What are 5 of the most frequently asked questions regarding Building Management Statements?
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Hi everyone, my name’s Elisha Quigg (Hodgson), a solicitor at OMB Solicitors. Today I’m going to be talking to you about five frequently asked questions in relation to building management statements.
Now, this topic is particularly relevant for our body corporate managers and our lot owners who pick up this document called a BMS and ask the question, what is this document? So the document is a recording of all of the information and the relationship between the commercial and residential components of a building.
Now, there could also be other components such as retail, which would have separate BMS’s. But what I’m going to be talking about today is the relationship between a building which has both residential and commercial components.
Now, the first question probably is, what is a BMS? So the building management statement is a document which sits over the top of those two schemes, the residential and commercial and what it does is it records the relationship and all the management covenants, which both benefit and burden those schemes.
Now, some of the management covenants include both insurance obligations in respect of the building, services utilities, such as electricity, plumbing, shared facilities such as storage facilities, or even car parking or garages, and any other management of that particular building.
Now, with the BMS, it is important to note at the outset that this document isn’t governed by the Body Corporate and Community Management Act. It’s actually governed by the Land Titles Act. So if you pick up your building management statement, you’ll see on there at the top left hand corner, it will show you that it is registered pursuant to the Land Titles Act.
Now, the BMS is essentially a contract, it’s a contract between the residential component of the building and the commercial component of the building.
Now, there are a lot of management covenants that you need to consider in the BMS, which can be quite particularly onerous for individuals to try and understand and manage, and this is what leads me to the first question is, who manages the BMS?
So the BMS is managed by generally representatives of both the commercial and the residential component of the building. Those representatives have particular guidelines in the BMS in relation to how to raise levies, how to appoint contractors, how to call meetings, and as well as how to resolve any dispute resolution, disputes within that building.
Now, it can be quite onerous for those two individuals to manage the entire scheme on behalf of those two entities. Now, that’s why it leads me to my next question in relation to, can you get any assistance with appointing perhaps a body corporate management company or a building management services to actually assist with that process?
Now, the answer to that question is yes, however, it’s not a particularly straightforward answer. So with the building management group, which is the two representatives appointed from those two schemes, there is no actual ability for those two individuals to go ahead and sign contracts, enter into administrative agreements in their individual capacity and the reason being is that they’re not actually a separate legal entity.
So the building management group is not a separate legal entity that is capable of entering contracts, capable of suing, or capable of being sued. The only way in which a decision to appoint a body corporate management company or a building management company to assist with the management of the BMS is if you get the agreement and you get the stamped, sealed, signed administrative agreement by both the residential and the commercial component.
So all of your agreements need to be agreed to unanimously by the two entities. So this sort of leads me into the next frequently asked question, and that’s in relation to opening a bank account. Now, it’s all well and good for the two representatives of the building management group to trot along down to the bank.
Now, the bank’s going to ask them, okay, so who’s the entity who’s opening up this bank account? They’re going to look at each other and go, oh, can we open it in our name? Well, that’s great, but that means all the funds are going to be going into those individual representatives.
So the way in which the bank account actually needs to be opened, is it will be opened in the name of the Body Corporate for residential and the Body Corporate for Commercial trading as the building management group, because that gives the actual entity being those two individual schemes, the residential and the commercial.
So it isn’t entirely straightforward and it’s important that you can understand that it’s not just the two representatives forming the building management group. It is actually the individual schemes entering into these agreements as well as opening these bank accounts.
Another way that you can get around opening up a bank account is if the building management group, so the representatives of the BMS, come together and make a decision in relation to incorporating the building management group into a separate legal entity.
Now, this can be achieved, but is only recommended in circumstances where you have quite onerous obligations under the building management statement, because there are quite a number of requirements to comply with if you are going to incorporate your building management group into an incorporated association.
So another frequently asked question that we get is in relation to dispute resolution under the BMS. This is quite a complicated issue and as a first point of call, we always tell our body corporate managers or our lot owners to go to the BMS and to read the terms.
If there is a disagreement about, for example, the apportionment of who’s paying for the cleaning of the garage, then simply the first point of call is always to read the overriding document, as that is the contractual agreement between the residential and commercial.
Now, if there is a dispute, there are specific dispute resolution provisions provided for under the BMS. However, it depends on the circumstances of the matter. But in some instances, if there is a dispute, generally what will happen is we will send a notice of dispute and then it will be referred to adjudication.
Now, the parties need to agree on who the adjudicator is, and my opinion is, if they’re already in dispute, how are they going to agree on anything else?So quite, quite often we see circumstances where the matters referred to dispute resolution, but they end up butting heads and they can’t agree on a particular issue and the matters then referred to a court of competent jurisdiction.
So that is just the general process that we see. It is all well and good if you have two representatives that form the building management group, making these decisions and trying to resolve matters amicably.
But quite often what we see, what happened is even if an adjudicator makes the decision, it then has to be enforced and the only court that is able to actually enforce an adjudicator’s decision is in a court competent jurisdiction.
So you might find yourself in either a Supreme Court, District court, Magistrate’s court, depending on the circumstances. But in any event, we always recommend the starting point is read your BMS and try and resolve the dispute and if you’re having any trouble, contact a solicitor to give you some advice and some guidance about how to enforce or how to enforce the BMS, or also how to resolve any disputes involved.
So some of the issues that we’ve discussed today in the frequently asked questions included, well, what is a BMS? Who can manage the BMS? Can you enter into agreements in relation to the BMS? Dispute resolutions and how to deal with that? And also setting up the BMS generally.
Now, there are a whole range of issues in relation to BMS’s, which I won’t go into detail today. But if you do have some specific questions or you have a funny circumstance or there’s some type of interpretation of your BMS you’d like some clarity on, please don’t hesitate to contact our office, we’d be more than pleased to have a quick review and to to give you some advice or some guidance if required.
So if you’d like to contact OMB, please do so, our number is (07) 5555 0000. Thank you.