Noosa Quays [2006] QBCCMCmr 79 (20 February 2006)

Last Updated: 19 December 2006

Office of the Commissioner for Body Corporate and Community Management SPECIALIST ADJUDICATION (Adjustment of Lot Entitlements) Number: 0789-2005

Applicants: WAINWRIGHT & ANOR



Respondent: BODY CORPORATE FOR NOOSA QUAYS

COMMUNITY TITLES SCHEME 5468

ORDER
20 February 2006

I ORDER that the contribution schedule lot entitlements in community titles scheme 5468 be adjusted in accordance with the following table: Lot No Entitlement Lot No Entitlement 1 44 14 43 2 42 15 43 3 42 16 43 4 42 17 47 5 44 18 43 6 44 19 43 7 43 20 43 8 43 22 43 9 43 23 46 10 44 24 47 11 40 25 45 12 41 Aggregate 998

G F Bugden
Specialist Adjudicator

Office of the Commissioner for Body Corporate and
Community Management

SPECIALIST ADJUDICATION
(Adjustment of Lot Entitlements)

Number: 0789-2005

Applicants: WAINWRIGHT & ANOR



Respondent: BODY CORPORATE FOR NOOSA QUAYS

COMMUNITY TITLES SCHEME 5468

DETERMINATION
20 February 2006

The Application

1. This is an application under section 48 of the Body Corporate and Community Management Act 1997 ("Act") for adjustment of the contribution schedule lot entitlements in community titles scheme 5468 ("Scheme"). The body corporate is the only respondent to the application. It is automatically the respondent as a consequence of the operation of section 48(2)(a) of the Act.
2. The application has been referred to me for specialist adjudication as required by section 265 of the Act.

The Scheme

3. The Scheme is based on Building Units Plan No 9869 which was registered in 1990 under the Building Units and Group Titles Act 1980 and was transitioned to the Act by virtue of the provisions of Division 3 Part 1 of Chapter 8 of the Act. Under the 1980 Act it had a single lot entitlement schedule that was the same as the current contribution schedule. When the Scheme was transitioned to the Act that single schedule was replaced by 2 new schedules, the contribution schedule and an interest schedule. The allocation of lot entitlements in those 2 new schedules were the same, each replicating the allocation in the original single schedule.
4. The Scheme relates to buildings situated at 4 Quambie Place, Noosa Sound on the Sunshine Coast and known as Noosa Quays. Those buildings were subdivided by the original Building Units Plan into 23 lots and common property. Subsequently in 1991 lots 13 and 21 were re-subdivided by Building Units Plan of Re-subdivision No 10866 for the purpose of swapping car parking spaces and those lots became lots 24 and 25 respectively. That re-subdivision did not affect the allocation of lot entitlements in the original schedule because the lot entitlements of the old lots 13 and 21 became the lot entitlements of the new lots 24 and 25 respectively.
5. Noosa Quays effectively comprises 3 buildings. One is a small 2 storey building fronting Quambie Place that comprises lot 11 and common property. Lot 11 consists of a double lock-up garage at ground level and a residential apartment on the first level. The remainder of that building consists of common property, being stairways, storage facilities, a conference facility and toilets servicing the nearby swimming pool.
6. The second building is a partly underground basement that runs from Quambie place towards the Noosa River and ends where the third building commences. The basement contains car parking spaces and storage areas. On top of the basement, fronting Quambie Place, is the building manager’s unit, being lot 12. It is situated above part of the basement, but in a practical sense it is like a separate building in that it stands aside from the third building, which is the main building structure at the Noosa River frontage of the property.
7. Between the "buildings" housing lots 11 and 12 and the much larger "building" at the Noosa River frontage (which I will call the "Tower") is a large podium type area that is partly above the basement and which houses recreational and open space facilities. These include a swimming pool, tennis court, barbecue area and courtyard area. Facilities on the river itself include a beach, pontoon and a ramp to launch small water craft.
8. On the ground floor of the Tower (Level A on the Building Units Plan) there are 5 residential lots, lots 1 to 5 inclusive. They look over the river and in front of them are an attractive lawn and landscaped area, as well as the beach. In a practical sense lots 1 to 5 virtually have exclusive use of the lawn areas, but those areas are clearly common property, maintained by the body corporate and available for use by all lot owners.
9. On Level B of the Tower there are another 5 residential lots, lots 6 to 10. On Level C there are lots 14 to 16 and the lower parts of lots 17 and 24. On Level D there are lots 18 to 20 and the upper parts of lots 17 and 24. On Level E there are lots 22 to 25. All those lots comprise residential apartments and on each level there are open passageways, stairwells and lift landings.
10. Because the basement is on the Quambie Place side of the Tower and its level is only a "half storey" below Level A of the Tower, it is more convenient for the occupants of lots 1 to 5 to walk up the steps to gain access to their lots from the basement rather than wait for and use the lift. Nevertheless, they do have the ability to use the lift and may well choose to do so if they are transporting heavy goods or furniture items. The occupants of lot 11 would not use the lift unless they were visiting people in the Tower. Similarly, ignoring for the moment the fact that lot 12 is the building managers unit, the occupants of lot 12 would not use the lift unless they were visiting people in the Tower.

