Enhanced Body Corporate Governance is Coming
On 4 May 2022, the Unit Titles (Strengthening Body Corporate Governance and Other Matters) Amendment Bill had its third reading in Parliament. When the amendment bill comes into force (most likely sometime in 2023), it will bring about a number of important changes to better protect those who buy or own unit title properties, as well as enhance the operation, levying and maintenance of these developments. The changes will affect residential, commercial and mixed-use unit title developments.
Key Amendments
An enhanced disclosure regime to ensure more information is provided for potential purchasers of existing units as part of the pre-contract disclosure statement (PCDS) including:
- details of any weathertightness issues, earthquake-prone issues and other significant defects that may require remediation
- details of any court or tribunal proceedings involving the body corporate
- the body corporate’s last 3 years financial statements or audited accounts together with details of the current levies, confirmation of the 12 month period covered by the financial year, and the balance of all accounts and funds operated by the body corporate
- the last 3 years’ notices and minutes of general meetings including all supporting documents
- a copy of the long term maintenance plan (and the date it will be next reviewed)
- a copy of any remediation report commissioned by the body corporate in the last 3 years
- details of any proposed works to be carried out or started in the next 3 years with an estimate of the cost of those works
- a summary of the insurance cover of the body corporate, and
- explanations covering key matters concerning unit titles and the development itself.
More information will also need to be provided for the sale of “off-the-plan” units in the PCDS including a summary of the draft financial budget for the unit title development with cost estimates of annual operating costs, an estimate of the proposed ownership and utility interest, draft body corporate operational rules and details of any proposed utility services contracts and body corporate manager appointment.
The new PCDS regime will do away with the additional disclosure statement procedure.
The pre-settlement disclosure statement is retained with the requirement for that statement to include additional information covering any new proceedings, claims or change of body corporate rules since the PCDS was prepared.
The Act will, for the first time, expressly acknowledges the role of the body corporate manager and introduce provisions governing their functions and duties.
There will be mandatory terms that must be included in any agreement engaging a body corporate manager covering:
- the manager’s reporting requirements on the performance of its management functions and duties
- the manager’s compliance with the new code of conduct
- periodic reviews of the manager’s performance against key performance targets
- the grounds for terminating a manager
- the role of the manager at general meetings of the body corporate
- the records, funds and other items that must be returned by the managers upon their termination or when their agreements end, and
- the timeframes by which these items must be returned.
Body corporate managers must act independently in relation to each body corporate and must not intermix the funds or records of different body corporates.
Remote access to body corporate meetings (temporarily permitted as part of the Government’s Epidemic Preparedness Notice) will be allowed.
Electronic voting for those attending body corporate meetings by remote access will be permitted.
New Codes of Conduct for Body Corporate Committee Members and Body Corporate Managers will be inserted into the Unit Title Regulations.
There will be a new conflicts of interest register and committee members cannot vote at committee level or sign any document relating to a transaction where there is a conflict.
Body corporate managers must also disclose any conflict of interest as soon as practicable to the body corporate committee, body corporate chairperson or the body corporate so that they can decide whether the conflicted manager can continue to act and on what terms.
Multiple utility interests can be assigned with each targeted for a particular service or amenity and assigned to all or some of the units only. Introducing target utility interests will allow for targeted levies for particular services and amenities.
The body corporate cannot enter into service contracts or signage agreements for terms of more than 24 months after the date of control period ends without the ability to vary or cancel the agreement without penalty. (The control period is the initial period in which the original owner of a unit title development (including its associates) holds 75% of the body corporate votes.)
(Applies to 10 Principal Units or more)
Large unit title developments must be managed by a body corporate manager unless the body corporate decides by special resolution not to do so.
Long term maintenance plans for large unit title developments must:
- cover a period of at least 30 years (versus 10 years for smaller unit title developments)
- include a high-level indication of expected maintenance costs covering the whole 30 years
- be reviewed every 3 years (or sooner if a matter arises that will have a material impact on the long term maintenance plan), and
- unless the body corporate decides otherwise by special resolution, be developed (or reviewed, as the case may be) in consultation with
- appropriate building or other suitably qualified consultants.
Overall, these changes will be welcomed by those who own or are considering buying into a unit title development. For members of a body corporate committee and body corporate managers, it will be imperative to get acquainted with these changes to the Act and regulations, and the new codes of conduct before they come into effect and updating existing processes to ensure compliance.