Developers

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Effective Body Corporate Management (Strata) consultants can assist in achieving higher sales and reduced costs for developers whilst taking the mystery out of establishing a Community Titles Scheme and Body Corporate.

As part of our service we review and provide input on the below aspects, pre and post construction. These are generally drawn by your solicitor, however we are able to provide assistance with the following:

  • Statement of future development
  • Building management statements
  • Community management statements
  • By-laws
  • Allocation of exclusive use areas
  • Onsite management agreements
  • Onsite management space needs
  • Deeds, easements and covenants
  • Waste disposal arrangements
  • Community facility layouts
  • Utility services
  • Body corporate assets (i.e. gym equipment, furniture, chattels)
  • Budget for the principal and each subsidiary body corporate
  • Statement of contributions showing the body corporate financial requirements for each lot
  • Body corporate administration agreement
  • Interest schedule lot entitlement
  • Contribution schedule lot entitlement
  • Defects schedule
  • Work health and safety reports
  • Sinking fund reports
  • Building replacement estimate reports

We are also available to brief your sales team on the body corporate functions and layout.

WHAT IS THE BODY CORPORATE AND COMMUNITY MANAGEMENT ACT?

The Body Corporate and Community Management Act 1997 is Queensland legislation regulating bodies corporate, owners and others (such as tenants). It balances the interests of owners, bodies corporate and persons engaged by a body corporate.

When a community titles plan is registered it becomes a legal person much like a company. This legal person takes on the role of a management company of the apartment complex, and is referred to in the Act as a “body corporate”. The body corporate is charged with administering the common property for the benefit of the lot owners. It obtains the funds it needs to discharge this function by imposing levies (or contributions) on the lot owners.

WHO DO YOU NEED?

A developer’s first point of contact for advice and assistance in establishing and managing the process of bodies corporate and community titles should be a qualified body corporate management company such as tcmstrata.

There are distinct advantages in appointing a body corporate management firm early as their knowledge and advice can often save developers time and money. Even if a development is fairly small and is basic in the titling structure, it is recommended to meet briefly with a body corporate management company to review the project and provide early advice and establish structure and timing.

WHAT ARE THE ISSUES?

Establishing body corporates in larger developments or projects which are somewhat complex or innovative usually have critical issues which need to be planned for and addressed when planning and establishing the body corporate.

These issues can include:

  • Titling structure i.e. how the subdivisions are done
  • Multiple community title schemes and what the arrangement of the schemes is to be
  • how different uses in the completed development are to be catered for
  • Liability issues for developers.

Once the optimum arrangement and titling structure for your development has been established the body corporate management company will advise on the optimum arrangement providing the best possible outcomes and best options available as the project progresses.

If poor structuring arrangements are chosen it can have both a negative impact on sales and lasting adverse effects for the owners in the development.

WHO DOES WHAT?

There are many steps and documentary requirements of the Body Corporate and Community Titles Act 1997 which your body corporate management company will manage and organize on your behalf. The body corporate management company will organize and liaise with sub-consultants such as Quantity Surveyors, Solicitors and Surveyors for specialist reports and services required to establish the body corporate.

 

FREQUENTLY ASKED QUESTIONS ABOUT NEW BODY CORPORATES

As answered by Kelly Roberts of tcmstrata, Cairns leading body corporate management firm:
 

HOW LONG DOES IT TAKE TO COMPLETE ALL DOCUMENTS FOR ESTABLISHMENT?

After we’ve got the information we need it will generally take us only a couple of days to produce the contribution and interest lot entitlement schedules, the first year budgets, and resulting levies.
 

WHEN IS THE BODY CORPORATE FORMED?

The body corporate is formed automatically when the titles and Community Management Statement (CMS) are registered by the Department of Natural Resources. This occurs after practical completion of construction and the registered plans have been certified by Council.
 

WHAT HAS TO HAPPEN BEFORE WE CAN SETTLE CONTRACTS?

As soon as titles and the Community Management Statement are registered, and the body corporate insurances are in place, we can draft the First Extraordinary General Meeting (EGM) minutes and get those approved by your solicitor and then establish the body corporate up in our computer systems. This process typically takes a day or two. We are then are in a position to issue body corporate certificates and other documents for individual lots and the sales settlements can begin.
 

WHEN IS THE BODY CORPORATE MANAGER APPOINTED?

The Body Corporate Manager is appointed as part of the First EGM agenda mentioned above. One of the motions on that EGM is for the body corporate to enter into a management agreement (for up to 3 years) with the Body Corporate Manager.
 

WHEN IS THE RESIDENT MANAGER APPOINTED?

Similar to Body Corporate Manager, as part of the first EGM agenda mentioned above one of the motions on that EGM is for the body corporate to enter into a Caretaking and Letting Agreement with the resident management entity (often a private company or family trust owned by the resident manager). Sometimes the body corporate will enter into the Caretaking and Letting Agreement with an entity owned by the developer, and he may assign the agreement to another party at a later time.
 

