QLD: Records Management and Improvements to Common Property by Lot Owners

This article about records management and improvements to common property by Lot Owners has been supplied by Bradley van Xanten, UOAQ President.

The UOAQ has been approached recently by several members concerned about improvements by individual lot owners to the common property at their schemes. The main complaint involves alterations to the balconies including the balustrades, and significant alterations to common property car parks subject to exclusive use.

It seems the schemes involved, ie the committees, have not managed these improvements very well, largely because they are either unaware of the improvements themselves or because they are unaware of the relevant BCCM rules requiring approval -then formal registration – of the improvements to the common property by the individual lot owners.

Without exception, none of our members was aware of the need for a formal Register of these authorisations and were pretty sure their schemes did not have one.

Like most of our strata law, navigating your way through the rules for improvements to common property – whether by the body corporate or by lot owners – can be a veritable minefield.

The article provides some guidance for safe passage through improvements to common property by a lot owner for the lot owner, ie ‘2 BY 4’ Improvements.

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First, some general rules for improvements to common property

Authorisation of any improvement to common property is a matter for the body corporate, not an individual owner. This includes improvements to common property by an owner for the owner, ie ‘2 BY 4’ improvements.

Body Corporate: When we talk about authorisations by “the body corporate” this generally means both (1) the owners in general meeting, ie AGM or EGM, and (2) the committee – unless:

1. It is a ‘restricted issue’, eg the committee is excluded from the decision-making process altogether because the improvement, for example, “changes rights, privileges or obligations of the owners of lots included in the scheme”– ACT s.100, and AM s.42 / SM s.42; or
2. There are limitations on the committee’s power in relation to a certain issue, eg they may not authorise ‘2 BY 4’ improvements with an installed cost above $3,000 – AM s.162(2) / SM s.164(2) .

Special rules for all improvements: Regardless of whether it is the owners in general meeting or the committee authorising an improvement, there are special rules in place specific to improvements. The body corporate does not have a carte blanche authority to do whatever it likes with common property, and the rules need to be followed – Cinque at 52 Underhill Ave [2012] QBCCMCmr 25.

Two main categories of improvements: The Accommodation Module (AM) and the Standard Module (SM) separate these rules into two main categories dependent on who is making the improvement to common property as follows:

1. Improvements by the body corporate: AM s.161 and SM s.163; and
2. Improvements by lot owners for the benefit of the owner’s lot: AM s.162 and SM s.164.

This article is focussed on these ‘2 BY 4’ improvements.

There are significant variations between each category.

These rules in both Modules are identical.

NB: There are no specific rules requiring body corporate approval for improvements by owners to their own lot.

Some distinguishing features between the two categories

1. Spending Controls: Unlike ‘2 BY 4’ improvements, improvements by the body corporate are expressly subject to the body corporate’s Committee Spending Limit (CSL) and Major Spending Limit (MSL). For example:
   
   1. The committee may be authorised to make an improvement under AM s.161 but prohibited because the cost exceeds the CSL; or
   2. The body corporate may be authorised to make an improvement by special resolution under AM s.161 but required to obtain at least two quotes and then present them to the general meeting as a Motion with Alternatives.
2. Authorisation with Conditions: As you would expect, ‘2 BY 4’ authorisations come with an automatic condition, ie the lot owner “must maintain the improvements…in good condition, unless excused by the body corporate” – AM s.162(4) / SM s.164(4).
   Further, the body corporate – including the committee – may impose additional but reasonable conditions it considers appropriate, eg agreement by the lot owner to cover all costs if the improvement needs to be removed (and reinstated) when the body corporate requires access to the common property for maintenance purposes etc. – AM s.162(3) / SM s.164(3).
3. Ongoing Responsibility: Unlike improvements by the body corporate, responsibility for maintaining a ‘2 BY 4’ improvement generally attaches to the lot owner. Further, the lot owner’s responsibility transfers automatically to any subsequent owner of the lot.

   It does not matter if a vendor does not disclose this responsibility to a purchaser. It is up to the purchaser to do due diligence searches of the body corporate records including general meeting Minutes, committee meeting Minutes, Records of Votes Outside Committee (VOC), and most importantly, the Register of ‘2 BY 4’ authorisations.

