Clover Court [2000] QBCCMCmr 71 (15 February 2000)

C G YOUNGREFERENCE: 0068-2000

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	10206
Name of Scheme:	Clover Court
Address of Scheme:	17 Australia Avenue BROADBEACH QLD 4218

TAKE NOTICE that pursuant to an application made under the abovementioned Act by

Nicholas SOILEMEZIDIS and Anna SOILEMEZIDIS, as co-owners of Lot 4,



I hereby order that Resolution 16.03.2 concerning the cleaning of stair carpet by letting owners upon each change of tenancy, purported to have been passed at the annual general meeting held on 31 December 1996, is invalid and of no effect.

I further order that -

1.

the body corporate must take immediate steps to investigate and determine its sinking fund obligations in accordance with the requirements of section 94 of the Body Corporate and Community Management (Standard Module) Regulations 1997 and compile a sinking fund budget based on that investigation; and

2.

within three (3) months of the date of this order the body corporate is to call and hold an extraordinary general meeting of the body corporate for the purpose of the adoption of an appropriate sinking fund budget relative to its obligations, and to levy a contribution on owners calculated on the basis of the budget.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0068-2000

“Clover Court” CTS 10206

This is the final order to an application by Nicholas and Anna Soilemezidis of Lot 4, who have sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (“the Act”), quote -

1.

Owner occupiers decided I should pay for the repairs to lock on front entrance door of unit block. I believe that the Body Corporate is responsible for all doors, including the front doors of the individual units, and any costs to repairs done is the responsibility of the Body Corporate, See Attachments 1 and 2.

2.

Owner occupiers decided that the two owners who let their units out, would pay for the carpet cleaning to stairwell each time a tenant moves in and out. Again I believe that the Body Corporate is responsible for all maintenance to the common property and the stairwell is the common property. See Attachments 3 and 4.

3.	Owner occupiers do not send notices of meetings only minutes of the decisions.

4.	The last AGM was held on 30th December 199. Therefore, an AGM was not held in 1998 and 1999. See Attachments 5 and 8.

5.	No Sinking Fund Analysis has ever been done on the building. I believe that a requirement of the Body Corporate and Community Act is that the Body Corporate must have a sinking fund budget for the current year plus the next nine years.

The applicants also sought the following interim orders –

1.	Inform Body Corporate that locks on unit block door and front door of individual units are Body Corporate responsibility.

2.	Inform Body Corporate that common areas like stairwell carpet is used by all occupiers and tenants are no different. Again all common areas is Body Corporate responsibility.

3.	Notice of Meetings to be sent to all owners and meetings to be held at correct time of year (and not when owner occupiers feel like it). See Attachment 6 where it shows current meeting to be held anywhere between 8th March and 11th April, 2000.

On 15 February 2000 the following Interim Order 68-2000 was issued –

C G YOUNGI hereby order that the application for an interim order that 2ythe body corporate be informed of both its responsibility for maintaining external doors and stairwell carpet, and its responsibility in respect to the giving of notice of meetings and the timing of meetings, is dismissed.

Section 223(1) of the Act provides that an adjudicator may make an order that is just and equitable in the circumstances (including a declaratory order) to resolve a dispute, in the context of a community titles scheme, about –

(a) a claimed or anticipated contravention of the Act or the community management statement; or

(b) the exercise of rights or powers, or the performance of duties, under this Act or the community management statement; or

(c) a claimed or anticipated contravention of the terms, or the termination of, or the exercise of rights or powers under the terms of, or the performance of duties under the terms of an engagement contract or an authorisation contract.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 223(2)). An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 230(1)).

“Clover Court” was registered as a building units plan on 22 June 1982 and comprises 5 lots. The applicant’s lot, Lot 4, is one of two lots in the building which are rented out. The applicants are seeking two orders against the body corporate regarding certain charges being levied solely on the basis that they let their lot. They are seeking a further three orders against it for not complying with the legislation in respect to the service of notice of meetings on owners, the failure to hold annual general meetings in 1998 and 1999, and the failure to properly determine its sinking fund liability.

The application and an invitation by this office to owners to respond to the application, was forwarded to the secretary, Mr Livio Taraborrelli, for onforwarding to all owners. Several submissions were received from owners.

I shall deal with each of the matters raised by the applicant in the order they were set out in the application.

