It is undeniable that the size and complexity of strata developments have been increasing in the ACT, following in the footsteps of other states and territories.
The ACT Government has recognized the need for our legislation to meet the unique needs of the complex buildings and the requirements of community ownership. As a result, a suite of amendments has been introduced to our unit titling and civil property legislation.
Among the more significant of these amendments are the introduction of Building Management Committee (BMC) structures and the requirement for certain complexes to develop and register a Building Management Statement (BMS).
The legislation regulating these structures is can be challenging to decipher. Still, it is essential for both owners and developers to have a sound working understanding of how these structures operate when they are required and what opportunities they present.
When is a Building Management Committee Required?
Although it may seem confusing at first, understanding when a BMC is required is key to appreciating the opportunities this new governance mechanism contains. In a regular units plan, each building level is divided into individual parcels of land, allocating select units for individual ownership and designated areas for common ownership (the ‘common property’).
In a more complex subdivision (known as a ‘volumetric subdivision’, ‘stratum subdivision’ or ‘air-space subdivision’), the building is essentially divided by height based on usage types.
This means that you can have multiple owners existing within one building envelope – for example, residential units plans, a hotel and a commercial owner all co-existing within one shared building. When numerous owners (or ‘stratum leasees’) exist within a connected building envelope, a BMC must be implemented.
It is important to note that this does not mean that a mixed-use units plan must implement a BMC. In a mixed-use units plan, there is only one stratum lessee – the Owners Corporation. It is only if there are multiple crown leases existing within a single building envelope that a BMC is required under the legislation.
Why is a Building Management Committee Useful?
The essential purpose of a BMC is to regulate the different user groups within a single building envelope. This has never really been a clear option in the ACT prior to implementing the amended legislation, which has resulted in different user groups ending up in disputes over their various goals and objectives for their building.
With a BMC in place, these previously unregulated user groups now have a mechanism by which to ensure that the governance of their building can be voted on, adapted and recorded against their legal titles.
Perhaps most significantly, a BMC can regulate and distribute costs fairly and accurately across user groups. For example, if there is a pool that is exclusively available to the hotel owners in a building, the hotel can now be responsible for paying 100% of the maintenance costs of the pool under the BMS.
The BMS will contain a shared facilities register which will detail the common facilities shared between the user groups and the percentages in which the user groups will be responsible for contributing to the maintenance of those facilities based on their usage.
What is a Building Management Statement?
A Building Management Statement (known as a ‘BMS’ in the ACT or Strata Management Statement / ‘SMS” in NSW) is the key governance document for the BMC. As noted above, the BMS contains the shared facilities register, which will identify and allocate the shared costs of facilities within the building envelope.
The costs must be allocated fairly between the user groups and must be reviewed regularly by the BMC to ensure that the distribution is still accurate.
The BMS must be registered over the title of the properties it deals with and is the principal binding document of the user groups it regulates. This means that a BMS will override the rules of an Owners Corporation or Community Management Statement to the extent that they are inconsistent. The requirement to have the BMS registered is a massive positive for owners and developers, as the clear disclosure of obligations for prospective buyers will eliminate the current confusion and uncertainty around owning in these more complex developments.
As an important side note, developers of volumetric subdivisions will now be required to lodge their BMS for approval with their unit title applications. This provides a unique opportunity for developers to clearly disclose to prospective purchasers what the shared facilities and arrangements will be between the different user groups within a building envelope.
A BMS can be a complex document and must be customized to take into account the unique requirements of each building it is regulating. There are several items that a BMS must include under the legislation, including providing a mechanism to settle disputes, insurance obligations and voting mechanisms, among other items.
Getting your BMS right is the key to ensuring the smooth operation of your building, and now is the time to take advantage of this powerful new tool to resolve and prevent disputes between competing user groups.
If you would like to discuss establishing a BMS for your complex, please contact our specialist team, who will be pleased to discuss further with you.
**Assisted by: Alex Miglietti**