body corporate suing developer

[ABC123]

I own an investment property purchased off the plan.The property is a unit/townhouse in a small complex on a building format plan. A few of the other owners are unhappy with the finished product. Their concerns are predominately with the communal areas that fall within the remit of the Body Corporate (BC). The BC lodged a complaint form with the BSA on behalf of all owners re: the communal area issues. The BSA inspected the properties and advised that the majority of the issues were "contractual" and therefore not within their authority to take action. The only issue that the BSA identified that the builder needed to rectify was regarding a flexible sealant of a floor/wall joint. The BSA inspector hinted to me personally that it was a minor issue and has confirmed in writing that this rectification work is now complete. There were a number of other issues listed on the BC complaint form as 'defects' - the BSA deemed that there was "insufficient evidence to reveal any obvious defective construction practices". Some other items on the complaint form were identified by the BSA as being outside the gambit of building work (i.e outside the Queensland BSA Regulation specific definition) and therefore they were unable to exercise any statutory power on those issues. Consequently, the remaining outstanding issues on the complaint form were identified as contractual matters.

Therefore at the recent AGM one of the owners put forward the following motion (which was agreed/carried): "That the BC for [complex name] make a decision on whether or not [complex name] unit owners are going to take legal action against the property developer for the numerous breaches of contract"

The BC have written a proposal of litigation to put forward to a solicitor so that they can get legal guidance on the legitimacy of the proposal and likelyhood of success. On the proposal they have categorised the issues into 'contractual' and 'substandard workmanship' (despite the BSA's comments regarding no evidence of defects) and are seeking advice on both.

I respect the viewpoints of the other owners, but to be honest I have to question how many of these identified issues are objectively valid. My concern is that any legal process could be potentially very costly to what has otherwise proved to be a very good investment for me so far. In my cynicism, Im concerned about solicitors as having a vested interest in recommending anything that will line their pockets with cash. The complaints also appear at face value to be coming from a select few owners only.

My understanding of any decision-making surrounding the issue of legal action in this type of scenario is that it is series of stepping stone decisions on whether to seek advice on legal action, getting quotes, agreeing which quote to go with, paying for an initial consultation, deciding to proceed or not, and perhaps what type of action to take, based on the solictor's comments, etc. I didn't attend the AGM when this motion was carried. It appears ambiguously worded. It essentailly reads (to me) as "a decision to make a decision". It doesn't specify "pay X amount towards the cost of X legal action". Subsequently, in my interpretation it does not give the BC committee an ongoing mandate to pursue legal action on behalf of all owners. A lot of unit owners abstained from the vote. A proposal of litigation document has been drafted for submission to solictors for quotation purposes. The document mentions (under the heading 'contractual issues') that one of the items has the potential to cost the BC in excess of $4,000 to rectify (based on a verbal quote only). Under the heading "substandard workmanship" is the (subjective?) comment that the issues subtract from the property value, overall aesthetics of the property, and are potentially costly in the future if not addressed. It is my opinion/understanding that once further costs and legal advice is obtained, further decision-making (at an extraordinary general meeting where all unit owners can vote) needs to be made before proceeding.

I looked at a sinking fund forecast and as far a s I can see it factors in 10% for unforseen expenses, but there is no mention that I can see of litigation costs specifically budgeted for.

Any comments/viewpoints on the above from other property investors with a legal/body corporate background would be appreciated.

 

[Dazz]

Hi ABC123,


My initial prelim. thoughts are that any lawyers that you get involved with, will necessarily have to rely on expert building reports, they won't have the expertise to determine whether or not something is dodgy or not. If you already have a report from an building expert saying most of it is not building stuff.....perhaps the lawyer route isn't the best angle.


You also need to weigh up whether or not you wish to be part of the complaint or not, what are the numbers who are complaining compared to the total owners. Of course, this type of thing is synonymous with buying strata property....you don't have full control and need to accomodate the wishes of other owners whose views may diverge from your own.


Has anyone looked at the expected likely protracted cost of hiring lawyers to argue endlessly, where you have little control and stresses go thru the roof and the possibility of getting nothing is high vs taking full control and just spending the money and have 100% certainty about fixing whatever is wrong ??

 

[Propertunity]

ABC123, you have identified issues with OTP (off the plan) and BC (body corporate).

As Dazz says, this is going to cost a packet and line the pockets of the solicitors in the process.

It is quite common for the BC to have allocated 10% in case of unforseen circumstances. The next BC meeting, you should take the time to attend, as it is about to raise a "special one-off levy" to fund the courtcase.

I've seen it all before, it drags on for ages, and the special levy contribution/s make it almost impossible to sell your unit too - just to get out. Any intending purchaser doing a strata search will have all this revealed.

I stongly advise you and the others who abstained last time at the vote, get together and vote down the motion at the next BC meeting.

 

[ABC123]

Hi Daz,

Thanks for your feedback, most appreciated.

I have spoken to the council and I can access the building reports myself, but only with the body corporate's permission. I am awaiting a response.