1.

Owner occupiers decided I should pay for the repairs to lock on front entrance door of unit block. I believe that the Body Corporate is responsible for all doors, including the front doors of the individual units, and any costs to repairs done is the responsibility of the Body Corporate, See Attachments 1 and 2.

Section 37 of the Act provides that all owners own the common property as tenants in common. The common property is defined in section 11, and its scope is extended by section 21. Section 87 provides that the body corporate administers the common property for the benefit of owners; the elected committee is the administrative arm of the body corporate which carries out the day to day administration.

Section 109 of the Body Corporate and Community Management (Standard Module) Regulation 1997 (hereafter the “Standard Module”) provides that the body corporate must maintain the common property in good condition. Subsection (2) provides, in the case of a building format plan, the body corporate must maintain in good condition “doors, windows and associated fittings situated in a boundary wall separating a lot from common property”. That is, regardless of whether a door is sited within the owner’s or the body corporate’s half of a boundary wall, the body corporate is responsible for its maintenance.

In my opinion the term “associated fittings” includes the lock and key to a door.

The problem of tenant keys is not one unique to this body corporate. It is the experience of many schemes where lots are rented, particularly in the tourist areas, that tenants are prone to losing keys which provides access to the building and unit. For this reason, most bodies corporate in buildings where a large number of lots are let charge a standard fee for providing replacement keys.

That they made do so despite the duty imposed by section 109(2), arises from, in my opinion, the correct premise that while the body corporate is liable for the maintenance of locks and the provision of keys for those locks, it is not liable to provide replacement keys where the loss is the fault of the holder. If it were otherwise then non-letting owners could be contributing funds arising out of an owner’s choice to let their lot and caused by the negligence of their tenants. This is clearly unacceptable and is not to be found in either the interpretation or intention of the legislation.

Although the order sought is that the body corporate be informed that it is responsible for “lock repairs”, the applicants state in the supporting grounds that –

Owner occupiers are discriminating against the two owners who let out their units, for example, costs associated to re-cutting of keys ...”

The application has attached a letter dated 18 June 1998 from the body corporate to the applicants requiring reimbursement of $48 for two keys cut and provided to the tenant. The letter relays the opinion of the attending locksmith that a new and separate key for the front door lock was necessary because successive cutting of replacement keys had “mal-aligned” the key to such an extent that it could no longer open the front door. The applicants have also attached a copy of Mr Soilemezidis’ response of 29 June 1998. In it he suggests that a servicing of the lock may have been the cause of the problem rather than the reason advanced by the locksmith. He also writes that had he been aware of the dual nature of the key then like other owners he would have kept the original key.

The applicants have offered no evidence to convince me that the reason for the key cutting was other than the result of their own and/or their tenant’s negligence, and therefore it is matter of their own cost. I also note that the incident took place nearly two years ago. The delay and the small amount involved border on the frivolous.

2.

Owner occupiers decided that the two owners who let their units out, would pay for the carpet cleaning to stairwell each time a tenant moves in and out. Again I believe that the Body Corporate is responsible for all maintenance to the common property and the stairwell is the common property. See Attachments 3 and 4.

I have already set out the scheme of the legislation with regard to the maintenance of common property in “1.” above. The stair-carpet servicing Lots 3 and 4 is part of the common property and therefore the responsibility of the body corporate to maintain.

Resolution 16.03.2 passed at the annual general meeting held on 31 December 1996 states –

“It has been noted that each time a Unit tenant leaves and a new one arrives, the stair carpet becomes soiled. It was agreed that after a new tenant has moved in, the owner of the applicable Unit must arrange for and pay the cost of cleaning the flight(s) from Garage level up to the Unit.”

This is an incorrect decision as its arbitrary nature offends against both section 109 of the Standard Module (see above) and the general law which prohibits discrimination on an inappropriate basis. The latter is reflected in section 142(40 of the Act which states that “A by-law must not discriminate between types of occupiers”. A by-law requiring that a letting owner must have the common property carpet cleaned after every tenancy change is a clear example of an offending by-law under this section.

