Moreton Towers [2007] QBCCMCmr 109 (27 February 2007)

Last Updated: 5 March 2007

REFERENCE: 0927-2006

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	5809
Name of Scheme:	Moreton Towers
Address of Scheme:	25 Moreton Parade KINGS BEACH QLD 4551

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

Mr Jackson & Mrs Netta Mobbs, the Owner(s) of lot 11

I hereby order that, within three months, the body corporate must provide all owners with a forecast of anticipated major expenditure for the present financial year and the following nine years.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0927-2006

"Moreton Towers" CTS 5809

Application

Moreton Towers Community Titles Scheme (Moreton Towers) is an 11 lot scheme under the Body Corporate and Community Management Act 1997 (Act) and the Act’s Standard Module Regulation (Standard Module). The scheme is designed for residential purposes.

This application is by Jackson and Netta Mobbs, owners of lot 11 (applicants) seeking orders against the body corporate for Moreton Towers (respondent). The applicant are seeking an order that the body corporate prepare and provide to all owners a forecast of sinking fund expenditure for the financial year and anticipated major expenditure for at least the next nine years.

Submissions

The applicants’ main submissions were to the effect that they had requested to view the body corporate’s budget plan for the sinking fund expenditure on maintenance for the building but have not been provided with any information.

The chairperson has provided a submission to the effect that the sinking fund is not at a high level due to owners preferring to raise special levies when expenses become due. Submissions are also made to the effect that the applicants developed the scheme, unfairly combined the two top floor units into one large penthouse that has the same lot entitlements as the other normal sized units, and that when hand railings need to be replaced or if the walls need to be rendered then a lot more work is done for the applicants’ lot 11 but the applicants only contribute the same amount of funds as normal units. It is also submitted that the applicants failed to keep a proper sinking fund forecast when one of the applicants wast he chairperson.

One other owner has made a submission. This submission is to the effect that the applicant set the precedence for such a low sinking fund but that a future maintenance plan is required as handrails, doors, and windows might need to be replaced and the brickwork will also need some form of maintenance.

Decision

Sinking fund

The sinking fund is designed to facilitate owners, over a period of time, accruing funds for all works of a capital/non-recurrent nature that are anticipated to be required in the next ten years. To avoid owners being inconvenienced by large special levies it is important that the body corporate identify the scheme’s predictable major/capital repairs (eg painting, replacement of waterproofing membranes, intercom and security replacements etc). The body corporate must then estimate the likely cost of each repair and how many years away the repair will be. A proportional amount of each expense must then be reserved towards each expense to ensure there are sufficient funds for each particular expense at the start of the year in which the expense is likely to be incurred.

Any owner is entitled to insist that the body corporate must keep an appropriate sinking fund (Standard Module 94(3), 100). All owners will then need to adopt an appropriate sinking fund budget and contribute the necessary funds in proportion with their contribution lot entitlements (Standard Module, 95). Funds can then be invested appropriately to earn interest on accrued amounts pending the anticipated work needing to be performed (Standard Module, 100(4)).

Other issues

Other issues have been raised, including issues about the equity of the applicants be liable for contributions in the same amount as other owners even though the applicants’ lot is twice the size of other lots. The basis principle is that the contribution schedule lot entitlements should be equal for each lot and the interest schedule lot entitlements should reflect market value of the lots (Act, 48). However, there are circumstances where it is not just and equitable for contribution schedule lot entitlements to be equal and the entitlements can be adjusted. If a significant number of owners are concerned about the fairness of lot entitlements then the usual process would be for owners to obtain a quantity surveyors’ report reflecting the extent to which contributions towards costs is unjust or inequitable. If the quantity surveyors’ report shows a significant disparity between expenses related to each lot and the respective contribution towards these expenses then action can be taken to adjust the lot entitlements. Usually owners would vote on whether to adopt the lot entitlements recommended in the quantity surveyors report and register a new community management statement incorporating those changes. If this resolution is not passed then an application can be made seeking a variation of lot entitlements. For an example where contribution schedule lot entitlements were adjusted and it was determined that the entitlements should not be equal, owners may wish to read the decision concerning Stanton Crest II [2005] QBCCMCmr 649, GF Bugden, 22 November 2005.

Order

For these reasons, I make the order above.