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Service supply and Cost Recovery (Qld)

Does your Body Corporate supply services to owners and occupiers within your scheme? This practice is perfectly legal provided that the legislated requirements to enter into an enforceable agreement are reached.

An agreement is required to provide certainty when seeking recovery of the Body Corporate’s costs paid for providing the service benefiting the owner or occupier and, importantly, costs can only be imposed after reaching agreement with the service user. Failure to follow this requirement to enter into an agreement could see a body corporate left out-of-pocket for something that does not benefit all owners or occupiers.

Service supplied to owners and occupiers for their benefit is different to the ordinary services a body corporate would supply to fulfil its statutory obligations to maintain the common property. For example, this does not apply to arranging for a common property pool to be serviced regularly as it is a body corporate duty to maintain that common property in good condition, funded by levy contributions payable by all owners and not just the occupiers who like to use the pool.

Pest control is an example of a service where the body corporate is obliged to regularly arrange for the common property. The pest control service provider may see an opportunity for a wider offering and put forward a good price to also service all of the lots, however, it is the duty of owners to maintain their lots in good condition and not the body corporate. Furthermore, it is not an allowable use of body corporate funds to pay for the pest control service to lots as they are not part of the common property. The body corporate may still arrange for the supply of the particular service to owners and occupiers, but it is obliged to recover that cost from those owners or occupiers who use the service, with the prior agreement of those users.

Ordinary services that the body corporate may arrange that do not require agreements with owners or occupiers are:

  • Mowing the common property lawn.
  • Painting common property structures.
  • Maintaining equipment in a common property gymnasium.

Ordinary services that usually require agreements with owners and occupiers are:

  • Supply of utilities such as electricity to individual lots.
  • Pest control.
  • Painting of private lots.
  • Laundry or dry cleaning services.
  • Foxtel.

The idea is that an owner or occupier who does not use or benefit from these private services should not have to fund them. An occupier may not want a Foxtel connection in their lot, or may be comfortable laundering their own sheets, but if another occupier does want those amenities, they should pay for them and agree to the charge.

A body corporate should avoid imposing any charges on occupiers they presume will use a private service, either through a by-law or by resolution passed in committee or general meetings. This is due to the legislation prohibiting a by-law imposing a monetary liability, and the approval of a resolution to impose a charging regime on occupiers, which is not the same as the occupiers actually agreeing to the charge.

In Sylvan Beach Resort [2005] QBCCMCmr 40, a body corporate approved a resolution in a general meeting stipulating that all lot owners would pay a levy to fund a Foxtel service. The adjudicator found that:

“…the body corporate must have the agreement of the person to who the services are to be supplied that they want / require the service. This is not simply a majority resolution. Rather it requires the specific agreement, preferably in writing so the agreement is evidenced, of each individual owner who seeks to avail themselves of the service I conclude that the legal position cannot be any clearer than this. The resolution purportedly carried by the body corporate at its AGM to the effect that all owners pay for the Foxtel levy is invalid and of no effect.”

It is not enough for a body corporate to say that they made the service available to all occupiers, and it is the occupier’s fault if they chose not to avail themselves of it. The legislation respects the right of occupiers to choose what amenities they want for the enjoyment of their lot, and to agree on the price they will pay for them.

Service agreements should be in writing, easily understood, signed and dated by the body corporate and the individual lot owner. The advantage to having a well-written and easily-understood agreement is that:

(a)     it will assist in gathering the funds for the services in a timely manner, which is important if the body corporate is required to pay the service contractor in periodic instalments and relying upon owners making payments in turn; and

(b)     if it contains the right terms, the reimbursement monies can be deemed a body corporate debt which runs with the lot – this puts the body corporate in a good position to recover the money if the owner falls into arrears.

While we always recommend a written agreement, we understand that it is not always possible to do everything by the book. The legislation does not require an agreement to be in writing. The agreement could be verbal or, hypothetically, by an exchange of emails.

Repainting is a good situation where all of this can get confusing.

If lots were created under a standard format plan of subdivision, then the boundaries between lots and common property will be determined by marks in the ground, such as survey pegs as opposed to building structures as in the case of a building format plan. Often in this case, the buildings (ie villas, townhouses, standalone properties) will be wholly within the boundaries of a lot. This means the body corporate has no duty to maintain the properties in good condition.