Evidence

11. By way of evidence, I have before me:

(a)	title searches from the Department of Natural Resources and Mines;
(b)	copies of various plans;
(c)	a report dated 31 October 2005 from Leary & Partners Pty Ltd ("Leary Report") setting out a very comprehensive analysis of the extent to which the respective lots in the Scheme draw upon the resources of the body corporate; and
(d)	a number of submissions from lot owners, which I might say, were very well composed and which I found most useful.

12. I also had the benefit of an inspection of the Scheme on Wednesday 8 February 2006. I found it necessary to carry out an inspection in respect of this application because of the arguments in a number of the submissions from lot owners.

The law

13. Section 48(4)(a) of the Act provides in respect of this type of application:

"The order of the court or specialist adjudicator must be consistent with –

(a)	if the order is about the contribution schedule – the principle stated in sub-section (5); or
(b)	............"

14. Section 48(5) of the Act then provides:

"(5) For the contribution schedule, the respective lot entitlements should be equal, except to the extent to which it is just and equitable in the circumstances for them not to be equal."

15. Section 49 of the Act then sets out the criteria for deciding just and equitable. It provides:

"(1) This section applies if an application is made for an order of the District Court or a specialist adjudicator for the adjustment of a lot entitlement schedule.

(2) This section sets out matters to which the court or specialist adjudicator may, and may not, have regard for deciding--

(a) for a contribution schedule--if it is just and equitable in the circumstances for the respective lot entitlements not to be equal; and
(b) for an interest schedule--if it is just and equitable in the circumstances for the individual lot entitlements to reflect other than the respective market values of the lots.

(3) However, the matters the court or specialist adjudicator may have regard to for deciding a matter mentioned in subsection (2) are not limited to the matters stated in this section.

(4) The court or specialist adjudicator may have regard to--

(a) how the community titles scheme is structured; and

(b) the nature, features and characteristics of the lots included in the scheme; and

(c) the purposes for which the lots are used.

(5) The court or specialist adjudicator may not have regard to any knowledge or understanding the applicant had, or any lack of knowledge or misunderstanding on the part of the applicant, at the relevant time, about--

(a) the lot entitlement for the subject lot or other lots included in the community titles scheme; or

(b) the purpose for which a lot entitlement is used.

(6) In this section--

"relevant time" means the time the applicant entered into a contract to buy the subject lot.

"subject lot" means the lot owned by the applicant."

