings, sending notices, and maintaining the strata roll.
• Assist with bookkeeping and accounting: This ensures a clean and accountable budget.
• Assist with financial planning: Objectively looking at expenditure and any plans the body corporate foresees, and then helping to create the most appropriate and affordable budget.
• Assist with complaints from lot owners and tenants.
• Deal with maintenance and repairs of the building: Guide the committee on who to use and when to complete repairs in common property areas.
• Assist with insurance needs and communicate with insurance companies on the body corporate’s behalf.
• Liaise with neighbours, tenants, property managers, sales agents, councils, conveyancers and tradespeople as required.

Having an objective, external strata manager on board takes the stress away from owners corporations. They also assist with professional advice and decision making so that committees can avoid making the incorrect decision.