Protest over Lot Entitlements Change

GOLD Coast association Voice of Unit Battlers is marshalling its troops to ensure the Newman Government hears the concerns of unit-owners about its community-title Bill.
President Philip Williams said the Bill "has the potential to make small units almost worthless" and their owners needed to make a stand.The organisation last week staged meetings at the Pinnacle and Q1 towers to encourage unit-owners to make submissions on the Bill to parliament's legal affairs committee.
See Article and Prior Post

Changes to Lot Entitlements, Again

The Campbell Newman Queensland Government has decided to change the lot entitlement laws, yet again.  This adds more uncertainty for apartment owners and people intending to buy apartments.  It also enables a body corporate to reverse any recent changes made to their lot entitlements under the prior law.  So some apartment buildings will end up having 4 lot entitlement schemes within 4 years.  As a direct result of these changes, some apartment owners will have their body corporate levies increased, and a minority of apartment owners will have their body corporate levies significantly decreased.

The Newman Government is clearly favouring rich penthouse owners over those owning the less desirable apartments in a building.  These changes will create further disharmony in some apartment buildings.

Before buying an apartment in Queensland, you should make sure you fully understand the implications of these changes.

Details see:  SSKB newsletter   (Story about old law that has now been repealed is here.)

Uncertainties, Risks and Body Corporate Fees

I feel that now is probably a good time to buy an apartment in Brisbane.  Prices are down, and there are many good apartments for sale.  However, there are uncertainties that are holding me back:

• What will happen if the mining boom comes to an end?
• Will Newman's retrenchment of 20% of the public service kill any chance of growth for the next 3 years?
• Will Newman increase land tax rates and lower land tax threasolds in Queensland?
• What will Newman and the Attorney-General do in relation to the complex issues regarding lot adjustments (that impact the percentage of body corporate fees an individual unit owner will pay)?  If I buy now, will the unit entitlements be adjusted up in the near future so that my body corporate fees will increase?  Will there be costly legal action between the body corporate and various interest groups in the buildings.  See here and here for example.  Changes to this are a priority for the government it seems, to reward penthouse owners for voting for the Liberal party.

So, for the time being, there is too much uncertainty and risk to buy an apartment (or an investment property) in Brisbane or Queensland.

Regardless, body corporate fees and council rates are becoming prohibitively high, and make investing in apartments less attractive.

I looked at an older apartment on the river recently.  It has been on the market for more than 6 months.  It is a 2 bedroom (with a small second bedroom), with river views.  The facilities are moderate -- no doorman, onsite manager, reception desk or the like.  The list price has come down, and is now $455,000.  But the body corporate fees are $8,830 a year, and council rates are $2,000 a year.  So more than $10,000 a year in these expenses.  The rent for this apartment would be about $400 a week, or about $365 a week after real estate agent's fees.  So that is 30 weeks, or more than half a year's rent, just to cover body corporate levies and rates!  Clearly, this is not a good investment, even if the price drops another $100,000.

Post-script -- comment from a reader after this post was published:
Your sentiments re purchasing a unit or apartment in Brisbane reflect my own also, very valid points.

Another is upcoming or planned or approved “future” capital works such as painting, under-pinning, structural repairs, landscaping, tree removals and the like. At a number of units I have looked at, the agents got very cagy when put the question. Pressing one very hard got I wind of a complete paint job coming up within 2 years,  approx $250,000k across 80 units, and unit titles re-appropriation may also make some owners rather unhappy as well. Ouch! Another had $30,000K in quotes not yet voted on (but very necessary since drains were becoming repeatedly blocked by roots) for tree removal. Ouch!  Many units 10 years and over now need a lot of work, much of which has been delayed or put back but  it’s coming. New buyers beware.
Article in AFR, 7 August, P38: Newman at a get together of banks and bizo’s was playing pretend Reserve Bank Chief and instructing banks to start lending. Banks won’t (as we all know), denying they should take risks just for Newman et al. Last para of article states : At a meeting of people from the big four banks recently, one person from one of the big four proclaimed  “We’re not lending anything into Northern Australia. Northern Australia begins at Nundah in Brisbane.”