16. There are other provisions of the Act that are not directly relevant to this application, but which serve as a guide to what is just and equitable in the circumstances. Sub-section 46(7) and (8) are such provisions. They say:

"(7) For the contribution schedule for a scheme for which development approval is given after the commencement of this subsection, the respective lot entitlements must be equal, except to the extent to which it is just and equitable in the circumstances for them not to be equal.

Examples for subsection (7) of circumstances in which it may be just and equitable for lot entitlements not to be equal--

1. A layered arrangement of community titles schemes, the lots of which have different uses (including, for example, car parking, commercial, hotel and residential uses) and different requirements for public access, maintenance or insurance.

2. A commercial community titles scheme in which the owner of 1 lot uses a larger volume of water or conducts a more dangerous or a higher risk industry than the owners of the other lots.

(8) In deciding the contribution schedule lot entitlements and interest schedule lot entitlements for a scheme mentioned in subsection (7), regard must be had to--

(a) how the scheme is structured; and

(b) the nature, features and characteristics of the lots included in the scheme; and

(c) the purposes for which the lots are used."

17. Those sub-sections were inserted by the Body Corporate and Community Management and Other Legislation Amendment Act 2003 ("Amending Act") which commenced on 4 March 2003, so they post date the establishment of the Scheme and have no application to it. However, they do give further indication of what might be "just and equitable in the circumstances" for contribution schedule lot entitlements not to be equal. One effect of these provisions is to make it clear that the legislature had a strong bias in favour of equality of contribution schedule lot entitlements unless justice and equity demanded otherwise. Indeed, the Amending Act reinforced this bias that was also evident from the earlier provisions of the Act.
18. As regards section 46(8) of the Act:

(c)	there is nothing special about the way the Scheme is structured that would be relevant to this application;
(d)	all of the lots in the Scheme are used for the same purpose, namely for a residential purpose; and
(e)	there are differences in the "nature, features and characteristics" of the lots in the Scheme and it needs to be determined whether these differences warrant special consideration in relation to the adjustment of the contribution schedule lot entitlements.

19. A change to the contribution schedule lot entitlements will affect the voting rights of the respective lot owners (vide section 47(2)(b) of the Act) but I do not regard that as a significant factor and it is not a factor that appears to have concerned lot owners.
20. As regards the "nature, features and characteristics" test referred to above, in the past the District Court and specialist adjudicators have had regard to a wide range of matters when determining applications in relation to contribution schedule lot entitlements. However, the decision of the Court of Appeal in Fischer & Ors v. Body corporate for Centrepoint community titles scheme 7779 [2004] QCA 214 has substantially restricted the range of matters that can be taken into account. In that case Chesterman J (with whom McPherson JA and Atkinson J agreed) said [at paras. 25 and 26]:

"The submission for the applicants is that this Part of the Act is concerned with the just and equitable distribution of body corporate expenses among apartment owners and that in making an adjustment of a lot entitlement schedule the court must pay regard only to the origin and allocation of body corporate expenditure.

Although the Act gives no clear indication one way or the other, the preferable view is that a contribution schedule should provide for equal contributions by apartment owners, except insofar as some apartments can be shown to give rise to particular costs to the body corporate which other apartments do not. That question, whether a schedule should be adjusted, is to be answered with regard to the demand made on the services and amenities provided by a body corporate to the respective apartments, or their contribution to the costs incurred by the body corporate. More general considerations of amenity, value or history are to be disregarded. What is at issue is the ‘equitable’ distribution of the costs."

21. That is not to say that other factors are irrelevant, but rather, in the absence of other factors, the proper test is the demand the respective lots make on the services and amenities provided by the body corporate. As I have already indicated, there does not appear to be any substantial "other factors" that apply to this particular application.
22. In the submissions on the application the issue of potential occupancy, based on the number of bedrooms and bathrooms, was raised as a factor that should be taken into account. This is a common argument in these applications and for completeness I should address it.
23. I think the Centrepoint case supports the proposition that a potential occupancy difference should not be taken into account. I think I am also supported in this conclusion by the explanatory notes to the Amending Act (which, as I said, reinforced the bias in favour of equality of contribution schedule lot entitlements). In dealing with amendments to the current section 46 (i.e. the old section 44 before the sections were re-numbered) the notes say:

"Clause 10 amends section 44 to change the requirements for the number that is allocated for the contribution schedule lot entitlement.

