In brief - New body corporate and community management regulations were recently made that will introduce significant reforms to the regulation modules that will apply to all community titles schemes from 1 March 2021 

Summary of main changes

  1. Developer's "original owner" power of attorney to be given to the body corporate: additional documents and materials must be given to the body corporate at the first annual general meeting (including a copy of any document under which the original owner derives representative capacity for an owner of a lot (e.g. power of attorney);

  2. Defect assessment report: the body corporate is required to consider a motion proposing the preparation of a defect assessment report either at the next annual general meeting after the first annual general meeting, or if the scheme is intended to be developed progressively, at the annual general meeting that is called immediately after a request to record a new community management statement for the scheme is lodged or property is included in scheme land; and

  3. Disclosure of monetary amount of any commission, payment or other benefit: any developers that own the management rights (and are therefore the caretaking service contractor), need to be aware of the new requirement to disclose the monetary amount of any commission, payment or other benefit they are entitled to receive that is associated with a contract the body corporate is considering entering into (including insurance). 

Below is a more detailed look at these changes and how they might impact property developers.  

All Body Corporate and Community Management Regulations affected

The new regulations introduce significant reforms to the following regulations: 

  • Body Corporate and Community Management (Accommodation Module) Regulation 2020

  • Body Corporate and Community Management (Commercial Module) Regulation 2020

  • Body Corporate and Community Management (Small Schemes Module) Regulation 2020

  • Body Corporate and Community Management (Specified Two-lot Schemes Module) Amendment Regulation 2020

  • Body Corporate and Community Management (Standard Module) Regulation 2020

The new regulation modules include provisions to modernise body corporate procedures, reduce body corporate costs and enhance protections for unit owners. 

This article focuses on the changes to the Body Corporate and Community Management (Accommodation Module) Regulation 2020, however, we note the same changes have also been made to the Commercial Module. 

1. Documents and materials to be given to body corporate at first annual general meeting (Regulation 86) 

At the first annual general meeting, the original owner (developer) is required to give certain documents and material to the body corporate. The changes to the Accommodation Module regulation require additional items be provided to the body corporate, including:

  • a copy of a development approval;

  • the scheme’s community management statement (including a Word version);

  • copies of documents relating to any claim made against a policy of insurance taken out by the original owner for the body corporate;

  • a copy of any fire and evacuation plan required under the Fire and Emergency Services Act 1990

  • an independent valuation for each building the body corporate must insure; 

  • copies of any contracts or agreements for the supply of utility services to the body corporate;

  • copies of any documents relating to warranties for: buildings or improvements forming part of scheme land; common property plant and equipment; and any other body corporate asset;

  • a copy of any proxy form under which the original owner is the proxy for an owner of a lot; and

  • a copy of any document under which the original owner derives representative capacity for an owner of a lot.

The maximum penalty for non-compliance with these requirements is 150 penalty units, which is currently just over $20,000.

Impact of this change on developers 

We consider the major impact of this change on developers is the requirement for the original owner to provide a copy of any proxy form or document under which the original owner derives representative capacity for an owner of a lot, as this will effectively require the developer to provide a copy of each sale contract and disclosure document (or relevant pages or a redacted contract including the power of attorney clause and power of attorney statement) to the body corporate. 

These requirements will apply to all community titles schemes established after 1 March 2021, and therefore for those developments with existing off-the-plan sale contracts and disclosure documents, these will need to be provided (or relevant pages or a redacted contract) to the body corporate to demonstrate the original owners' representative capacity (power of attorney) for each owner of a lot. 

To reduce the administrative burden of this requirement and the effect of disclosing potentially confidential sale contracts to the body corporate that will be held as a body corporate record (and potentially searchable by the general public), developers may consider having a separate  power of attorney statement  to the sale contract and disclosure document. Consider asking your lawyer for further advice in respect of this matter.  

2. Defect assessment motion (Regulation 171) 

The body corporate must include a defect assessment motion on the agenda for the next annual general meeting after the first annual general meeting. 

For a body corporate for a scheme that is intended to be developed progressively, the body corporate must include a defect assessment motion on the agenda for the annual general meeting that is called immediately after: 

  • a request to record a new community management statement for the scheme is lodged; or 

  • property (other than body corporate assets) is included on scheme land.

This regulation is made with the intention to encourage the early discovery of building defects in community titles schemes. The body corporate is required to consider a motion proposing the engagement of an appropriately qualified person to prepare a defect assessment report (although this motion does not have to be passed). 

Impact of this change on developers 

Any defect assessment report could bring to light potential defects in the building which the body corporate may seek to rectify under the warranties contained in the building contract. 

Developers should take a proactive approach and if not done so already, ensure that its building contract appropriately deals with defects and warranties to allow the body corporate to make any claims under the building contract directly with the builder (which may reduce the likelihood of any claims directly with the developer). If required, your lawyers can also arrange a formal assignment of the warranties under the building contract in respect of the common property to the body corporate at the first general meeting. 

Consider asking your lawyer to review any building contract in light of the above. 

3. Disclosure of commission, payment or other benefit (Regulation 146) 

If a body corporate manager or caretaking service contractor (relevant person) is entitled to receive a commission, payment or other benefit from the body corporate entering into a contract for the supply of goods or services, before a body corporate makes its decision to enter into such contract, the relevant person must give written notice to the body corporate disclosing: 

  • the commission, payment or other benefit; and 

  • to the extent the commission, payment or other benefit is monetary - the monetary amount the relevant person is entitled to receive. 

There is a penalty provision for a breach of this disclosure requirement of a maximum of 20 penalty units (currently $2,669). 

This amendment was made with the intention to improve the requirements for a body corporate manager or caretaking service contractor to disclose any commission, payment or other benefit they are entitled to receive that is associated with a contract the body corporate is considering entering into (including insurance). Specifically, where a benefit is monetary, the disclosure must include the amount of the benefit.

Impact of this change on developers 

Any developers who own the management rights (and are therefore the caretaking service contractor), need to be aware of this new requirement to disclose the monetary amount of any commission, payment or other benefit they are entitled to receive that is associated with a contract the body corporate is considering entering into (including insurance) from 1 March 2021. 

This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2020.

Related Articles