Body corporate or owner: Who takes responsibility for getting the job done?

I know most investors baulk when they see the body corporate levies, but I think that there are many that just don't understand what a body corporate levy is, what it pays for and why they are actually a great thing for investors that don't live where their investment is.  The key to a good body corporate is to have a great chairperson who makes sure all the jobs are done.

For an investor, it is difficult to understand what the body corporate is responsible for and what they aren't.  As a general rule, the body corporate is responsible for all the common area, the building and the insuring of the actual structure.  The internals of the unit are the responsibility of the owner but even so this is a bit blurry.  If you have a leaking tap, then the owner is responsible to get the washer changed.  If there is a burst pipe and that pipe is in the slab then it is the body corporate.  If the kitchen needs replacing due to age, then it is the owner’s responsibility.  If the kitchen is damaged due to an insurable event, then it is covered under the body corporate insurance cover.

Let's say the hot water system is located in the kitchen cupboard and it bursts flooding the unit.  The damage to the kitchen is covered by body corporate insurance.  The owner will have to pay to get a new hot water system installed.  If the carpets are damaged, these are classed as contents and the owner needs to claim this through their Landlords Insurance.  If the walls are damaged, this is a body corporate claim and their policy will fix this - yes I know very confusing.

I will use Palm Tree Apartments for the example.  This is a complex of 44 units, with 24 of them being bedsit units and 20 being two bedroom units.  The complex was built in 1995 and is a besser block, three storey, bomb proof place.  It isn't the prettiest but it is perfect as an investment.  The units themselves are basic internally but very functional.  The beauty of these is they are big internally - much bigger than a two bedroom in a newer property.  When you have a big complex, you really need to be proactive - if something is wrong it needs to be fixed.  If you leave something broken or dumped next to the bin area it sends out a message that this is acceptable.  This is a learning curve that I had to have - just because we pick up that piece of rubbish near the letter box and put it in the bins, doesn't mean everyone else will!

There are two parts to a levy - you have the administration fund, which budgets for the things that will happen each and every year, and then you have the sinking fund. This is for future works to be completed such as new roof, gutters, fences and repainting.

The Queensland government realised that if they didn't make people put money aside for future works, then they wouldn't.  In the mid-1990s they brought in sinking fund and each building had to do a report and estimate what works would be require, what time frame they were needed to be done in and the cost.  They then work backwards and come up with a figure so that there will be enough money in the bank when the work is required.

The sinking fund is the second part of the levies.  This is for the future works or something that doesn't happen all the time.  This can include tree lopping, pressure cleaning, big garden upgrades etc.

I have been driving around and looking at all our properties, and let me tell you that the outsides are starting to look tired and need some work done to them.  If they are in a body corporate it is easy, get the quotes, pass it via the committee and get the work done.  The money is there sitting and waiting for the work to be done.

On the other hand, if it is a property not in a body corporate - the owners have to find the money to get this work done.

Linda Tuck is director of Cairns Property Ladder Realty,  an independent real estate agency in specialising in property management, investment and sales expertise in the tropical Cairns region.


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