News & Insights

The Queensland State Government, in an action out of step with the other States, has passed legislation amending the Body Corporate and Community Management Act 1997 (Qld) (‘BCCMA’) to now include provisions to temporarily:

• allow bodies corporate to adopt reduced sinking fund budgets less than anticipated major expenditure, which in turn reduces contributions payable by owners;
• relax the two-year requirement for bodies corporate to initiate proceedings to recover lot owner contributions;
• allow committees to postpone the due date for payment of contributions until the end of the body corporate financial year. In other words, instead of quarterly payments a balloon payment at the end of 12 months;
• increase the maximum amounts that bodies corporate can borrow when authorised by ordinary resolution. This will become necessary for most if not all schemes if levy collection is postponed.

While at first glance these changes seem a good idea to take financial pressure off strata owners they will have long and short term impacts on Owners, Buyers and Sellers in a community titles schemes, including:

• s206 Disclosure Statements required for a sale might be completed by Sellers using details of the temporary or reduced sinking fund budget for the contributions and levies disclosure. Buyers may not be aware that the disclosed contributions are not typical;
• future years’ sinking fund budgets will likely need to be higher to recover any shortfall created by any temporary budget.

Administrative fund budgets may also need to be higher to repay additional funds borrowed by the body corporate. A Seller may need to disclose this potential future liability under s223 BCCMA;

• any relaxed requirements to recover lot owner contributions is not a waiver and they will still need to be paid either upon sale or at a future date nominated by the Body Corporate;

While these changes expire on 31 December 2020 the impact for strata owners and their Body Corporates may continue for some time after that date.

takeaway message

1. The “right” to adopt a reduced sinking fund budget or delay the date for contribution payment should be approached with caution
2. Additional borrowing by a Body Corporate will impose future expense and Committees should seek advice before adopting this approach.
3. Committees, if adopting any of the temporary measures, should carefully draft resolutions and explanatory notes to avoid future liability.

Macpherson Kelley has many years’ experience with strata development, sales and management. In the difficult times caused by COVID-19 we can assist strata managers and committees with the necessary skills to avoid unexpected pitfalls.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.