Body Corporate Inaction

[prunster]

Hello all you property gurus.

Hopefully, there is a brighter investor than me out there that help me in my situation.

I currently have a unit in Yarraville (VIC) that is part of a complex that has been subjected to inaction by Body Corporate management due to insufficient funds as a result of outstanding fees not being paid.

My problem is that my tenant has taken us to VCAT because he is insisting on a reduction in rent and compensation because the pool/spa area is out of service and has been for several months. The hopper bin is/was also overflowing to the point that the bin was almost buried and a garden fountain in the front has not been cleaned to a point where the water is stagnant.

All these problems are out of my control and the Body Corporate Manager has been contacted by me to voice my disapproval of his actions or inaction as the point is. He constantly quotes the lack of funds as the primary reason for this problem. The major unit holder is also the the developer of the site and he holds 14 of the 25 units in the complex and has not paid his Body Corp fees.

As of January, the services of a new Body Corporate Manager has been enlisted because the primary unit holder sacked the original manager. The new manager has been contacted and he says that immediate action (without complex funding) has been taken to clean up the unsanitary conditions of the complex and recoup the funds from the outstanding fees. However, the pool/spa needs to be closed until such time as an automated chlorine filter can be installed IAW Standards Australia. In my opinion, this filter should have been installed during construction of the pool/spa because it is law for such devices under the public pools act. Although the Body Corp wants to incur a new levy to raise $4,000 from every owner to have this problem fixed, I feel that the developer should be sent the bill.

My question is what can I do to recoup lost income if the VCAT decides to reduce my rental income in favour of the tenant due to the flow on result of other owners failing to fund the Body Corporate responsibilities? Should we give in and just pay our share of the pool/spa levy and get things back to normal as opposed to fighting the developer to fix up his building? The building has been finished for around 2 years now (I think).

Cheers

 

[arriety]

I really can't shed much light on your question re trying to recoup costs from builder but I can tell you that because of poor Body Corp management, unit owners in 2 apartment blocks where I have units have lost money and tenants etc etc. I finally got myself on the management committee and we got in new Body Corp Managers. I realise now that the owners have to take some responsibility in keeping an eye on the Managers, otherwise they take the easy options or can let things slide - unit owners who are in arrear of their Corp fees can be forced to sell their unit and the Strata Corp can recoup the costs. There is a set procedure for this, (well in SA anyway) and a good Manager will ensure the coporation doesn't get so low in funds that it can't function.

 

[toony]

Is the developer a common household name? Send an email to Jenman. Give today/tonite or a current affair a call.

It sounds like the type of stuff they may be interested in.

 

[Kristine..]

G'Day prunster

Thanks for the comprehensive information in your post.

... the Body Corporate Manager constantly quotes the lack of funds as the primary reason for this problem. The major unit holder is also the the developer of the site and he holds 14 of the 25 units in the complex and has not paid his Body Corp fees.

As of January, the services of a new Body Corporate Manager has been enlisted because the primary unit holder sacked the original manager. The new manager has been contacted and he says that immediate action (without complex funding) has been taken to clean up the unsanitary conditions of the complex and recoup the funds from the outstanding fees. However, the pool/spa needs to be closed until such time as an automated chlorine filter can be installed IAW Standards Australia. In my opinion, this filter should have been installed during construction of the pool/spa because it is law for such devices under the public pools act. Although the Body Corp wants to incur a new levy to raise $4,000 from every owner to have this problem fixed, I feel that the developer should be sent the bill. ...

Firstly, may I suggest you contact the City of Maribyrnong for a copy of the Planning Permit including engineering requirements.

This will indicate whether or not it was a condition to install the equipment for the pool. Remember that the definition of a 'public' pool will differ widely from that of a 'private' pool or pool on private land, which yours is.

If the engineering requirments were not met then the Council would not have issued a Certificate of Completion allowing the Titles Office to register the subdivision and to issue new titles.

Regarding the unpaid Body Corporate levy.

If you do not currently have a copy of the Subdivisions Act you can read it online. Levies are a legal impost and are payable by all owners of property within the subdivision, and this most certainly includes the original developer.

Does the Body Corporate manager have the responsibility for ensuring that the Building and Public Liability insurances are current? They cannot do that if the levies are not paid.

As a member of the Body Corporate you have the right to request a Special General Meeting and it may be opportune to do so. This Special General Meeting could be held eg one month after the new management company takes over the responsibilities of management of the development. Any member of the Body Corporate whose levies are unpaid does not have the right to vote. This means that the developer will not be able to vote at the meeting despite still owning a large proportion of the units.

The Agenda for the Special General Meeting should include a printed list of all the units and the amount of arrears relating to each unit. This is most important as the cash flow of the Body Corporate is vital to the proper managment of all properties.

The Agenda must list the reason for the meeting and the business to be discussed. Business could include reference to the unsatisfactory condition of the recreation amenities and the general dishevelment of the development.

Business could also include reference that management of arrears has now become critical and that interest charges will start to accrue from a certain date and that debt collectors will be engaged to follow up collection of arrears.

Remember, the developer cannot vote unless he has paid the arrears.

Assuming that you can get a quorum at the SGM, any decisions of the meeting will become binding on all members. If you cannot achieve a quorum, then there is a 28 day lapse until the decisions of the meeting can become the decisions of the Body Corporate.

Regarding the tenant and their not unreasonable request for a reduction in rent until all amenities at the site are in working order:

Why go to the Tribunal? This is where you must negotiate through the property manager for an amicable resolution to the problem. A goodwill reduction or rebate is only fair, even though you may feel badly done by on all counts. The lack of the pool may not be your 'fault', but it's not the tenant's 'fault' either and they are paying for something which is not there.

Don't let a third party make the decision for you. Try and negotiate a win-win solution - could you offer to pay for a season's ticket at the local public swimming pool or a gym membership instead of an actual reduction in rent?

From where I sit, you are a member of the Body Corporate and the Body Corporate has failed in it's duty to ensure cleanliness, maintenance and the provision of common amenities in the complex. The law says you are all individually and severally liable, so you would have a hard time trying to claim compensation from another member.

Make sure that arrears are charged interest and that the debt collectors are engaged. After that, and assuming that you can clarify the situation regarding the filter (by the way, who closed the pool and on what authority did they act?), the new Manager will at least have a head start on maintaining a proper environment from here on.

Good luck

Kristine