There are 8 units. 3 voted in favour and the rest abstained. Only 3 people attended the AGM. Understandably people probably abstained because of the complexity of the decision and perhaps the ambiguity of the way the motion was worded (my interpretation). The BC committee (largely made up of those who are complaining) appear to be reasonably intelligent and fiscally responsible from looking at previous BC decisions. Having said that, this can presumably be quite an emotive issue for people who live there and they have been like a dog with a bone on these issues for a couple of years now. Although the motion to take litigation was very recent.

I dont know if anyone has looked at the protracted costs of litigation yet - very good point though.

My understanding is that the BC have a spending limit of $200 per lot and if the legal costs are not in the budget (which I assume they are not) and its more than $1600 (200 x 8) then a special levy will have to raised (and presumably voted on at an extraordinary general meeting?).

Which brings me back to my initial post. Daz or anyone feel free to jump in please - Is my interpretation of the recent motion and subsequent need for further decision-making at a general meeting level correct? - .i.e. the power/mandate this carried motion gives the BC committee in terms of decision-making? For example, lets say the BC committee decide to go with a quote - do we have to vote on this specific expenditure at another extraordinary general meeting (as surely specific costs need to be discussed first!!) ? Or do you think the previous motion gives the BC a mandate to spend on legal costs within the $1600 limitation?

Presumably each and any request for special levies raised re: legal fees will have to go to general vote not just a committee vote? (keeping in mind that the majority of the committee are the ones leading the complaints).

Further comments much appreciated.

Cheers

 

[ABC123]

Hi Propertunity,

Thanks very much for your input. You must have responded whilst I was writing my reply so I didn't read it until after my posting ; ) Im going to definately take your advice.

Cheers

 

[cu@thetop]

Can the BC be responsible for contractual issues in the building when the BC was not in existence until after the building (and defective work) was complete?

I think BSA inspector is dodging the defective work issue. Ask for a review of the decision.

 

[Sheryn]

A picture is worth a thousand words

What is BSA inspector?
Did Building Corporation lodge a complaint via Dept of Fair Trading and the department sent out a BSA inspector?

Do you have some pictures of the issues?

Did one owner at BC meeting put forward the motion 'to shut up some other owner up as they whinge at each BC meeting because something is not 100% perfect'.

In my opinion if the Fair Frading Department Building Inspector says you have a defective work then that is possibly worth pursuing, otherwise it creates an issue that stops people buying the units in the future as the word defective is in BC minutes and ongoing legal fight is in progress.

One other thing to consider - is the company that built the units still around as there are lots of joint venture partnerships that start up to develop a project - make their money and cease the company partnership afterwards to protect their assets.

Guess you will have to attend the next meeting - and have type up some information to explain to other owners how what is written in minutes can affect the future saleability of units for many years to come & the value of the units can be significantly decreased if protracted leagl action is instigated.



Regards
Sheryn

 

[aaarghhh]

What is BSA inspector?

www.bsa.qld.gov.au

Quote:

"Who we are
The Queensland Building Services Authority (BSA) regulates the building industry in Queensland. BSA provides four main services for Queensland consumers and contractors. These are:
Licensing services
Dispute resolution services
Home warranty insurance
Information and education"

 

[grossreal]

hi abc
this might be afunny question but have you done a title search on the developer and the company behind the development
not alot of point taking a silo to court when its backed by a 2 dollar shelf company and most developments are done this way for this reason
also I have not looked at the deal but its not the developers problem in the first place
here is the procedure and you can work out where you site
the land is flat and a developer buys it its the developers problem
he then contracts a builder to build something
upto 99% complete its still the developers problem
at occupation the building is subdivided and now its no longer the developers problem its the units uits divided into and the builder carrys the warranty for the work and the developer folds the silo as it has no longer any use
so if you have issue with the building its the builder not the developer that you go to have a chat with
when the last unit is sold the developer is out of it all together. most people try to have a go at the developer but they get very little luck after the development is finished because its not his or her problem its the builder
and even the builder trys to have a go but get now where as the silo is closedso I think you have to have a look not at should you sue the developer
the question is will you get any money
now let me have a look
do I know of one development that has been successfull and got any money
heres the answer
no
no
no
not one
so you guess my advice

 

[the helix]

I was about to post about the issue of numbers at the AGM (quorum), however I looked into it, they seem to have had enough.

This link has information about meetings, that may be interesting.

 

[ABC123]

CU@The Top - I don't really understand what you mean. I don't doubt the outcome of the BSA Inspection. Its the other owners' perception of 'substandard workmanship' that I query (i.e uneven walking surfaces, crap landscaping, poor drainage, poor quality outdoor stairs). The contractual issues are basically the owners saying/disputing that certain things weren't included in the development which they were led to believe would be (i.e. a privacy screen blocking out the view from one unit into another, some sort of screen across an external carport).

Sheryn - the motion was put forward by the primary complainer. There is really only 1 or 2 other potential complainers at the most. On a positive note, the complainer has also been a tight **** with body corporate spending generally and I think he is fairly intelligent and well-educated. The motion was only to look at quotes at this stage to see if its worthwhile pursuing. Ive got a gut-feeling (read:hope!) that it won't get very far. Although I am quite concerned.

GrossReal - the developer and the builder are one and the same. Doesn't appear to be the arrangement you seem to be talking about. The builder doesn't appear to have had any other issues with other prior developments.

The Helix - Thanks