The change is intended to reinforce the concept that usually all lot owners are equally responsible for the cost of upkeep of common property and for the running costs of the community titles scheme. However, it is recognised that there are many valid instances where the contribution schedules do not have to be equal. The amendment provides that usually the numbers in this schedule are equal, unless it can be demonstrated that it is just and equitable for there to be inequality.

The need for difference is best shown by examples.

Example 1 Where a basic community titles scheme contains lots having different uses, for example a combination of residential and business lots (restaurants, small shops and the like) the contribution schedule can be different to reflect the higher maintenance and utilities use of the shops in comparison to lower requirements for the residential lots.

Example 2 In a layered scheme there may be a difference in the contribution schedule of each basic scheme in the layered arrangement depending on the nature of each of the basic schemes. If the layered scheme was a building that comprised a number of basic schemes including a car park, shopping centre, hotel and residential schemes, the contribution schedule would be different between, for example, the car park and the shopping centre to reflect the different service needs, the different levels of consumption of utilities and the different maintenance and refurbishment costs. A similar difference would exist between the hotel and the residential schemes.

Example 3 In a basic scheme, if all the lots are residential lots ranging in size from a small lot to a penthouse, the contribution schedule lot entitlements generally would be equal. However, the contribution schedule may be different if the penthouse has its own swimming pool and private lift. The contribution schedule should recognise this type of difference. The other lots in the scheme despite being of differing size or aspect would be expected to have equal contribution schedule lot entitlements.

The clause also includes basic principles to be applied by the developer when first determining the lot entitlements for the community titles scheme.
For example it is not uncommon for a developer to assign a high contribution schedule lot entitlement to a small lot in comparison to that for a larger lot in the scheme. The contribution should not be based on lot size or value. The developer must consider all the factors included in section 44."

24. Example 3 is particularly relevant. It suggests:

•

In the absence of significant difference (e.g. a private swimming pool and private lift) the entitlement for a penthouse would generally be the same as the entitlements for the other residential units in the building, even small ones. In other words, size of the unit in itself is not the deciding factor. (This is confirmed by the two last sentences in the above quotation.)

•	Even if the entitlement for a penthouse is different, the entitlements for the other lots would be expected to be equal, notwithstanding they are of different size and value.

Application of the law

25. All of this leads to a strong argument that the contribution schedule lot entitlements should be equal unless it can be shown that particular lots draw on the services provided by the body corporate to a greater extent than other lots. In that event, the contribution schedule lot entitlements should be adjusted to reflect the difference.
26. The Leary Report goes into a thorough analysis of the range of expenses met from the administrative and sinking funds of the body corporate and then seeks to apportion those expenses against the respective lots in the Scheme based on the extent to which those lots "draw" on the particular expense item. While the vast majority of the expenses are apportioned equally, the following are treated on an individual basis (the approach to deciding allocation being indicated in brackets):

• Lift (availability for use)
• Automatic basement door opener (car space numbers)
• Aluminium balustrade (calculated quantity per lot)
• Glazed aluminium balustrade (calculated quantity per lot)
• Door hardware (calculated quantity per lot)
• Aluminium windows and hardware (calculated quantity per lot)
• Metal door frames (calculated quantity per lot)
• Reseal aluminium windows (calculated quantity per lot)
• Roofing membrane (calculated use area)
• External building painting (calculated quantity per lot)
• Downpipes and gutters (lot areas)
• Metal roof sheeting (lot areas)

