What exactly is a Body Corporate? What is its significance to apartment buyers? Andrew Murray will provide his insights and why it’s an essential factor in every apartment building. Learn more from this podcast.
TRANSCRIPTION:
What is a Body Corporate?
A lot of people will buy an apartment thinking a body corporate is a company. They think, “Oh, because it is body corporate, I do not have control.” That is actually not the case. A body corporate is not a company. It is not an external company that looks after your complex or your apartments. A body corporate is actually you. When you buy an apartment, you actually become, automatically, part of the body corporate.
These body corporate companies that you hear about, like Strata, The Crockers, BCA or Body Corporate Admin or Strictly Body Corporate. All these kind of companies, they are actually employed by the body corporate, which is decided by the owners. Because as an owner, you are the body corporate. The first thing you need to know is the distinct difference between buying a house and buying an apartment.
Buying a house, you are in charge of doing the lawns. You are in charge of doing the rubbish. You are in charge if the house needs to be repainted. The roof needs to be redone every fifteen years. With a body corporate, the body corporate as a whole has to be in charge and you can not just let it go. You can not just go, “Ah, yeah, I’ll do it next year. It’s not too bad.” Everything has to be looked after spick and span, which is actually better.
That is where you have got to understand the big one. Just because you are in the body corporate, it does not mean you have control. Everybody has a vote and you all elect a committee to represent you, which is also voted at, what is called the AGM, the annual general meeting, which happens once a year.
The body corporate is actually responsible for, not the individual – like inside each person’s apartment. The body corporate which is, you know now, collectively you are all responsible for the maintenance and the up-keep of what is generally called the common property. The common property are the corridors, the lifts, the actual building structure. You know, if you have got a pool, if you have got a tennis court, if you have got land, if you have got a garden – things like that. When you buy an apartment, you have got to understand that you are actually becoming the body corporate. You are becoming part of that body corporate. And that is really important.
Now, what I will do in the next podcast is actually go over what does a body corporate actually do? What are their key responsibilities?
I will help you understand more of what a body corporate does. It will help you understand how to look, when you are looking at an apartment to buy, how good is your body corporate. It is almost like a health check. That’s what these body corporates minutes are. So you’ve got to know what a body corporate is to be able to judge if it’s a good one. Okay, Andrew Murray, apartment specialist, hope that helps, and talk soon.
Your Body Corporate is worked out by the unit of entitlement on your apartment.
Your unit of entitlement is basically the value of your apartment – for example the pent house or larger apartments in the complex will be different to a smaller, lower to the ground property.
This is worked out by how many units your apartment is worth and then divided by how many units make up the whole building.
And then the budget for the year is divided between how many units there are and then that gives your annual Body Corporate fee.
TRANSCRIPTION:
Good day, Andrew Murray here from the Apartment Specialists, and today we’ll be talking about body corporate fees, unit entitlements and how it’s all worked out.
If you are an apartment owner, then you pay a portion of the budget, which is called your body corporate fee. This was worked out by your unit entitlement, which is basically the value of your apartment. A penthouse has a higher unit entitlement than a studio on the bottom floor.
These unit entitlements are provided when the apartment is first built. They are actually set out in the title. Generally, on a pages further down, four or five, something like that. In there, there will be a schedule of unit entitlement of every single unit.
I have got this in front of me right here. As you can see this off the title here, a schedule of unit entitlements. In the entitlement, you will see the number of unit and the floor area. You also got your unit entitlement and the heights, and so on.
Here, this is all car parks, and you can see that this figure of the unit entitlement for each unit. Now there are 49 units in this complex. If you add all these together, including the carparks, that will come to 10,000. It is a share of 10,000 and you can see a total unit entitlement equals 10,000.
You then go, “Okay, how do we work out the body corporate fee for a particular unit?”
Obviously, your nominated real estate agent gives it to you or a body corporate gives it to you. This is how you can work it out. You go to, say, unit 4D. That is my particular unit. It has a unit entitlement of 265. 265 divided by 10,000 – which is the unit entitlement – gives you .0265%. That means my body corporate fee is 2% or 2.65% of the overall budget. It is my share. If we then go to the budget which is $205, 030.
Okay, let us work out the budget. I’ll go, okay, so we will go 205,030 (sorry about my writing) times .0265, which is unit entitlement percentage of the overall budget. If I do that on my calculator now, on my phone as you do. Okay, $205,030, as you can see times .0265. I’m not too sure if you can see that equals my unit, my body corporate fee of $5,433.00. Which is spot on and that helps you figure out your unit entitlement or your body Corporate’s fee from the overall budget.
Okay? So that was 5,433. I love this. My handwriting, it is shocking. $5,433 from my unit entitlement.
Anyway, I hope that helps. Bit of a different way of doing it. And yeah, cool. If you have any questions about unit entitlements, figuring it out. If you are struggling to do it, give me a ring or flick me an email to andrew@apartmentspecialist.co.nz.
The owner’s committee is more important than the Body Corporate, it is one of the most important aspects of an apartment building.
The owner’s committee is comparative to a board or group of directors who direct the future of the building and keep the Body Corporate honest.
