In our last article, we looked at how to structure a Building Management Statement, or BMS. The BMS effectively controls anything tying one lot to another in a scheme, and is necessary to ensure there is a clear distinction between individual lots. This includes use of services and utilities, access to common property, and location or installation of infrastructure essential to the individual lots.
Here we continue the BMS trend, as we discuss critical cost sharing methods in the BMS. Dividing up the sharing of costs in a BMS is in terms of cost sharing of assets owned by one party or lot in a scheme, between different lots on the one site. These parties are often not tied together by a Body Corporate, although one of the lots may be, in its own right, a body corporate.
Specifying the sharing of costs is critical to ensure disputes between lots are minimised. In particular for strata schemes, shared items which are of large cost nature must be specifically acknowledged. Parties must then identify who will maintain the infrastructure, who recovers the costs and what method is to be applied to the recovery of these costs. Importantly the parties must decide what portion each party with pay for the item, sharing of capital replacement cost and what method if different to maintenance sharing method.
As with the development of the BMS itself, working out the sharing of costs between parties is absolutely vital. SSKB Developer Consultants recognise this, and on new developments we spend a considerable amount of time consulting on the BMS and ensuring it has been robustly constructed to the needs of the client on individual sites. More time is spent on the construction of the BMS and cost sharing methods than is spent consulting on the creation of the Body Corporate in a new scheme, which may be one of the parties to the BMS. Spending this time on the BMS ensures the costs which flow down through the scheme are correct for each of the parties, and that the methods applied for sharing are equitable and up to the market standard.
If costs are not appropriately shared between parties, disputes can quickly arise. Issues often occur where minimal time is given to consulting on the BMS. Dispute Resolution can then become an concern, as there is no avenue to seek adjudication under the Body Corporate Community Management Act. This is because the BMS is governed by the Land Titles Act, and not the BCCM Act. The Land Titles Act, unlike the BCCM Act, does not have any overarching governing body available to resolve disputes. Adjudication and disputes over cost sharing of a BMS are handled by arbitrators and other legal professionals. These avenues of Dispute Resolution can cost parties a lot of time and money, with outcomes often not amenable to all parties. While DR processes are available, SSKB aims for a fair and equitable division of costs so there is a good outcome for both sides.
It is very difficult to modify the sharing of costs after BMS has been finalised, as there is always at least one losing party. By decreasing one party’s costs, the other parties end up paying more. Changing a BMS is also difficult and requires a unanimous resolution by the parties, as well as requiring all the Body Corporate attached to the BMS to pass a Resolution without Dissent to approve any changes. Thus it is critical to get the BMS right from the outset.
If you are looking at creating a BMS and the sharing of costs for your development, talk to SSKB Developer Consultancy. With a real focus on ensuring every detail is covered, SSKB can structure your Building Management Statement to be as effective and future proofed as possible.