body corporate war heats up

[Propertunity]

For unit owners / intending purchasers this must be worrying

From http://www.news.com.au/story/0,27574,25076302-421,00.html

A BULLET has been fired at a Gold Coast penthouse amid a bitter body corporate fee feud that is dividing apartment communities across Queensland.
Police are investigating and the State Government has ordered a review of controversial legislation enabling millionaire penthouse owners to slash their body corporate levies at the expense of other unit owners.

Tensions are rising among many of the state's 340,000 apartment dwellers, with one warning yesterday: "It's getting to the stage where someone is going to get hurt."

The shooting incident, which shattered a penthouse window, followed a bid by wealthy apartment owners in riverside Surfers Paradise highrise The Pinnacle to have their body corporate levies halved and the fees of residents on lower floors doubled, The Courier-Mail reports.

Trouble erupted in December when penthouse owners applied to the Commercial and Consumer Tribunal to change the lot entitlements in The Pinnacle.

Unit owners in almost 30 other buildings in Brisbane, the Gold and Sunshine coasts have filed similar applications.

The claims are based on a controversial legal precedent, known as the Centrepoint case, which has led to massive increases in body corporate fees for thousands of lower-floor unit owners across the state and hefty decreases for those in penthouses.

This followed a successful 2004 court challenge by unit owners in Brisbane's Centrepoint Apartments to the long-held practice that bigger and more expensive apartments attract higher body corporate levies.

The landmark case has since sparked civil war in many apartment buildings, which are attracting growing numbers of residents.

"It's completely unfair," Gold Coast Labor MP Peter Lawlor said.

He has been campaigning for legislative changes for five years to stop body corporate fee hikes and he said the issue would become "a tidal wave" if something was not done.

Airline pilot Michael Corr, who owns a one-bedroom unit in The Pinnacle, slammed the move by penthouse owners as "greedy and completely immoral".

"These guys are worth millions and they are trying to screw everyone else in the building," he said.

Mr Corr said if the penthouse owners were successful, their body corporate fees would plummet from about $30,000 to $12,000 while lower-floor unit owners would see their fees jump by up to 70 per cent to almost $7000.

But penthouse owner Nigel Neaves said the current body corporate fee structure was "inequitable and ridiculous".

He said he was paying 10 times more in body corporate fees than lower-floor residents to use the same facilities.

Sub-penthouse owner David Callard said too many unit owners had been "getting away with low body corporate fees for years".

 

[boomtown]

The law suits to reset the unit entitlements combined with the "rates parity" initiative of the Brisbance City Council - this is quite nasty for "cheaper" units in the block.

 

[Perp]

Sounds fair enough to me... the penthouse owners are still paying more than those with smaller units, but it sounds like now it's somewhat in proportion, whereas before the penthouse owners were paying substantially more than their fair share. (At least in the example given.)

 

[units4me]

The same sized unit on a high floor unit theoretically uses the same services as the lower floor units, and should be charged accordingly, regardless of what the unit is worth.

The one thing that higher unit owners should pay is a higher proportion of costs associated with lifts, as they use them far more than those on lower floors.

 

[vbplease]

but it sounds like now it's somewhat in proportion,

Whether or not it seems to be in proportion is not the point...

The point is, the way body corporate fees are calculated should never change. how can they?? Can a apartment miraculously grow in size, or gain features that require more maintenance? BC fees should be calculated after construction, then remain constant..

Admitting that the fees were calculated unfairly at the start, is admitting someone needs their head checked..

 

[boomtown]

Put it this way - these are actual numbers from a real apartment.


You have a 1 bedroom apartment on the ground floor with 1 car space that rents for $380 pw. Body corp is $3300 pa (works out to 16% of gross rent).

You have a 4 bedroom penthouse on the roof with 4 car spaces that rents for $1200 pw. Body corp is $7700 pa (works out to 12% of gross rent).

After adjustment the body corp for both apartments is $5200 pa.

That represents 26% of the gross rent for the entry level apartment and 8% of the gross rent for the penthouse. Is there anyone that actually thinks that is fair?

Add in the most recent change to the BCC rules which increases rates on 1 bedroom apartments from $1700 to $3400 - you now have a situation where an apartment that rents for $380 per week has to pay $3400 + $5200 pa in rates and levies.

$3400 + $5200 = $8600. That means for a nice 1 bedroom apartment in inner Brisbane 43% of the gross annual rent is going on rates and levies.

Investing in 1 bedroom apartments has become unviable in Brisbane. The Brisbane City Council and State government have completely killed affordable high density housing in the inner ring.

I will be surprised if Trilogy, Vision, Rivers Edge go ahead in this environment. Its ludicrous.

 

[dave99]

A large part of the body corp fees is usually insurance.

The penthouse holders own a much larger proportion of the building. If the building burned down and the insurance paid out, they would get a larger payout.

They should pay a bigger share of the insurance premium if they are getting a bigger share of the payout.

Generally, if they own a larger proportion of the common areas, they should pay a larger proportion of their upkeep. Seems fair enough to me - don't understand the basis of the Centrepoint decision myself. The body corp is not about providing "services" like a hotel - it's about the owners of the pool, gym, lifts etc contributing to their maintenance. If you don't want pay your share of the maintenance, don't buy into a building with these things!

 

[Perp]

Whether or not it seems to be in proportion is not the point...

The point is, the way body corporate fees are calculated should never change.

Unfortunately, it's about what's legal rather than fair, and the two are often entirely different things, as anybody with any experience of the legal system will be well aware.

Now that I've looked into it a bit and read the decision, it seems to me that quantity surveyors have adopted an erroneous "accepted practise". Specifically, the norm has been to charge penthouse owners substantially more, even though the governing legislation quite clearly specifies that the body corporate fees have to be distributed with regard to the contribution to expenses only, with no reference to relative values or amenity, and that equality is the presumptive norm:

the BCCM Act is intended to produce a contribution lot entitlement schedule which divides body corporate expenses equally except to the extent that the lots disproportionately give rise to those expenses, or disproportionately consume services: at 645 [30];
the determination of lot entitlements in a contribution lot entitlement schedule can only be made by reference to factors which have a financial impact or consequence on the body corporate, and cannot be affected by factors which go to a lot’s value or amenity: at 645 [30];
the starting point is that the entitlements should be equal, and a departure from that principle is allowable only where it is just, or fair, to recognise inequality, with the focus of the inquiry being the extent to which a lot unequally causes costs to the body corporate: at 645 [31]

From this decision.

QSs have strayed from these principles for years; I was surprised to discover that these provisions existed. If I were a member of a lower level unit whose body corp fees are going up, I'd be tempted to take legal action against the quantity surveyor who screwed up the initial allocations. (I'm glad I'm not a QS professional indemnity insurer, as this practise appears widespread.)

Generally, if they own a larger proportion of the common areas, they should pay a larger proportion of their upkeep.

They can; it just has to kept in proportion to their contribution to overall expenses.

I do feel sorry for those who bought into lower-value units on the basis of thinking that their body corporate fees would be lower than they're going to be in future. But they're victims of the quantity surveyors who appear to have been flouting the legislation, not the penthouse owners. (And no, I don't own a penthouse. )