5 AREAS WHERE BODY CORPORATE LIVING CAN GO SERIOUSLY WRONG

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Buildings are kind of like people, obviously not to look at, but in their individuality. Everything from imperfections to location to maintenance and the owner differentiate buildings one from the other.

The same is true of body corporates. They are all very individual and they have an amazingly wide range of issues and problems. Trying to sum up all the problems that arise in body corporates is a bit like trying to name grains of sand on the beach.

That said, when I’m doing a search there are five main categories I’m checking to determine the strength or weakness of the subject body corporate.

1. FINANCIAL STABILITY

In the eyes of the law a body corporate is a legal entity, just like you or me, or Coca Cola. We can all enter into contracts, make money, run up debts and all those things that being a taxable citizen is all about. So anything that could conceivably go wrong with our finances, can conceivably go wrong for a body corporate as well.

Which is a bit of a problem. A body corporate can go broke just like any other legal entity, although they rarely do. A body corporate is a vehicle for managing common property on behalf of lot owners. If the body corporate runs into fiscal trouble those lot owners will need to dig deep in personal funds to find the money the body corporate needs.

There are key indicators to financial stability in a body corporate. Current cash levels, debt ratios and budget forecasts indicate current stability. A review of other areas will give a good idea of future stability.

2. BUILDING CONDITION

In a body corporate the term “building” really means the common property. Lots of things go wrong on the common property. Roads crack, windows leak, plumbing and electrics fail, any number of things happen, exactly the same as a house, just on a larger and more complex scale.

Sometimes the issue is not so much maintenance as it is a building defect or worn out infrastructure or an accident that’s caused a problem.

It doesn’t need to be a problem though.

New buildings have defects and rectification can be pursued through the warranty.

Older buildings need renovation and financing that is the purpose of the sinking fund.

Accidents are covered by insurance.

It doesn’t always work that way though. Builders can go broke and invalidate warranties, sinking funds can be woefully small and renovations enormous and sometimes the insurance company just won’t pay.

The condition of the building is a wild card in any structure but knowledge of problems is a powerful place to start.

3. DISPUTES

The core, the whole concept of body corporates is people working together for a common good. It is one of their greatest strengths.

Unfortunately there’s one little ingredient there that can make things really challenging. People.

The problem is who gets to decide what the common good is? And what if you don’t agree? Or what if instead of courtesy and respect you’re met with arrogance and disdain? A body corporate is an enclosed environment and it’s easy for disputes to flare quickly and burn hot.

Unfortunately it’s not just disputes between residents and lot owners. Disputes can be anything from noisy neighbors to squabbling committees to contractual issues with service providers. They can be a simple action for an overdue levies to a complex case of negligence or defective workmanship. Even criminal activity is not unheard of.

Just as the sources of disputes are wide so are the potential impacts ranging from an uncomfortable or annoying home environment through arbitration and even costly special levies to fund court action or decisions.

4. MANAGEMENT ISSUES

Maintaining a house can be quite a challenge; I know this, I struggle with it every day. I shudder when I think of maintaining a body corporate. They’re seldom just “big houses” and they’re managed by committee, who are then subject to some fairly demanding duties of care, all within a heavily legislated environment.

It’s no wonder management issues arise. Some examples:

  • Committees are all volunteers and in some buildings, no one volunteers, so no one is in charge.
  • In others too many people get involved and factions appear within buildings and committees.
  • Body corporate managers can be a poor fit, either giving too much input or not enough. Sometimes they simply cannot complete necessary tasks.
  • Building managers can be incompetent or unwilling to undertake the necessary tasks.

Problems arise in a body corporate and the strength and ability of the management team is going to make a lot of difference in how issues are resolved.

5. LEGISLATIVE COMPLIANCE

Legislation surrounding body corporates comes from more than just the BCCM Act 1997, although that act does require documentation such as sinking fund forecasts and insurance valuations.

Pool safety legislation requires a pool safety certificate be obtained. Fire safety legislation requires certification of fire safety equipment and evacuation plans. Workplace health and safety legislation requires a whole host of differing audits and reports.

It’s frustrating but the reality for body corporates; legislation must be complied with. Non-compliance can lead to fines and even prosecution, and of course non-compliance can also lead to the natural consequences the legislation is seeking to avoid.

ALL AREAS ARE INTERCONNECTED

These are the five main areas where I look for issues in a body corporate. Each of these areas contribute to the overall health of a body corporate, but, issues in one area seldom stay that way.

For instance, say the body corporate hasn’t had a sinking fund forecast for several years; the likely consequence will be an under-collected fund unable to finance works as required. Then add an accumulative building defect such as concrete cancer and a special levy is imminent.

Most body corporates are well managed and maintained, issue reasonable levies consistently and experience minor issues that are quickly dealt with. Sometimes though, they aren’t.

 

My name is Lisa Rutland and I’m a body corporate records searcher. I’ve spent much of the last eight years learning about body corporates and what can and does go wrong. Now I’m sharing as much of that information as I can at MyBodyCorpReport.com.au