Property developers and their end stakeholders risk wasting money and time in expensive litigation by failing to getting the basics right when planning Building Management Statements that are attached to volumetric lots.
Volumetric lots – are generally used in mixed use properties which have a body corporate as well as a retail or commercial leasing space – are governed by Building Management Statements (BMS) which are supposed to state clearly and precisely, all rights, responsibilities and shared costs.
For example, a BMS might cover:
- The rights of owners, occupants and invitees to access the lots through shared access ways – similar to an easement
- The obligation of each party to make appropriate insurance arrangements
- Financial matters and cost apportionments
- Aesthetic matters relating to an Architectural code or Landscaping code
- General administrative arrangements
The mandatory requirements of a BMS are straight forward and self-explanatory – supply of services, access, support and shelter, and insurance arrangements.
But the devil is in the details of the optional provisions, and this is where developers can become unstuck.
Optional categories include:
- The establishment and operation of a management group
- The imposition of levies and how levied amounts are to be kept and spent
- Property maintenance
- Architectural and landscaping standards
- The resolution of disputes
- Rules for services and facilities common to lots
- Administrative arrangements
- Proposed future development
Consultants, surveyors and lawyers who are inexperienced in creating Building Management Statements can often miss important ramifications that can result in costly dispute resolution and possible court involvement.
Areas which can be disputed include the use and access of common areas and location of services.
For example, just imagine a mixed use development with a restaurant space which is not leased at the time residents have moved into the building.
Some of the questions that need to be addressed in the project planning stage include:
- Where are grease traps, extractor vents and air-conditioning compressors to be located?
- Will a future fit out negatively impact on residents use and enjoyment of their property?
- How will the costs of facilities and upkeep of common areas be apportioned?
For instance, a restaurateur shouldn’t have to pay for the upkeep of a residential swimming pool that diners will not use, but what if the restaurant also runs the pool-side bar?
Failing to consider all the factors not only means headaches at the time of construction and leasing, but also the potential for costly and time consuming litigation in the future.
Unlike purely residential buildings, which are governed by body corporate legislation, volumetric lots and Building Management Statements are governed by the Land Titles Act.
And unlike Body Corporate committee decisions, in which the majority decision is carried, it only takes one dissenting vote from any one of the lot holders to prevent a change to the Building Management Statement.
Ideally Building Management Statements should result in a ‘minimum positive status quo’ – that means the BMS was carefully and thoroughly thought out in the first place and only needs to be changed under extraordinary circumstances.
It is vital for developers to ‘future proof’ their buildings by working with experienced consultants, like the team at SSKB who have a proven track record in creating successful Business Management Statements. They know the thorough and detailed questions to ask.
SSKB – every detail matters.