Increasingly, Bodies Corporate in Queensland and across the country are carrying out construction projects designed to repair or improve their common property – whether it’s a new air-conditioning system to a multi-million dollar refurbishment. Unfortunately, carrying out these projects can be risky – particularly in the case of Bodies Corporate unfamiliar with their obligations under the Body Corporate and Community Management Act 1997. Partner, Warren Jiear, and Senior Associate, Mario Esera, provide their top three tips for Bodies Corporate embarking on a construction project.

Tip 1: Pick the best quote

Due to their cost and complexity, most construction projects undertaken by Bodies Corporate need to be authorised at a general meeting by ordinary resolution. Before authorisation may be given, however, Bodies Corporate must generally provide lot owners with at least two quotations.

Invariably, lot owners will prefer the quotation that costs them the least amount of money. However, this notional saving up front can sometimes come back to bite a Body Corporate – particularly if the construction project suffers from delays, cost increases, or latent building defects. It is for this reason that the explanatory material included with the quotations is so important.

The Body Corporate and Community Management Act (BCCMA) and its regulations do not prescribe what information must be contained in explanatory material, but the District Court in the decision of Body Corporate for Palms Springs Residences CTS 29467 v J Patterson Holdings Pty Ltd [2008] QDC 300 found that Bodies Corporate owed a fiduciary duty to lot owners to provide such information to “fully and fairly inform members” of what is being considered.

Therefore, in addition to providing at least two quotations, Bodies Corporate should ensure that they provide lot owners with enough information to make a full and informed decision as to what is best for them and their scheme. For example, in the case of quotations provided by Queensland builders, the explanatory material should include a search of their building licence to establish whether they have a good or indifferent disciplinary record with the Queensland Building and Construction Commission.

Tip 2: Know your project from your projects

It sounds simple, but a common mistake made by Bodies Corporate it not knowing whether their construction project is one project or multiple projects. In the matter of Good Hope Court [2011] QBCCMCmr 282 (30 June 2011), the Commissioner for Body Corporate and Community Management (Commissioner) was asked to consider whether works of a similar nature carried out by the same contractor between May and June 2010 was a single project or separate projects. In this case, the adjudicator found:

“It can sometimes be difficult to ascertain whether a series of proposals forms a single project. In this case although many of the works are of a similar nature, and were undertaken by the same contractor over a relatively short space of time, I am not convinced that they were all part of a single project. It seems to me that each was a separate item of maintenance on different parts of the common property. On the basis of the information provided, it seems each item of work was ‘stand alone’ and could be undertaken individually without impacting on the progress of the other items of work.”

Therefore, when in doubt, a Body Corporate should err on the side of caution and have each stand alone part of a construction project authorised under separate motions. This will help avoid the risk of the Commissioner setting aside motions earlier approving a construction project, as well as the delay of having to call another general meeting hear and approve new motions for the same works.

Tip 3: Read the fine print

Once a construction project has been properly authorised, the final stage before works commence usually involves the successful supplier offering the Body Corporate a construction contract to sign. In many ways, this is the most important stage for Bodies Corporate, yet it is a stage that many rush through without fully understanding what they are signing or what risks they are exposing themselves to in the process.

Arguably, a Body Corporate that signs a construction contract without fully understanding its terms and conditions is in breach of its statutory obligations to act reasonably in anything it does in relation to the common property.

Therefore, before signing a construction contract, a Body Corporate should take advice. This will not only ensure that the Body Corporate understands what it is agreeing to, but it may also allow them to amend or include new terms and conditions that limit the Body Corporate’s risk.

Comments

All building projects are complicated. Building projects within a community titles scheme are particularly complicated due to the statutory obligations imposed on Bodies Corporate by the BCCMA and the consequences for Bodies Corporate if they fail to meet those obligations. The key is taking expert advice from professionals who are equipped with the knowledge and experience to assist.