Within a committee there is a chairman, this person’s role is more like a facilitator rather than a director.
There is a nominated secretary who deals with all the income and expenditure.
Then there is the building manager, who may or may not be in the committee but we think it is important they are due to being in the building and in know of what is happening all the time.
Someone has the responsibility of keeping the minutes and then communicating these to everyone in the correct manner.
The owner’s committee deals with all concerned in your building and it not a small task. It is job that needs to be done to high standard with efficiently and sound communication.
TRANSCRIPTION:
Good day, Andrew Murray from the Apartment Specialists. Today I’m talking about Owners’ Committees and how important they are.
Now, an Owners Committee is more important than the body corporate company. It’s one of the most important parts of a building. It’s like having a board on a company or a C.E.O. It’s what actually directs the building into the future and it’s what keeps the body corporate honest.
Now the known key aspects to do with an Owners’ Committee that needs to be occurring very efficiently and to be covered to be able to run a building very well. It’s very, very important.
Obviously, first of all, is the obvious one, you have a Chairman. The Chairman isn’t like the boss. He’s the facilitator. They run the meetings. They are making sure that everybody’s gelling and that there’s, basically everybody has their say. They are making sure you get through your agenda and everything is communicated properly, and everybody’s doing – He’s overseeing the whole process.
Number two, you obviously have your body corporate secretary. Now that’s whoever your body corporate is, whether it’s body corporate admin, whether it’s Australia, whether it Crocker’s, whoever it is, the point of the company is actually an administrative role. So they’re dealing with the income and the expenditure.
Then you have the Building Manager. Now a lot of Owner’s Committees don’t have the Building Manager there and I think that is incorrect. I think a Building Manager should always be at the Owners’ Committee meeting. Why? Because they’re the ground floor. They can tell you what’s happening.
A lot of people in the Owners Committee’s who don’t live in the building or if it’s an investor building, how do they know actually what’s happening day to day? It’s very important the Building Manager is there so they can give their feedback and actually talk about what’s happening. What contract is coming in, what contract is coming out, what problem’s they’re having.
The next is having a person in charge of the accounts. This is where you’ve got to choose from your Owners’ Committee members, who is best suited for certain roles. In a perfect world it would be great to have an accountant on your Owners Committee but we can’t all have accountants on Owners’ Committees or accountants living in our buildings who are willing to give up the time. It’s really important that someone is in charge of accounts and is looking over the whole administration of their current expenditure. What’s going in and out and making sure everybody’s on the same path.
The next is somebody who is keeping the minutes, if they’re body corporate’s, but more importantly checking them and making sure that what is being said, is communicated properly in those minutes. It’s very easy for words to come across in the wrong way and come across, I suppose, giving a different message. It’s like we’re sending a text message. Sometimes you get a text message and if you think your friend’s angry with you when they didn’t mean that at all.
It’s just like that with body corporate minutes. They’re really, really important because they communicate a message. If you get that wrong that can lead to all kinds of things. For example someone thinking there’s a big issue with the building, when really there isn’t, and that kind of thing. It also means you’ve got a reference to go back to and say “This is the decision that was made. We all agreed on this and this is the terms of that decision.”
Okay the next one is operations. Because you’re going to have things that are happening within the building. You’re going to have– it’s basically a project management role. This is to say for example, if the lift needs to be refurbished, you’re going to have somebody in your Owners’ Committee who you’re going “Okay, you’re acting as a Project Manager, you’re in charge of that project and you run it and use other members to be able to do that kind of thing.” That’s also making sure the quotes are coming in, making sure the decisions are made if they happen by email. That’s where obviously your Building Manager– your Building Manager is actually in charge of the quotation process and should be doing all of that. Why? Because they’re on site and they can meet the contractors.
The next is communication. Now communication is very important. How are you supposed to know when your next meeting is? How are you communicating what the agenda is? Are the agendas coming out on time so everybody can actually read them before the Owners’ Committee meeting. What’s going to happen at the A.G.M? Who’s supposed to be doing what? Is everybody keeping to the deadlines? Communication of this is very important and generally now this is done via email, which is great. Occasionally phone calls need to be made and things like that.
You also need somebody who is in charge of the long term maintenance plan. It’s great if you have enough members so you can have one person who’s just in charge of that and give feedback to the committee and report on that because we’re looking at looking after the building, not for that year, not for two years, but for ten, 20 years in advance. That is directly related to the babies because you’re building it to be well looked after. And a long term maintenance plan that’s really working, it makes a huge difference to the building and any projects you want to do it to enhance the values.
The final one is building management. Now that’s an interesting one when I say that because you’ve got to build a manager but you need someone that oversees the overall bulk building management. Is actually reviewing the Building Manager, and looking at how the whole building management is done. This is down to, how good is the cleaners? How good is this contractor doing? How good is such and such?
That gives you an idea of what’s actually involved in an Owners’ Committee. It’s a lot more than just sitting around and talking about issues. It’s about working where everybody has an area that they are specialized in, so that the responsibilities are, I suppose, given out to the people that are skilled for them. Then everybody comes together where the Chair actually facilitates the whole meeting so this can all be brought together and the result is a building, that when it’s done well, that is run properly and very efficiently and keeps everybody happy.
