What is a Body Corporate Asset?
Monday September 24th, 2018
For the purposes of the Body Corporate and Community Management Act 1997 (the Act), a body corporate can acquire an asset in the same way an individual can acquire an asset.
What, then, do we mean by body corporate assets and what are the responsibilities of the body corporate in relation to their assets?
Section 11 of the Act provides that body corporate assets “are items of real or personal property acquired by the body corporate, other than property that is incorporated into and becomes part of the common property”.
On this latter point, the Act gives an example of an air-conditioning unit which might be bought by the body corporate as a body corporate asset, but then becomes common property when it is installed as a fixture.
Section 45(3) of the Act then provides that a body corporate may dispose of a body corporate asset, although it must not (except to the extent permitted under a regulation module) mortgage, or otherwise create a charge over, the asset. Section 157 of the Act further provides that the relevant Regulation Module may provide for how disposal is to occur.
I will refer to the Body Corporate and Community Management (Standard Module) Regulation 2008 (the Standard Module), so please refer to the relevant provisions of other Regulation Modules if they apply to you.
Part 3 of the Standard Module sets out requirements for body corporate assets, which I have summarised as follows:
• Maintenance: the body corporate must maintain its assets in good condition (note that “good condition” is not defined).
• Types of asset acquisition: the body corporate may acquire freehold land, leasehold interest in freehold land, acquire (or surrender) a licence or concession related to land or other personal property. In all of these instances, the acquisition is for “the general use and enjoyment of the owners and occupiers of lots included in the scheme”.
• Requirements to acquire: the requirements are—
o For acquiring freehold land or a lease of more than three years: resolution without dissent; and
o For entering into a lease of three years or less, or a licence, concession or agreement, or acquiring personal property where the value of the property to be acquired is more than the greater of $1,000 or multiplying the number of lots included in the scheme by $200: a special resolution.
The requirements around disposal of assets reflect the requirements to acquire them, namely:
• selling or otherwise disposing of a body corporate asset that is freehold land, or a leasehold interest in freehold land: resolution without dissent;
• granting or amending a lease over a body corporate asset that is freehold land, or another body corporate asset capable of being leased:
o If the term of the lease, as granted or as amended, is more than three years: resolution without dissent. Otherwise, a special resolution applies;
• selling or otherwise disposing of a body corporate asset that is personal property including a licence or concession related to freehold land, if the market value of the asset is more than the greater of $1,000 or multiplying the number of lots included in the community titles scheme by $200: special resolution.
Further requirements are that the body corporate must insure its assets to full replacement value (Standard Module, section 178(1)(b)) and must keep a register of its assets (Standard Module, section 197). The register must include all assets more than $1,000 in value and include the following details:
• a brief description of the asset
• whether the asset was purchased or was a gift
• when the asset became an asset
• if purchased, how much the asset cost and the name and address of the person from whom the asset was purchased
• if the asset was a gift, the estimated value of the gift and the name and address of the gift’s donor.
This register forms part of the body corporate’s records and, as such, can be accessed by an “interested person”.
If you are reading this information about assets and thinking that it all sounds convoluted and complicated, remember that the body corporate has a duty to act reasonably and this duty extends to the way in which it acquires, maintains and disposes of assets. Keep in mind also that assets are for the benefit of all owners (and occupiers) and so for this reason alone, it is important that there be appropriate transparency and detail about the assets.
If a body corporate has questions about the legal or financial implications of its assets and how they are acquired, maintained or disposed of, I would recommend it seek appropriately qualified advice on these topics.
For further, general body corporate information please contact my Office on 1800 060 119 or visit our website http://www.qld.gov.au/bodycorporate.
This article was contributed by Chris Irons, Commissioner for Body Corporate and Community Management.