Ins and outs of understanding your body corporate agreement

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Ins and outs of understanding your body corporate agreement

Community living tends to come with many misconceptions about the responsibilities of a body corporate manager. Having and understanding a body corporate agreement helps to clarify responsibilities and set realistic expectations. The agreement can also be used to tailor services that are important to the committee and to ensure the body corporate is paying for what they use.

Find out more from our PICA Group team:

  1. What to look out for when comparing service agreements?

  2. What is included in a standard body corporate agreement?

 

What to look out for when comparing service agreements?

Most reputable providers which are industry-accredited tend to use the supplied agreement template issued by Strata Communities Australia (SCA). This means that the core services listed below under Schedule F are generally the same. The differences come in what other services above the core services are included under the agreed fee and the differences in fees for additional services.

 

Comparing fees and services

Some providers offer a lower management fees to attract new customers but have higher fees for additional services. Take time to compare the differences in the additional service pricing when considering who to engage, as you may end up paying more in fees unexpectedly.

 

What is included in a standard body corporate agreement?

An important part of understanding your body corporate agreement is understanding the included ‘Schedules’. A standard body corporate agreement is sectioned into ‘Schedules’ and may contain the following:

  • Schedule A: The reference schedule for terms of the agreement, agreed services fees, associated charges, manner of payment and review percentage.
  • Schedule B: The fees for agreed services.
  • Schedule C: Additional fees for services that are listed in Schedule F. Fees in this section are usually listed as an hourly rate or a set fee for a service.
    This is an important section as it determines the cost of extra services such as the hourly rate payable for the body corporate manager to run meetings outside of business hours, or the accounting team’s time to prepare BAS statements.
  • Schedule D: The percentage increase that the fees will increases per year.
  • Schedule E: Disbursement charges (such as envelopes, reconciliation statement costs, incoming and outgoing phone calls) a body corporate will be charged for. Disbursements can be negotiated as a fixed or variable fee.

PICA Group tip: Unsure of whether a fixed or variable rate is best for your property?

If your body corporate uses a lot of hard copies i.e. levy notices are posted out and your meeting agendas are still printed, then it might be wise to choose a fixed disbursement fee. If you get notices and levies sent mostly via email and there is very little photocopying or postage, then it may suit your body corporate to choose a variable disbursement charge.

PICA Group tip footer

Further details – Schedule B: Agreed services that the body corporate manager will deliver on for the agreed fee.

Generally, agreed services (Schedule B) includes the following activities:

Secretarial

  • Convene and attend the annual general meeting
  • Call nominations for the position of executive and ordinary members of the committee
  • Prepare and distribute the notice of annual general meeting and documentation
  • Record and distribute minutes of annual general meeting
  • Prepare and distribute notices for committee meetings
  • Attend committee meetings
  • Record and distribute the minutes of committee meetings

Financial

  • Open, maintain and operate a bank account for the administrative fund and the sinking fund
  • Prepare a statement of accounts for each financial year
  • Prepare a draft budget for each financial year
  • Issue notices for payment of contributions
  • Receipt and bank levies
  • Process and pay accounts
  • Prepare financial records and statements

Administrative

  • Pay insurance premiums and organise renewal quotations for renewals
  • Establish and maintain the roll and registers
  • Maintain and keep records
  • Make available the records for inspection.

Note, the number of meetings and the duration of the meetings are defined in this section. Additional fees may be charged if meetings go over time or if additional meetings are required.

The body corporate manager also accepts the service of notices on behalf of the body corporate and respond to correspondence relating to all agreed services.

 

Further details – Schedule C: additional services that are incur a charge in addition to the agreed fee.

Generally, additional services (Schedule C) includes the following activities:

  • Voting outside committee meetings
  • Arranging extraordinary general meetings
  • Preparing and filing applications to the Office of the BCCM Commissioner
  • Attending hearings
  • Arranging investment accounts
  • Debt management
  • Lodging business activity statements, instalment activity statements and taxation returns
  • Obtaining quotations and issuing work orders for building management, repairs and maintenance.

 

Other important aspects to be aware of in your body corporate agreement:

  • Disclosure of associates
    The body corporate manager must disclose relationships they have with any relevant service provider, such as repair and maintenance providers, insurance, and other professional services.
  • Disclosure of commissions
    The body corporate manager must disclose the commission that is paid by service providers such as insurance and utility providers.
  • Indemnities
    The agreement provides for the body corporate to indemnify the manager against any claims that are not caused by the wilful or negligent act of the manager.
  • Transfer
    The agreement may be transferred to another strata manager in accordance with the Body Corporate and Community Management Act.
  • Termination
    The body corporate may terminate the manager in accordance with the legislation or the manager may terminate the agreement by giving 30 days’ notice. If this occurs, books and records must be delivered to the body corporate within 30 days of the expiry of the agreement.
  • Complaints handling procedure
    The agreement outlines the complaints handling procedure adopted by company.

 

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