I have emphasised that the decision is incorrect because of it arbitrariness. This is because the duty of the body corporate to maintain common property does not prevent it from recovering the cost of repairs, cleaning etc., where it is appropriate. This principle is contained within subsection (4) of section 109 of the Standard Module which states –

(4) To avoid doubt, it is declared that, despite an obligation the body

corporate may have under subsection (2) to maintain a part of a lot in good

condition or in a structurally sound condition, the body corporate is not

prevented from recovering an amount of damages from a person (whether

or not the owner of the lot) whose actions cause or contribute to damage or

deterioration of the part of the lot.

Accordingly, if a tenant were to damage the carpet by staining it or ripping it, beyond what could be regarded as reasonable wear and tear, then the body corporate is entitled to recover its costs from the tenant.

I have ordered that the resolution of 31 December 1996 is invalid. However I would emphasise that any damage by tenants beyond what is normal and reasonable should be pursued against them. The applicants cannot expect other owners to pay for the rectification of damage caused by their tenants and I have assumed this is not the submission of the applicants, but that they be relieved of the cleaning obligation upon every change of tenancy even where no damage is evident. I would also comment that it is also in the interest of the applicants to ensure that specific damage by their tenants is rectified otherwise the state of disrepair may deter prospective tenants.

3.	Owner occupiers do not send notices of meetings only minutes of the decisions.

The body corporate has a duty under the legislation to serve notice of all meetings of the body corporate (see section 42 of the Standard Module). The section also sets out the required documentation for a notice of meeting in section 47 of the Standard Module. It is important that all owners are able to participate in the decision making of the body corporate and in the case of absentee owners this can only be done by the provision of a notice containing an agenda and the capability of voting by voting paper or through a proxy.

This is a requirement of the legislation and an order such as that sought by the applicants would merely repeat what is already an obligation of the body corporate. An order is only appropriate where there is a specific contravention of the legislation. It should be noted that section 193 of the Act imposes a three month limitation on bringing such matters before an adjudicator unless “good reason” can be shown for the adjudicator to waive this limitation.

4.	The last AGM was held on 30th December 199. Therefore, an AGM was not held in 1998 and 1999. See Attachments 5 and 8.

This is a statement and no order is appropriate. The legislation requires that a body corporate must hold an annual general meeting each year and the procedures and the timing of the meeting are set out in the Act. I do not propose to discuss all of the requirements here. The Office provides a telephone information service on Freecall 1800 060 119 which is available to all owners seeking information on the legislation.

5.	No Sinking Fund Analysis has ever been done on the building. I believe that a requirement of the Body Corporate and Community Act is that the Body Corporate must have a sinking fund budget for the current year plus the next nine years.

The Standard Module, which regulates the body corporate, provides in Part 7 for the financial management of bodies corporate. Briefly, it requires that an administrative fund budget be compiled according to estimates of reasonable and necessary “recurrent expenditure” to be incurred by the body corporate over the forthcoming financial year (see section 94(2)). It also requires that the body corporate must compile a sinking fund budget based on its estimates of reasonable and necessary “non-recurrent/capital” expenditure to fund its intended expenditure for both the financial year ahead and to proportionately accumulate funds to meet expected expenditure over the following 9 year period. That is, each year the budget must contemplate expenditure for the next 10 years.

Basically, the sinking fund budget involves a process of: the body corporate first identifying future major/capital maintenance (eg painting, fence replacement) requirements; determining when that maintenance event will fall due; allocating the likely cost of each maintenance event evenly over the intervening years; levying those amounts on owners each year so that when each maintenance event falls due there are earmarked funds already accumulated to enable the work to carried out. It is a concept which shares the burden of major/capital maintenance over all owners through the course of their ownership. The Standard Module gives a simple painting example of this concept following section 94(3).

I would also mention that purchasers of units, and their solicitor representatives, are now very much aware of these relatively new provisions and in instances where a body corporate has not made proper sinking fund provision relative to the state of the building, they will take this into consideration in making their purchase decision.

It appears from the material before me that the body corporate has not carried out a full analysis of its future liabilities but has based its sinking fund contribution on a “best guess” basis of those future costs. It may be that the contributions are sufficient, even excessive, however that will not be known until the legislative requirement is complied with and an analysis is done. This does not necessarily the engagement of a quantity surveyor but should be based on defensible grounds – in the most simplest situation it may involve the advice of a painter as to when painting is necessary and an expert estimation of what the cost at that time will be.

I have made an appropriate order for the body corporate to comply with the sinking fund requirements of the legislation.