Building Management Statements – what are they?

Does your building have retail or commercial lots below, mixed with the residential lots?

Chances are your Body Corporate is part of a Building Management Statement (BMS). What is a BMS you ask?

A BMS is, in general terms, an agreement between two or more entities to share and maintain areas or services within a building or buildings.  The most common shared services include:

• car parks
• fire services
• lifts
• water and sewerage services and pumps,
• access ways foyers etc.

The parties to a BMS usually include a Body Corporate and commercial or retail lots.

The most common misconception we come across is that a BMS is governed by the Body Corporate and Community Management Act and this act is often applied when there is no legal basis to do so. This is of particular concern when the shared costs are not correctly allocated or recovered, leaving a nasty surprise once discovered by both the party that has not been reimbursed its share (usually the Body Corporate) and for the party left with a large bill for unpaid back charges they often don’t know about (usually the commercial or retail lot owners).

A BMS is registered under the Land Titles Act 1994 and identifies the lots to which its terms apply.

A BMS must contain provisions about the following:
(a) the supply of services to lots;
(b) rights of access to lots;
(c) rights of support and shelter;
(d) insurance arrangements.

And may contain provisions about:
(a) establishment and operation of a management group;
(b) imposition and recovery of levies, how levy amounts are to be kept and spent;
(c) property maintenance;
(d) architectural and landscaping standards;
(e) dispute resolution;
(f) rules for common services and facilities;
(g) administrative arrangements;
(h) proposed future development.

The 3 key areas that require attention to enable fair, transparent and equitable management are:

1. Financial Management;
   2. Decision making under the BMS terms and by the Body Corporate; and
   3. Dispute resolution options

FINANCIAL MANAGEMENT

If there are provisions about how finances are to be managed, they should be followed from registration and in accordance with the shared costs schedule, if one exists.

There are generally 2 different methods for cost recovery. The most common method is that one entity pays for a service upfront (usually the Body Corporate) and recovers the appropriate portion as outlined in the shared costs schedule from the other parties by way of direct invoice. The second method is that a BMS budget is set, and contributions made by the responsible parties proportionate to the shared costs schedule and payments received in advance then costs paid as received. For the second method it is important to remember that the funds received need to be reconciled to ensure that funds contributed are made towards only the actual costs paid and any under or over collected funds are adjusted when seeking future contributions in advance. In either case, it is imperative that an accurate and transparent method is established to avoid disputes.

DECISION-MAKING

The BMS terms and not the Land Titles Act specifies how meetings are convened, owner representation and voting rights. These terms are unique to your BMS and need to be fully understood when considering decisions. For Bodies Corporate, contributions towards BMS decisions are made via the representative who is often the Chairperson. Body Corporate Committees should direct their representative on how to vote on BMS matters to be decided or ratify decisions made when prior direction was impractical. If a decision is a restricted matter for the Body Corporate Committee, a general meeting should be called for the appropriate approval to be sought. This type of approval will usually apply to decisions that will affect the rights and obligations of all owners within the Body Corporate bound by BMS terms and decisions.

DISPUTE

The First thing to note is the BCCMA disputes process is not applicable here.

A BMS is required to have dispute resolution provisions. However, the dispute provisions cannot include debt disputes. The dispute provisions usually refer to the appointment of an independent party to mediate. The resolution process will not decide whether the terms in place are fair and or reasonable.  Further, by definition, mediation will not necessarily resolve the dispute, and if the dispute persists the correct forum is the District or Supreme Court

Depending on the complexity and stakes involved, a legal opinion should be sought on the commercial viability of pursuing a dispute, particularly involving debts. If you think it’s best to change terms or terminate the BMS altogether, this is possible with the consent of all registered owners and all owner mortgagees.

SUMMARY

Do not assume that the BMS is being managed appropriately, particularly if there is not a specific agreement in place appointing a manager or no instructions have been issued to perform the duties under the Body Corporate Management agreement. If you do have a manager appointed either by the BMS or by instruction to administer the BMS under your Body Corporate Management agreement, check that the manager is competent in administering Bodies Corporate, but also understands the specialised area of BMS administration.