While a painting company may offer a cost-effective price to repainting all of the properties, that service cannot be imposed on all owners and occupiers without their agreement. Instead, it needs to be offered to them and an agreement is required to charge for it. When we give this advice to bodies corporate of these types of properties they can get quite distressed at the prospect of a handful of owners holding out and refusing to have their properties repainted, which could undermine the entire project.

In that case, we encourage committees to investigate whether those properties really do need to be repainted because they are in poor condition or otherwise. If so, the body corporate could say the owner is failing in their statutory duty to maintain the lot in good condition and may perform the work for the owner and recover the reasonable costs of the work as a debt. However; in the absence of a breach of that duty (and the legislated enforcement process followed), the charge cannot be imposed on the owner / occupier without their agreement.

A District Court judge once described this legislation “as incomprehensible as it is over-prescriptive”. This issue illustrates the wisdom of that assessment. But it also reinforces why committees should seek and take advice from strata managers and specialist lawyers to help guide them through these intricacies.

This article was contributed by Jason Carlson from Grace Lawyers.

 

Leave a Reply

  1. Colin Jennings.

    I was wondering if If this information covered my problem. I as caretaker and service provider requested to live of site as my wife was sick and needed some assistance at home. The result was if they allowed me to live off site – one of the conditions was I would have to pay 350.00 odd thousand dollars for use of the common property such as the kitchen and office as I was no longer living on site… We had free use of the kitchen and office in our contract . What difference did it make to the use of theses places if we lived of site. We were still supplying all of the service as well as putting in a replacement assistant caretaker to be on site 24/7. Can they charge for use of common property that is already gifted as part of a contract. Would it be split between all owners or just the ones that used our service.

    1. Jason Carlson

      Hi Colin

      That is a different scenario to what my article is covering. If you have concerns with that arrangement, you should speak with a specialist management rights lawyer. If you would like to be introduced to one, feel free to give me a call and I can arrange it.

      Regards, Jason (3102 4120)

  2. Colin Mildwaters

    One of the key services we provide is electricity.

    Our by-law says that the cost of electricity supplied to a lot for a tenant can be recovered from an owner.

    I had always had concerns as to whether this is lawful

    Regards

    Colin
    COLIN MILDWATERS, SECRETARY, ST KITTS SUNSHINE COAST

    1. Jason Carlson

      Hi Colin

      The point is very well explained by the adjudicator in Q1 [2012] QBCCMCmr 16 at [40]-[47], which is accessible here: http://www.austlii.edu.au/au/cases/qld/QBCCMCmr/2012/16.html

      There are also much tighter restrictions that apply to the on-supply of electricity, which makes it harder to ensure full recovery from tenants. The best approach is to ensure that there is a service agreement between the body corporate and the tenant, and that the owner (as landlord) co-signs in the similar way that a guarantor would for a loan.

      Regards, Jason

  3. Shirley Inkster

    As I am a manager with my own Complex Villa Mikonos and I have an investment property in Country Club Fairways, my question is if the complex is under an accommodation module my understanding is if the Body Corp own the outside of the buildings and we have exclusive rights to the backyards, surely it would be the body corps responsibility to have pest protection in the back & front yards for their buildings wouldn’t it, or is that the owners responsibility. Would love to get this cleared up as different Body Corps have different views.

    1. Smart Strata

      Hi Shirley,

      The following order has similar circumstances to the issue you have described:

      http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/qld/QBCCMCmr/2008/347.html?stem=0&synonyms=0&query=pest%20control

      This passage seems to relate to your specific question:

      Body Corporate’s Duty to Undertake Reasonable Termite Prevention and Control on the Common Property

      Whether the body corporate has failed in its duty to undertake reasonable termite prevention and control on the common property requires consideration of what threat existed and what steps were taken. It is for the body corporate to decide what particular steps it wishes to take to protect the scheme from attack by termites. However, the body corporate’s failure to take appropriate steps to protect against attack by termites can result in the body corporate being liable to pay for the cost of repairs to lots. The body corporate has a duty to maintain the common property. If it is reasonably foreseeable that failure to properly maintain the common property will result in damage to individual lots then the body corporate can be held responsible for the damage to the individual lots.

      We trust this assist with your query.

      Regards,

      The Smart Strata Team