27. In addition, in recognition that lot 11 does not use the basement; some expenses are further allocated as between the basement and other common areas (e.g. car space holders and replacement of light fittings).
28. The approach in the Leary Report is in line with what has become normal industry practice when assessing the fairness of contribution schedule lot entitlements. In most cases this approach will be necessary to determine the cost of providing a particular service or facility to the various lots, but in my view, it does not necessarily follow that the costs should be apportioned strictly in accordance with the calculations rather than being treated equally. It goes back to the question of where you draw the line between making an adjustment and allocating the cost equally.
29. The detailed calculations in the Leary Report resulted in its author recommending the following new contribution schedule lot entitlements (which are shown beside the existing ones for comparative purposes):
Lot No Existing Proposed Lot No Existing Proposed

1 10 44 14 14 43
2 10 42 15 16 43
3 10 42 16 14 43
4 10 42 17 21 46
5 10 44 18 16 43
6 13 44 19 16 43
7 12 43 20 16 43
8 14 43 22 19 43
9 12 43 23 26 45
10 13 44 24 21 46
11 7 40 25 26 45
12 6 45

Aggregates 332 999

30. These new allocations are based on a relatively strict allocation of the individual expense items against the respective lots. Ordinarily, where this process results in contribution differences that are not material one would resort to an equal allocation of contribution schedule lot entitlements. While I am not convinced that the approach taken with respect to lift related expenses is appropriate, I am satisfied, on balance, that in this case the detailed apportionment of expenses is appropriate and leads to the most equitable allocation of contribution schedule lot entitlements.
The lift expenses
31. Regarding the lift; I agree with the recommendations in the Leary Report that lot 11 should not bear the expenses associated with the lift. The occupants of that lot simply have no occasion to use the lift unless they are visiting someone in a Tower lot. Because that is likely to be infrequent it should probably be disregarded. However, as a matter of principle it should be disregarded in any event. The lift usage for visitations is really on account of the Tower lot being visited and not lot 11 because the lift is facilitating its visitors, the occupants of lot 11 being no different to any other visitor.
32. It can be argued that lot 11 has the "right" to use the lift and therefore it should contribute to its costs. While there is some merit in that argument I think the physical constraints outweigh that argument in this particular case.
33. I do not agree with the recommendations in the Leary Report that lot 12 should share in the lift related expenses. The author of that report acknowledged that lot 12 had no direct relationship to the lift but took the view that the occupants of lot 12 would use the lift because they:

(a) have a car space in the basement "that might be accessed using the lift"; and
(b) being the on-site letting agents, would be a regular user of the lift for the purpose of discharging their duties.

34. It is correct that lot 12 has a car space in the basement. However, that car space is located close to 2 sets of stairs each of which give direct access to lot 12. The lift is at the other end of the basement and one cannot imagine why an occupant of lot 12 would walk the full length of the basement, use the lift and then walk the full length of the podium back to lot 12 in preference to using the direct stair access.
35. It is also correct that lot 12 is the manager’s lot, an on-site letting business is conducted from that lot and such business will result in the manager using the lift. However, in discharging his or her duties as on-site letting agent, the manager is acting on behalf of the lot owners in the Tower who have placed their units in the letting pool. This agency is a formal agency regulated by the Property Agents and Motor Dealers Act 2000. Therefore, in so acting the manager is acting as legal agent of the lot owners and the use of the lift is therefore to the account of the lot owners and not to the account of the manager or the manager’s lot.
36. In my opinion, lot 12 is in virtually the same position as lot 11 and should not be required to contribute to the lift related expenses.
37. That now brings me to the lots in the Tower. In my earlier description of the building I explained how the occupants of lots 1 to 5 are more likely to use the stairs than use the lift to exit from the basement. Indeed, in the submission of a number of those owners in response to this application, they say they never use the lift. That is not necessarily a reliable indicator of the habits of some other or future lot owner.
38. Because the occupants of lots 1 to 5 are able to conveniently use the lift as an alternative to the stairs they should contribute to its related expenses. The principle is much the same as that applying to the waterfront grassed areas in front of those lots. Those areas substantially enhance the amenity of those lots and are effectively exclusively used by them. However, those areas are common property and all lot owners have the right to use them. The fact that they do not use them, or that they choose not to use them, does not relieve them from responsibility for their maintenance. The physical constraints are not such to justify those grassed area costs being borne by lots 1 to 5.
39. The next question is how the lift related expenses should be allocated against the lots in the Tower. The Leary Report says the following about this question:

