Body Corporates and their fees

Body Corporates and their fees

Body Corporates and their fees

Body corporates get such a bad rap, usually because when things do go wrong they can go spectacularly wrong and that makes for good journalism. There are things that can go wrong for sure, but then there are plenty of advantages to.

Part of the reason things tend to go pear shaped is because of some common misunderstandings.

They’re Making Money Off Me!

The most commonly held myth about body corporates is that the body corporate is making money off the lot owners.

Body corporates are not carrying on a business. They’re not trading and they’re not offering services. They are in fact expressly restricted from carrying on any sort of business activity.

They do lodge tax returns and in most cases taxable income is interest on monies held. That is all. Collecting levies is not making money, its recouping costs.

Yearly levies are calculated for administrative funds by estimated how much it’s going to cost to run the body corporate, in that year, and then collecting that much. Nothing else.

Sinking fund levies are calculated based on a Sinking Fund Forecast estimating costs over the next 10 to 15 years.

Body corporates don’t collect more than they need. The committee, who’re putting together these budgets, are lot owners and have as much interest in keeping the levies low as any other owner.

Fraud with body corporate funds is not unheard of but it is very rare. Many body corporates are just expensive to run, mainly because they have expensive facilities. In the body corporate world you pay for what you get.

The Body Corporate Manager Is In Charge

Part of the problem with the idea the body corporate is making money off the lot owners is confusing the body corporate manager (BCM) with the body corporate committee.

In most cases BCM’s are firms that are making money off lot owners. They do that by contracting to body corporates to undertake specific tasks of the committee. By hiring a BCM the committee, made up of volunteers, can minimise the necessary hours to be invested but still have the body corporate managed well.

Effectively BCM’s are a cross between a secretary and an Accountant rolled up in a great big juicy roll of industry know-how. They advise. They suggest even. They do not make decisions.

Well, they will make decisions if owners specifically appoint them to do so, but, even then, they just follow legislation. No BCM ever really wants to find themselves in charge.

Body Corporates Have Lots Of Money

This one seems to be a favourite of contractors and tradespeople. Again, body corporates do not trade or make money. Their funds come directly from lot owners in the form of levies.

It may seem like they have a lot of money but they really have is a lot of cash. Cash they’ve raised by levying the lot owners. And those levies are raised because the body corporate intends to spend that money. All of it. Even the sinking fund.

Some people may view a body corporate as a company or a business that can just trade out of the problem but it’s really, really not. It’s just a group of people who’re trying to maintain or improve their investment.

Any increase in costs above quoted works is costs that have not been budgeted for. On a good day the budget can be juggled to cover the cost. On a bad day, lot owners will need to dip into their pockets again.

I Can Do What I Like Within My Lot

Yeah, not so much.

One of the things I tell everyone buying in a body corporate is read the by-laws. They will control what you can and can’t do within the lot.

There will most likely be restrictions on what you can do.

One of the great benefits of body corporates is curb-side appeal, that sameness that looks smart and sophisticated. Any external changes to a lot could interrupt that look so they’re usually controlled.

Other restrictions, things like bans on hard flooring and renovation policies will relate to minimising noise and impact on other lot owners.

Internal works may be restricted due to load bearing walls and windows and so on.

For the most part any changes, inside or outside the lot, will need to be approved by the committee. So yeah, read the by-laws.

You Can’t Tell Me What To Do

Again, I’ve got some bad news.

That doesn’t mean the body corporate can hassle you about how much salt you’re eating or wearing a short skirt, but they can tell you how to act if you’re on common property.

Or even if you’re within your lot, if what you’re doing within your lot is breaching one of the by-laws.

The by-laws exist for a reason. They’re rules put in place to let a group of relative strangers all live together without deteriorating into a mindless free-for-all that leaves everyone scarred for life.

The same with body corporate legislation.

Body corporates work best when they’re populated with people who follow rules.

They also attract people who have an obsessive need to follow rules and then point out to others that they’re not following said rules. Strange as it may sound this is actually a good thing.

Body corporates are here to stay and it benefits everyone who owns and lives in one to disregard myths and see them for the investment vehicle that they are.

Source :