Kenmore Terraces [2006] QBCCMCmr 85 (23 February 2006)

Last Updated: 19 December 2006

Office of the Commissioner for Body Corporate and
Community Management

SPECIALIST ADJUDICATION
(Adjustment of Lot Entitlements)

Number: 0809-2005

Applicants: WELLS & ORS

Respondent: BODY CORPORATE FOR KENMORE TERRACES

COMMUNITY TITLES SCHEME 20812

O R D E R
23 February 2006

ORDER that the contribution schedule lot entitlements in community titles scheme 20812 be adjusted so that each lot has one (1) entitlement the aggregate being 24.

G F Bugden
Specialist Adjudicator

Office of the Commissioner for Body Corporate and
Community Management

SPECIALIST ADJUDICATION
(Adjustment of Lot Entitlements)

Number: 0809-2005

Applicants: WELLS & ORS



Respondent: BODY CORPORATE FOR KENMORE TERRACES

COMMUNITY TITLES SCHEME 20812

DETERMINATION
23 February 2006

The Application

1. This is an application under section 48 of the Body Corporate and Community Management Act 1997 ("Act") by 7 lot owners for adjustment of the contribution schedule lot entitlements in community titles scheme 20812 ("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. Kenmore Terraces are situated at 67 Brookfield Road, Kenmore. They comprise 24 townhouses separated by party walls. Most of the townhouse have 2 bedrooms, but a number, at least including those owned by the applicants, have 3 bedrooms. The common property facilities include:

• Swimming pool
• Service areas (cloths lines and letterboxes)
• Car park, roads, driveways and open space areas
• Intercom controlled pedestrian gate and automatic opening driveway gate
• Various areas of fencing.

4. The Scheme was registered under the Building Units and Group Titles Act 1980 ("1980 Act") on 13 March 1989 as group titles plan 2001. The Scheme was then transitioned as a community titles scheme under the Act. The schedule of lot entitlements designated under the 1980 Act was replicated into 2 new schedules under the Act; a contribution schedule and an interest schedule. The allocations in each of the new schedules are the same as the allocations in the original 1980 Act schedule.
5. Section 19(2) of the 1980 Act required the lot entitlements on a group titles plan to be allocated so that the lot entitlement of each lot (as nearly as practicable) bore in relation to the aggregate lot entitlement of all lots the same proportion as the unimproved value of that lot bore to the sum of the unimproved values of all lots in the plan. In other words, on a group titles plan lot entitlements were allocated according to the respective unimproved values of the various lots. Evidence of this was required in the form of a valuation by a registered valuer.
6. This means that the current interest schedule lot entitlements in the Scheme are based on the respective unimproved values of the various lots.

The relevant law

7. 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)	............"

8. 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."

9. 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) .......

(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."

10. The submission on behalf of the owner of lot 1 drew upon section 49(4)(b) to establish that the difference in accommodation and areas among the lots amounted to a "nature, feature or characteristic" that supports unequal contribution schedule lot entitlements. A number of other lot owners also referred to these differences as support for unequal entitlements.
11. 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 under section 49(4)(b). 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."

12. In Locke & Ors v. Body corporate for Stanton Crest 2 community titles scheme 989 (No 0486-2005), decided by me on 22 November 2005, I referred to examples in the explanatory notes to the Body Corporate and Community Management and Other Legislation Amendment Act 2003 ("Amending Act") which introduced a range of amendments to further strengthen the bias of the legislation in favour of equality of contribution schedule lot entitlements. Example 3, which is in the following terms, is particularly relevant:

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

13. It therefore seems clear to me that there would need to be special circumstances before departure from the principle of equality of contribution schedule lot entitlements. The main circumstance that would justify such departure would be a significant difference in the extent to which the various lots draw upon the resources of the body corporate.

The evidence

14. The evidence before me substantially comprises a report from Leary & Partners Pty Ltd dated 26 September 2005 ("Report"). I also have the benefit of the other material in the Commissioner’s file, including title searches, plans, photographs and a number of submissions from lot owners.
15. The author of the Report has conducted a "line by line" analysis of the expense items in the administrative and sinking funds of the body corporate and then allocated those expenses against the various lots in proportion to the likely demand of the lots on the resources of the body corporate. The Report, correctly in my view, ignores minor variations and what I will call "theoretical variations". That is consistent with what is clearly intended by the legislature.
16. The Report concludes that all expenses in both body corporate funds should be allocated equally among the various lots and therefore the interest schedule lot entitlements should be allocated equally.
17. Submissions from owners raised the following matters as supporting unequal contribution schedule lot entitlements:

• Larger units have a larger roof area
• Larger units have larger grounds and more fencing that has to be maintained
• 3 bedroom units potentially house more people than 2 bedroom units and therefore potentially use more water and potentially use the automatic gate opener more frequently
• Larger units have greater exterior wall areas to be painted.

18. So far as those matters are concerned, I accept the propositions in the Report that are used to justify allocation of these items equally. It seems clear that the precise calculation of and allocation of costs relating to those matters will not be significant enough to justify departure from the principles of equality in this particular case.

Findings

19. My finding are that:

(a) the applicants are the registered proprietors of lots 15 to 20, inclusive, 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 just and equitable within the meaning of the Act for the contribution schedule lot entitlements to be equal;
(d) 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
(e) 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.

20. I propose to make an order adjusting the contribution schedule lot entitlements so that they are equal. There will be no order as to costs.

G F Bugden

Specialist Adjudicator