Admiralty Gardens [2003] QBCCMCmr 539 (28 May 2003)

Last Updated: 10 September 2007

REFERENCE: 0778-2002

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	15228
Name of Scheme:	Admiralty Gardens
Address of Scheme:	5 Thornely Close BELLARA QLD 4507

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

the Body Corporate for Admiralty Gardens


I hereby declare that each lot shall pay the proportion of the insurance premium attributable to building and contents or reinstatement insurance based on the interest schedule lot entitlement for the scheme, and for all other components of the insurance premium, including GST and stamp duty, the premium payable by each lot is proportioned according to the contributions schedule lot entitlement for the scheme.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0778-2002

"Admiralty Gardens" CTS 15228

The applicant, the body corporate for Admiralty Gardens, has sought the following order of an Adjudicator under the Body Corporate and Community Management Act 1997 (the Act), quote –

Seeking an order (decision) on insurance relating to breakdown and distribution to lot owners ...

Section 276(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 the Act or the community management statement; or

(c) a claimed or anticipated contractual matter about-

(i) the engagement of a person as a body corporate manager or service contractor for a community titles scheme; or

(ii) the authorisation of a person as a letting agent for a community titles scheme.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 276(2)). An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate (section 284(1)).

The applicant states –

... Under my current understanding insurance is distributed as per proportion to lot owners interests as provided in the CMS.

The applicant then attaches a copy of the body corporate’s current insurance invoice, and requests –

Can the Commissioner’s office provide an accurate direction to which of these individual items may be distributed between contributions and interest for lot owners.

The applicant’s terminology is a little unclear. The applicant speaks of distribution rather than contribution. Distribution implies or suggests a payment or dividend to owners. Contributions however are the amounts paid by owners to the body corporate for administration and sinking fund expenses. I assume that what the applicant is in fact intending is the proportion of contributions payable by individual owners to the body corporate for insurance related charges. I will proceed on this basis.

There are four lots in the scheme. Both the contribution and interest schedule lot entitlements are –

Lot 1 12
Lot 2 13
Lot 3 17
Lot 4 34

Total 76

The five components of the body corporate premium are –

Building and contents 709.97
Public liability 84.35
Fidelity guarantee 44.97
Personal accident events 44.97
GST and Stamp duty 171.24

Total 1055.50

The scheme is registered under a building unit plan of subdivision (now a building format plan).

130 Premium
(1) The owner of each lot that is included in the scheme and is covered by reinstatement insurance required to be taken out by the body corporate is liable to reimburse the body corporate for the proportion of the premium for reinstatement insurance that reflects--
(a) for a lot created under a building or volumetric format plan of subdivision--the interest schedule lot entitlement of the lot; and
(b) for a lot created under a standard format plan of subdivision--the cost of reinstating the buildings on the lot.
(2) The body corporate may adjust the amount payable by a lot owner under subsection (1) in a way that fairly reflects--
(a) the extent to which the fixtures and fittings forming part of the lot are of a higher standard than the fixtures and fittings of lots included in the scheme generally; or
(b) the proportion of the total risks covered by the policy attributable to activities carried on, or proposed to be carried on, on the owner’s lot.
Example of paragraph (b)--
In a community titles scheme, the buyer of a lot starts a small manufacturing business requiring the use and storage of flammable chemicals. The insurance premium for the body corporate policy is increased by the insurer because of the increased risk of damage through fire. The lot owner’s reimbursement liability for the insurance premium will include the amount of the increase.
(3) The reimbursement for which the owner of a lot is liable may be recovered by the body corporate as part of the owner’s annual contribution to the administrative fund.

Under section 130(1)(a), the premium for reinstatement of the building is proportioned between owners on the basis of the interest schedule lot entitlements. The applicant should also note the provisions of subsection (2) set out above and also sections 131 and 132 of the standard module.

All other forms of body corporate insurance, including public liability insurance which the body corporate is required to maintain under section 136, are proportioned between owners according to the contributions schedule lot entitlements for each lot. (see section 95(5) of the standard module).

This distinction between reinstatement insurance (or building and contents as it is commonly known) is only relevant were the interest and contribution schedule lot entitlements differ. Where the two schedules are the same, as is the case here, then the distinction is not relevant as practically the result will be the same.

So to conclude, each lot should pay the proportion of the insurance premium attributable to building and contents or reinstatement insurance based on the interest schedule lot entitlement, and for all other parts of the insurance premium, including GST and stamp duty, the premium payable by each lot is proportioned according to the contributions schedule lot entitlement.