Increasingly, Bodies Corporate in Queensland and across the country are carrying out construction projects on their common property. This is particularly common in the case of older buildings, where Bodies Corporate are often faced with the dilemma of merely repairing what is there versus replacing it with something new or more modern. Unfortunately, many Bodies Corporate still fail to appreciate that improving their common property carries very different rules and obligations to maintaining it. Partner, Warren Jiear and Senior Associate, Mario Esera discuss the key differences between the two and explain why knowing the difference is important for Bodies Corporate embarking on construction projects.
No Duty to “Improve” the Common Property
In MAGOG (No 15) Pty Ltd v The Body Corporate for the Moroccan  QDC 70, the Court found that the Body Corporate and Community Management Act 1997 (BCCMA) imposes a sometimes onerous obligation on Bodies Corporate to repair and maintain the common property in good condition, including, to the extent that common property is structural in nature, in a structurally sound condition.
The BCCMA does not, however, impose an obligation on Bodies Corporate to improve the common property. Therefore, when part of the common property becomes run down or dilapidated, Bodies Corporate are only required to repair it. They are not obliged to replace it with something better.
This is not to say that improvements to the common property cannot be carried out. They can be, provided they are properly authorised in accordance with the BCCMA and its regulations.
Correctly authorising a project designed to improve the common property can be a complicated affair.
To simplify the process, our table below broadly outlines the types of improvements Bodies Corporate may carry out by and what is required to authorise them:
Click here to view the table.
What are the consequences if you get it wrong?
If a construction project designed to improve to the common property is not properly authorised, the most common outcome is a complaint to the Commissioner for Body Corporate and Community Management (Commissioner). This can lead to delays to the project and added expenses. Indeed, since 2010 disputes concerning improvements to common property continue to be one of the most commonly dealt with by the Commissioner.
Equally, if a Body Corporate fails to properly discharge its obligation to maintain the common properly, the consequences can be even more significant. For example, in the MAGOG case mentioned earlier, the District Court ordered the Body Corporate for the Moroccan to pay a lot owner more than $345,000 in repair costs and lost rental (including interest) as a result of their failure to maintain the common property.
When a Body Corporate undertakes a project affecting their common property, it is important that they recognise from the outset whether that project will improve their common property or merely maintain it. Sometimes that can be difficult ascertain – particularly in the case of older buildings where the maintenance in question involves replacing a defective or dilapidated part of the common property with its modern equivalent.
Schedule 6 of the BCCMA provides some guidance as to what constitutes an “improvement” by defining it as something that includes:
- the erection of a building
- a structural change
- a non-structural change, including, for example, the installation of air conditioning.
The BCCMA does not define what constitutes “maintenance”. However, in Morcom v. Campbell-Johnson & Ors.  1 QB 106, Lord Justice Denning provides a helpful definition as to the difference between the two, as follows:
“It seems to me that the test, so far as one can give any test in these matters, is this: if the work which is done is the provision of something new for the benefit of the occupier, that is, properly speaking, an improvement; but if it is only the replacement of something already there, which has become dilapidated or worn out, then, albeit that it is a replacement by its modern equivalent, it comes within the category of repairs and not improvements.”
Therefore, where a construction project provides something new for the benefit of a lot owner or the scheme – particularly the erection of a building or a structural change – it will likely fall into the category of improvement. Where a construction project looks to merely replace something that has become dilapidated or worn out, it is likely a maintenance matter.