"Most lot owners assume it would be fair for people higher in the building to contribute a greater amount to the cost of running and maintaining the lift than those below them. They assume that the cost per trip varies substantially depending on the number of floors the lift travels. Lift experts inform us that this is not the case. The majority of the trip expense is incurred to stop and start the lift. While the lift is in motion, the distance the lift carriage travels is a relatively minor factor in the trip maintenance cost. The main variable in the lift running maintenance expense is actually the number of trips taken. The trip related maintenance costs are also only a portion of the lift maintenance and service expenses. The basic cost of regularly inspecting and testing the lift facilities is not likely to be affected substantially by lift usage.

We have considered the equity of apportioning the cost of lift maintenance (and an associated component of the power expense) non-equally between the lots based on occupant numbers. However, for the reasons discussed in section 6.3 we do not believe that there is likely to a (sec) substantial predictable long term occupancy variation. Further, some occupants are likely to use the lift more often than others, particularly as there is a mix of long term and short term holiday occupancy. We note that the lift carriage interior comprises mainly hard finish surfaces that would not be noticeably affected by minor variations in usage levels."

Section 6.5 of the Leary Report discusses the general relationship of usage levels to maintenance costs.
40. I accept what the Leary Report says about lift maintenance expenses and take the view that, in the case of the Scheme, the lift related expenses should be borne equally by the lots in the Tower.
41. Finally, in view of my conclusion about lot 12 not sharing in lift related expenses, I have obtained updated Schedules to the Leary Report which contain calculations excluding lots 11 and 12 from those expenses.

Findings

42. My finding are that:

(a) the applicants are the registered proprietors of lot 24 in the Scheme and, as such, are entitled to bring this application;
(b) the contribution schedule lot entitlements in the Scheme are not equal and are not just and equitable within the meaning of the Act;
(c) in this particular case it is not just and equitable within the meaning of the Act for the contribution schedule lot entitlements to be equal;
(d) lots 11 and 12 do not benefit from the lift that services the Tower and when calculating contribution schedule lot entitlements they should be excluded from bearing all lift related expenses;
(e) otherwise, the allocation of expenses against the respective lots as appears in the Schedules to the Leary Report is just and equitable and provides a proper basis for the calculation and allocation of contribution schedule lot entitlements;
(f) there are no special matters that need to be taken into account in relation to voting rights attaching to the lots in the Scheme; and
(g) there is nothing about the structure of the Scheme, the way lots are used or the nature, features and characteristics of the lots that should be taken into account when allocating the contribution schedule lot entitlements for this particular Scheme.

43. I find that the following allocation of contribution schedule lot entitlements among the lots (being in accordance with the Leary report, but excluding both lots 11 and 12 from all lift related expenses) is just and equitable within the meaning of the Act:

Lot No Proposed Lot No Proposed
1 44 14 43
2 42 15 43
3 42 16 43
4 42 17 47
5 44 18 43
6 44 19 43
7 43 20 43
8 43 22 43
9 43 23 46
10 44 24 47
11 40 25 45
12 41
Aggregate 998

44. The above table is based on a recalculation in the tables in the Schedules to the Leary Report to ensure that lot 12 does not share the lift related expenses.
45. I propose to make an order that the contribution schedule lot entitlements be adjusted in accordance with that table. I do not propose to make any order as to the costs of the adjudication.

G F Bugden
Specialist Adjudicator