WHEN ARE CONTRACTUAL MAINTENANCE AGREEMENTS ENTERED INTO?

Common agreements such contractual maintenance agreements for lifts or fire systems, may have already been entered into by the developer and be novated to, and binding on the body corporate. Alternatively they are sometimes entered into at the time of the First EGM when the developer is the sole owner of all lots. Generally the preferred timing, and the more usual arrangement, is that such agreements wait until at least the first AGM when the body corporate is represented by the individual owners which ensures they are provide the opportunity to decide what long term agreements the body corporate gets locked into.
 

RESIDENT MANAGERS - IS IT A GOOD IDEA TO HAVE ONE?

Any residential scheme of about 30 lots or more can generally support a Resident Caretaker/Manager. For the Manager’s letting side of the business to be viable he needs a reasonable percentage of the building to be owned by absentee (investment) owners letting their units to the rental market. As to whether the benefits to owners justify the cost to of having a Resident Caretaker - from our experience there is justification. The benefits a good Resident Manager brings to the complex include:

Increased security; more heightened awareness of what visitors are on the complex and what they are doing;

Increased supervision; and control of inconsiderate behaviour, and stricter application of By-laws to control such behaviour;

Better maintenance of the buildings and grounds;

Removal of a significant amount of the burden on the Committee as a lot of the maintenance issues are taken care of by the Resident Manager, including arranging for quotes from trades for larger jobs, and then supervising the caring out of those jobs by the chosen contractors;

Improved liaison between owners and a ‘point of contact’ at the complex.

 HOW DO I FIND A RESIDENT MANAGER?

Developers sometimes place newspaper advertisements to sell the management rights for a complex, but the main avenue is via a specialized management rights brokers e.g. Resort Brokers.
 

DO YOU NEED TO DO ANYTHING IN RELATION TO THIS?

The body corporate management firm needs to know whether the developer is intending to have a Resident Manager for the complex for the reason that it has a significant impact on the budgets. We can also assist with perusing and commenting on the Caretaking and Letting Agreement, especially vetting the Resident Manager’s ‘duties list’ to see that it is appropriate for the complex.
 

DOES MY SOLICITOR NEED TO DO ANYTHING IN RELATION TO THIS?

Yes. Your Solicitor will need to draw up the Caretaking and Letting Agreement (we can assist) and this will need to be part of the disclosure documents given to purchasers. Depending on the project, a management rights operation can raise issue under the Managed Investment Scheme provisions of the Corporations Act and your Solicitor will need to provide advice on this and its effect on sales contracts and disclosure requirements. Your Solicitor will also likely be involved in sale contract preparation or supervision for the contract of sale of the actual Management Rights themselves.
 

WHAT ARE THE MANAGEMENT RIGHTS WORTH TO ME TO SELL?

There are a number of factors that go into the calculation of market value for these Management Rights, and the rates change as the prevailing market conditions change. We recommend a developer talk to one of the leading Management Rights brokers for an appraisal.
 

WHAT SORT OF INSURANCE POLICY IS REQUIRED FOR THE BODY CORPORATE?

Strata Schemes need a specialized strata policy and these are available from most of the leading insurance underwriters. These policies typically bundle different components into the one package For example, a strata insurance policy will normally include cover for:

  • Buildings and common assets
  • Public liability of at least $10Million (legally required)
  • Loss of rent
  • Personal accident
  • Fidelity guarantee
  • Directors and office bearers
  • Additionally it might also include ‘Machinery Breakdown’ and would normally be included if there is significant machinery onsite e.g. lifts, treatment plants and pumps
     

HOW IS THE SUM INSURED DETERMINED?

There is a statutory requirement under the Act that the original owner (the developer) needs to obtain and supply to the body corporate prior to the First AGM, an Insurance Replacement Cost Estimate for the scheme this report indicates the correct sum insured for the insurance policy. It is possible for this report to be done ‘off-the-plan’ and so we get developers to arrange for this report early in the project life so that we can use the figures in our budget estimates for the insurance premium. Insurance replacement cost estimates should not be done by valuers, rather by Quantity Surveyors as they are experts in the field of construction costs.
 

WHEN IS IT TAKEN OUT?

The policy, or a cover note, must be activated as soon as the scheme comes into existence so that protection for owners is in place. In addition, the actual policy must be completely in place, and paid for by the developer for a full 12 months, and a Certificate of Currency supplied by the underwriter prior to the First EGM being held. Because the First EGM must be held before any settlements can take place insurance issue becomes one of the ‘time critical’ elements, and so it’s important that this is coordinated properly so that it doesn’t delay settlements. A developer should ensure Insurance is in place on the day the builder hands over the property to the original owner.
 

WHO ARRANGES IT?

It is the developer’s responsibility to get the policy in place and pay for it - we can assist with quotes for the cover and coordination.
 

WHO PAYS FOR IT?

It is the statutory obligation of the developer to pay for a full 12 months from the date of registration of the scheme. You can recover the costs of insurance established by you as an adjustment under sales contracts with buyers; your solicitor should address this in preparing the contracts.