Changes to Lot Entitlements for Some Apartments

After being approved by Queensland Parliament on the 6 April 2011, the Body Corporate and Community Management and Other Legislation Amendment Bill 2010 received Royal Assent on 14 April 2011, meaning that the new legislation is now in force. The new legislation will introduce a number of matters including:

• New principles to be used when determining Contribution and Interest Schedule Lot Entitlements
• A process where owners, who have been affected by a Lot Entitlement change, can submit a motion to the Body Corporate Committee before the 14th April 2014 to revert back to the Lot Entitlement Schedule before the change was made
• Additional requirements for Disclosure Statements and rights of termination
• Introduction of a new "Two Lot Scheme" module to make management of these smaller schemes much less onerous for their owners

Changes to Lot Entitlements in Queensland

This is edited from an email from Archers. This law, if passed, may impact the value of apartments in buildings where the lot entitlements were recently changed, and where there was a big difference in the initial sales prices of various apartments in the building.

"Now that you are all aware of the Body Corporate and Community Management Amendment Bill 2010 lets spend some time explaining, if passed, what it is going to mean for you.

Open for public consultation until 23rd September 2010 the Bill proposes to outline new concepts and principles for the setting of Contribution Schedule Lot Entitlements (CSLE), along with a provision for lot owners who were disadvantaged by adjustment orders to have the amended CSLE changed back to their original schedule prior to any change. We have provided a brief summary of the main areas of the Bill below but urge anyone who believes they will be affected to review a copy of the Bill at www.deedi.qld.gov.au and make a submission to bccm.policy@deedi.qld.gov.au.

1. Introduction of the following Principles for deciding CSLE:

• Equality Principle -The CSLE must be equal except to the extent which it is just and equitable in the circumstances for them not to be equal.
• Relativity Principle - The CSLE must take into account factors such as the nature, features and characteristics of the lots, the purposes for which the lots are used, how the scheme is structured, the impact the lots may have on the costs of maintaining the common property and the market value of the lots.
• Unimproved Value Principle - Where the CSLE must be proportionate to the unimproved value of the lots.
• Market Value Principle - Interest Schedule Lot Entitlements must reflect the respective market values of the lots, except to the extent which is is just and equitable for the lot entitlements not to reflect the respective market values.

2. Adjustment of CSLE

A Body Corporate is still entitled to change its CSLE by passing a Reolution Without Dissent. The notice of meeting must be accompanied by a written document outlining the changes and the reasons for the changes.

An owner is still able to apply to have the CSLE changed either through Specialist Adjudication or the Queensland Civil & Administrative Tribunal (QCAT), however there are restrictions. For an existing scheme, the scheme must have been affected by a material change since the last time the CSLE were decided. For schemes established after the commencement of the Bill, the owner making the application must believe the CSLE are not consistent with the deciding principle.

3. Previous Decisions

The proposed Bill will allow an owner (who must have been an owner at the time an order was made) to submit a motion to the Body Corporate to revert back to the CSLE before any order to change them was made. There will be a three (3) year time limit for an owner to submit such a motion. If the Body Corporate receives a motion from an owner, it must identify the CSLE pre-adjustment and call a general meeting to allow owners to vote, by Resolution Without Dissent, whether to change the CSLE back to what they were pre-adjustment. Special provisions will apply to Lots that have been subdivided or amalgamated.

4. Applications already made

If an application is being heard by a Specialist Adjudictoar or QCAT and a decision has not been made or has not been given effect at the commencement of the Bill, it will cease to have effect when the Bill commences.

Some other relevant changes proposed include:

• A buyer may terminate a contract if it is entered into but before settlement, a new Community Management Statement (CMS) is recorded and:
  • the seller does not give the buyer a copy of the new CMS within 14 days (or longer if agreed by both parties) after the new CMS is recorded; and
  • the buyer would be materially prejudiced given the extent to which the new CMS was different to the previous CMS; and
  • the buyer gives the seller 14 days notice (or longer if agreed) that they wish to terminate the contract.
• A buyer may terminate a contract if they are buying from the Original Owner for the Scheme if they reasonably believe that the CSLE are inconsistent with the principle on which they were decided and the buyer would be materially prejudiced if they completed the contract. There is a 90 day time limit to terminate after the buyer (or a person acting for the buyer) receives a copy of the contract."