As we outlined in our previous article here, getting your Building Management Statement right in the first place is crucial for the success of a mixed use project. In this article we drill down a little deeper to look at Building Management Groups.
The Building Management Group (BMG) is the foundation of a successful mixed use project – just like the foundation of a physical building.
Depending on the nature of the development, the BMG may comprise the following volumetric stakeholders:
- the owner of the floors dedicated to office space
- the owners of ground floor retail and,
- the residential body corporate (represented by either the body corporate chairman or a specific nominee)
Following the registration of a Building Management Statement (BMS), a meeting of the group is generally required to be held within 30 days, although they elect to make a resolution to defer this first meeting for a period of time – six months, for example.
Once the BMS comes into effect, the committee should decide on how frequent they would need to meet, the group may only need to meet once a year.
These early meetings with all of these stakeholders are crucial. It is at these meetings where binding decisions regarding access to common areas, responsibilities for managing these areas, and apportioning the costs of maintaining common areas under the first registered BMS is understood, and any non described areas etc can be established.
In this respect the BMG will act similarly to a body corporate – it will take minutes of meetings, keep bank accounts, possibly charge levies for the maintenance of agreed common areas and undertake to keep those areas in good condition.
But unlike a body corporate/owners corporation committee, which is a separate legal entity, the building management group is not. Each committee member acts on behalf of those they represent, thereby legally binding the owners to decisions made at this time.
The issues which can cause friction (or worse – litigation) can include:
- Costs and/or levy apportions
- Rights and access to common areas
- Maintenance responsibility
Of these, the costs and levy apportioning is the area most likely to run into dispute. Assumptions made when the development was new need ongoing annual review to respond to the changing needs of the site.
We recommend putting together a thorough and comprehensive capital funding forecast as one of the first tasks of the Building Management Group and to be proactive to reduce the likelihood of future disputes. Retail owners may prefer not to establish a levy based capital fund whilst the body corporate may elect to add these into their own allowance for their own Sinking Fund allowances collected annually.