Owning A Property With A Body Corporate – What You Need to Know

Units, apartments and townhouses can be great real estate investments and an affordable way for young first home buyers to get a foothold in the property market. But owning a property in a larger complex where the various owners share facilities and amenities is different to owning a regular house and land – Complexes of building units are administrated by what is known as a body corporate, whose role is to run and maintain the complex on behalf of the individual owners and occupants.

Here we will have a look at what constitutes a body corporate, what is involved and what you need to know as a property owner.

What is a body corporate?

A body corporate is a legal entity which is established to administrate a complex of building units or land lots. When a larger property is subdivided into either strata or community title properties (ie. an apartment building, unit complex or gated community), a body corporate is formed to oversee the running of the complex. This includes taking care of shared or common areas such as driveways, access roads, gardens, swimming pools and the external components of the building itself, as well as looking after the finances and legal affairs of the complex.

The body corporate consists of all of the individual owners of the properties within the complex who form a committee, and among them a manager and secretary are usually appointed to head the body corporate committee. In the case of smaller complexes or duplexes, the property owners will often run the body corporate privately and deal directly with one another but it is also common in larger complexes, where there is a larger number of owners and issues to deal with, for the management of the building or complex to be outsourced to a professional strata management company who specializes in running unit complexes.

Body Corporate Levies

Obviously, having and running a body corporate and managing a complex of units will cost money, and all owners will be required to contribute financially to ensure that the complex is properly maintained. These payments or levies are an additional cost to your everyday expenses such as your mortgage and home and contents insurance. Body corporate levies are usually invoiced and paid either quarterly or every six months, and typically comprise two separate payments – Administration fund levies, and sinking fund levies.

Administration fund levies are payments which contribute to the year-to-year running costs of the complex. This could include cleaning, gardening and grounds keeping costs, pool maintenance, servicing of electric gates and other equipment, service fees to the strata management company, or any other costs associated with the ongoing management of the complex. Sinking fund levies are payments which are contributed to the complex sinking fund to cover one-off or non-recurring expenses – A purse for future capital works of a non-recurring nature. These two levies are normally itemized and can be varied if the needs of the complex require them to be.

If the administration and sinking funds are unable to cover the costs of running the complex then a special levy is often implemented to cover the shortfall. Variations to levies are usually determined at the body corporate’s annual general meeting (AGM), which is where all of the important issues pertaining to the running of the complex are discussed and dealt with by committee vote.

Building insurance costs are sometimes included in the administration fund levy but can also be charged separately depending on how the body corporate is structured.

Body Corporate By-Laws

To ensure the smooth running of the complex and the quiet enjoyment of all occupants, a series of rules or by-laws will normally be established for all owners and tenants to abide by. The by-laws are documented in the complex’s community management statement and can impose restrictions on material use, car parking, noise, appearance of the individual units to maintain consistency, or any other rules the body corporate committee deems appropriate.

Details of the by-laws in any complex can be obtained by contacting either the body corporate manager of the strata management company who administrates it.

Body Corporate Disclosure Statement

If you are an owner of a unit which is subject to a body corporate, or exists in a community titles scheme, you can sell or transfer the property the same as you would a house and land, however you will need to disclose upfront to the potential buyer the material facts surrounding the body corporate, including the levies payable. To do this, you will need to obtain from the body corporate manager (or strata management company) a copy of the Body Corporate Disclosure Statement, which is required by law to be annexed to the sale contract.

The Body Corporate Disclosure Statement details the property particulars, the name of the person who manages the body corporate, all levies payable, the balance of the sinking fund, current insurance details, applicable by-laws and any other material facts which are relevant. There is typically a fee payable in order to retrieve this, but this will vary between different complexes and buildings.

‘Til next time, ciao 😊

Disclaimer: The information is this article is for general information only, it is not intended and should not be considered as either legal or financial advice. The information contained herein should not be relied upon solely and all parties are encouraged to obtain their own independent advice before making any financial decision.