You don’t know exactly as you have nothing to compare it to and other only way to tell is to get a competitor to do an audit and address needs that may have been overseen. This doesn’t mean you get rid of your Body Corporate necessarily but may high light needs to be attended to.
TRANSCRIPTION:
How do you know if your body corporate is doing the best job? Good day, Andrew Murray here from the Apartment Specialists. In short, you don’t know if your body corporate is doing the best job because you’ve got nothing to compare it to.
I have seen one building that is looked after by one body corporate and another building that is being looked after by exactly the same body corporate. One of these is doing a great job and the other, not so great. So what is it that actually makes or keeps all businesses striving to make sure their service and what they deliver is always best for the consumer?
That’s capitalism. That’s what we’re founded on. That’s why we are not communism and it’s competition. That’s why one airline gets more business than another. It’s the service. It’s the price. So in short, the only way to really be able to tell the if your body corporate is doing a good job is to bring in an audit from the competition.
He comes in and looks at how your body corporate is looking at your property, from what they are charging for their service. And it doesn’t mean that you have to fight your body corporate. But what it does mean is that, I can almost guarantee every single time, you’ll find something where you can bring to your body corporate and say, the competition didn’t identify this area.
Maybe you can improve on this area. Or worst case scenario, they come in and expose that your building hasn’t been looked after and then you can go to the competition. But really, it’s not really about whose going to win the business. It’s about you having visibility and doing things right. The only way you can do that is through how every single industry is run – competition. So this is a very interesting topic because most body corporates didn’t actually win the business because they did a great job.
They got it because it was given to them from the developer. So the developer sold down the apartments with a body corporate already in place. That’s why, in my opinion, there’s a lot of buildings that aren’t being managed as well as they could be. Now, I’m not saying that that is on purpose. I’m just saying that the business came a bit too easy.
So if you’re an apartment owner and you want a body corporate and you want to check out how well your body corporate is doing, bring in the competition and see what they have to say.
I hope that helps. Give me a ring on 021424892 or flick me an email andrew@apartmentspecialists.co.nz if you want some more information because it’s quite a complex situation. But I hope this has been of some help.
The role of the chairman in a Body Corporate is voted in by the owners of the building. Their role is to facilitate the running of the building and ensuring that everyone is doing their designated role. It is looking at the group of people involved and seeing where the strengths lie and certain jobs are done by the correct people.
At the meetings the chair runs the meeting and present new information and plans to the group.
If you are thinking of going for the role of chairman with your building you need to guarantee you have the time to do so as it at times can be quite time consuming.
TRANSCRIPTION:
Good day. Andrew Murray from Apartment Specialists, talking about, what is a Chairman in a Body Corporate. Now, a Chairman is elected at the AGM, the Annual General Meeting which is held once a year, by the Body Corporate Secretary, or the Body Corporate company.
So, what happens is, everybody turns up to the meeting. You also have proxies which are votes from people who are out of town, things like that, where you have other representatives, and they’ll generally have maybe one, two or three people going for the Chairman position. People will vote on who they think is best to represent. So, for example, I’m the Chairman in my own building complex, so I’m just going to describe to you, what it’s like to be a Chairman and what my responsibilities are.
So being a Chairman is very important, but it’s not like a dictator or even really a Prime Minister. You don’t have the final say on anything, but you do have a lot more responsibility. So my job is a job of facilitation. It is to facilitate the owner’s committee, to make sure that everybody’s got responsibilities. I would say if there’s a project being done, maybe it’s a refurbishment, or a lift replacement, or getting a new quote from a different provider, things like that – it’s making sure and following up to make sure that job is done.
It’s looking at the strengths of each person on that committee, and looking at who’s best suited for what role. Who’s the best person to look at the accounts, who’s the best person to decide colour scheme for the new gym, these kind of things. Then at the meeting I’ll come in and I’ll be chairing the meeting, so I’ll be reading through these decisions – Okay, has everybody got questions or want to have a say here. Okay, these are the options, now let’s have a vote. And, you have a vote on whatever that decision is, and the vote wins. So it’s pretty clear so I’d say, the Chairman’s role is really a role of facilitation.
It does have a lot of influence, and, it does meet with the Body Corporate, individually as well, and so it’s an important role. But if you are thinking of going up, you’ve got to allow quite a bit of time because you’re the person who’s the first go-to when it comes to complaints, when it comes to disagreements on that owner’s committees, when it comes to any situations. Especially if you’re dealing with issues where you’ve got something that’s happening to the building that needs to be addressed urgently, you pretty much have to drop everything – all that kind of thing.
But, it’s an important part, very rewarding, and, I’m really enjoying it because it’s helping me know even more about my industry than anyone else I guess. So anyway, just to round up, if you think you’ve got the time, give it a go. I’m sure you’ll find it very rewarding. Thank you.
Next time what I’ll do is, I’ll talk about what a quorum is. You often hear this thing called quorum mentioned, in regards to having meetings that are legal? in the whole apartment world, so I thought I’d go over that because most people go, Well what’s that. Anyway, talk soon.