   This ongoing responsibility of the lot owner, and the inconvenience of having to search through back-records of Minutes etc, probably explains the requirement for a central Register of ‘2 BY 4’ authorisations.

4. Register of ‘2 BY 4’ Authorisations: Unlike improvements by the body corporate, ‘2 BY 4’ authorisations must be recorded in a formal Register maintained by the body corporate under AM s.197 or SM s.199.

   This Register forms part of body corporate records and thereby is accessible by all interested persons as a matter of right under s.205 of the BCCM Act. This includes current and prospective owners.

   NB: There is no requirement to register improvements by owners to their own lot.

   Comment: The Register provision includes a note referring to the Authorisation provision. It is unfortunate that the Authorisation provision does not reciprocate with a similar note about the Register provision. This may explain why so many schemes do not have a Register of their ‘2 BY 4’ authorisations.

   It does not explain, however, why so many ‘2 BY 4’ improvements are not even authorised in the first place.

‘2 BY 4’ improvements and their authorisation by the body corporate

Generally, ‘2 BY 4’ improvements must be authorised by ordinary resolution of the owners in general meeting.

The committee may not authorise a ‘2 BY 4’ improvement unless all three of the following conditions are met:

1. It is a minor improvement, ie with an installed value of $3,000 or less ; and
2. It does not detract from the appearance of the lot or common property; and
3. Use and enjoyment is not likely to promote the breach of the owner’s duties as an occupier.

‘2 BY 4’ improvements and exclusive use

1. Grant of exclusive use: Improvements which intrude substantially into the common property may amount to a grant of exclusive use, eg construction of a garden shed or installation of a spa-pool on common property by an owner for the exclusive use of the owner. This would require a resolution without dissent by the owners in general meeting, and subsequent inclusion as an Exclusive Use By-Law in the Community Management Statement (CMS).
2. Existing grants of exclusive use: It is common practice for lot owners’ car parks not to be ‘on title’. If not ‘on title’ the car parks remain common property but subject to a grant of exclusive use in favour of the designated lot owner, ie the grantee.

   It is also common practice for these grants to include certain conditions and/or restrictions, including the grantee’s right to make ‘2 BY 4’ improvements etc to their common property car park.

   It is possible these conditions etc may be generous enough to allow certain improvements to the car park without recourse to the body corporate.

   Otherwise, the authorisation requirements should be complied with.

One example of how things can go terribly wrong

A scheme on the Sunshine Coast recently discovered there had been extensive ‘2 BY 4’ improvements by the caretaker to the caretaker’s unit in the late-1980s. These included conversion of the caretaker’s uncovered 40m2 patio into two bedrooms by installing new walls, windows and a 10-tonne concrete roof, and by cutting a new doorway through an external structural wall to allow light and ventilation into the original main bedroom. The patio had a height restriction of 2.4m on the CMS; the concrete roof, about 150mm thick, intruded into the common property airspace.

And it did not stop there. Some years later, a new caretaker replaced one of the walls for the new bedrooms on the original patio with sliding glass doors, to allow access to a new 25m2 patio which had been installed and paid for by the body corporate for the exclusive access of the caretaker.

The discovery was prompted by an enquiry from an owner as to whether the improvements were recorded on the scheme’s s.197 Register of ‘2 BY 4’ authorisations, and if so whether the current caretaker – who has been there for more than 10 years – had contributed to the on-going maintenance costs of these improvements, including those incurred by the body corporate for external repainting, waterproofing, insurance and replacement of all external windows and doors.

The improvements were not recorded on the Register, because there was no Register. (This was not the fault of the current BCM, who had only recently taken over after the previous BCM was sacked by the committee.)

There is no evidence so far of any contributions by the caretaker to the maintenance of the improvements.

A search of all Minutes back to 1982 for the general meetings and the committee meetings has failed so far to reveal any approval by the body corporate.

A search of all Building Approvals held by the local council has failed so far to produce any record of the build. This search also revealed that a number of other constructions at the scheme should have received council approval but apparently did not. The council has now intervened.

This is a terrible mess and people are not happy.

But as one owner pointed out at their recent AGM, “We wouldn’t have to be dealing with this now if things had been done right in the first place.”

Bradley van Xanten
UOAQ President
Unit Owners Association of Queensland (UOAQ)
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This post appears in Strata News #407.

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This article has been republished with permission from the author and first appeared on the UOAQ website.

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