10 August 2014

You can access the original letter here
Mr. Jarrod Bleijie
Attorney General
GPO Box 149
Brisbane QLD 4001

Dear Jarrod

Your letter of 1 August 2014 passing comment on, and interpretation of, the application of the BCCM Act ‘standard’ module to residential buildings is, to put it plainly, both confusing and distressing to the members of the Unit Owners Association Queensland (UOAQ).

Confusing because your stated understanding of ‘residential’ is contrary to the long held UOAQ and general community understanding of the definition of the word ‘residential’.

The BCCM Act 1997 does not define ‘residential’ but does define ‘residential property’. The definition of ‘residential property’ refers the reader to BCCM Act Chapter 5 dealing with the sale of lots. Chapter 5 refers the reader to the Property Agents and Motor Dealers Act 2000, section 17. This Act has been superseded by the Property Occupations Act 2014, and section 21 of that act states:

21 Meaning of residential property

Residential property is real property that is used, or is intended to be used, for residential purposes but does not include real property that is used primarily for the purposes of industry, commerce or primary production.

There is no further definition of ‘residential’ or ‘commerce’ contained in any section, or the dictionary, of the Property Occupations Act 2014. Therefore the UOAQ, in accordance with Government policy, consulted the Macquarie Australian Dictionary that states:

Commerce: ·trade, business.

Residential: 3. (of a hotel etc.) catering for guests who stay permanently or for extended periods.

The UOAQ submits that the 17 year understanding since the introduction of the BCCM Act in 1997 of ‘residential’ held by this Association holds true under the most current legislation.

The third paragraph of your letter states: ‘Therefore, the description of lots as ‘residential’ does not prevent the Accommodation Module applying to a community titles scheme provided the scheme otherwise meets the prescribed eligibility criteria.’

Section 3 Accommodation Module states:
Application of this regulation—Act, s 21 [SM, s 3]
(1) This regulation is a regulation module for the Act.
(2) For this regulation to apply to a community titles scheme—
(a) the lots included in the scheme must be predominantly accommodation lots

The Carrington Court decision as argued below determined that the ‘eligibility criteria’ be predominately accommodation lots, predominately meaning not less than 75% of lots in the scheme.

It therefore stands to reason that a developer or selling agent, that claims its development is residential and applies the accommodation module is misleading or deceiving prospective purchasers, which your fourth paragraph suggests is not permissible.

Distressing because the issue we are debating is to provide surety to purchasers who wish to live in residential property not affected by short term rental. ·Surely that desire for quality of residential living accords with basic human rights, and will be an increasing problem as residential unit living increases. The recent Griffith University study went to great pains to explore the frustration that purchasers experienced clarifying the classification issue, then ultimately finding that short term rentals were introduced into their property. The standard module should provide the means for that surety and restrict management rights agreements to 10 years.

Had your now expressed interpretation of the intent of the BCCM Act been applied from 1997, there would be 100% accommodation module buildings and in reality no need for the standard module for residential buildings.

Planning principles

The UOAQ has never suggested that the BCCM Act should override planning principles. The UOAQ has expressed deep concern that the Queensland Government has chosen to – or at least feign misunderstanding of – interpretation of the definitions of class 2 and class 3 buildings, allowing class 2 residential buildings to be used for short term accommodation that under the National Construction Code of Australia (NCC) should only be available in class 3 buildings. This subsequently allows misallocation of the BCCM module. The UOAQ has consistently recommended that class 2 buildings be allocated the ‘standard’ module and class 3 building be allocated the ‘accommodation’ module. This would align the management module regulation to the NCC intended categorisation and use of buildings.

Consumer protection

The UOAQ submits that persons purchasing residential or accommodation units should not be required, as a matter of course, to resort to the Department of Fair Trading or Australian Consumer Law (ACL) to understand or protect their rights. ·These rights should be clearly enunciated in the applicable legislation that in this case is the BCCM Act 1997. Section 4 (g) of that Act states as a secondary objective:

“to provide an appropriate level of consumer protection for owners and intending buyers of lots included in community titles schemes;”

The BCCM Act has since 1997 conveyed the clear understanding, that ‘residential’ lots are predominately places of long term residence and ‘accommodation’ lots are predominately places of transient or long term residence. ·Thus there has been no confusion as to the meaning of residential and accommodation for 17 years as demonstrated in the adjudication for Carrington Court quoted below. However, it now seems to become convenient, in the interests of developers and jeopardy of unit owners, to introduce doubt and confusion by taking text from the legislation that is unclear in its intent. Properly drafted text should read: “for long or short term accommodation or residential purposes.” ·The tone and chosen interpretation of the correspondence clearly indicates bias towards developers and caretakers obtaining 25 year contracts at the expense of unit owners.

Explanatory Notes

The explanatory notes to the Body Corporate and Community Management Bill 1997 provide elucidation to the intent of the ‘standard’ and ‘accommodation’ modules:

3.1.1 Regulatory Modules

Central to the objective of providing for flexible arrangements for community living·are the regulatory modules provided for in Clause 22. In the second reading·speech the Minister, referring to the flexibility proposed by the BCCM, stated:·The primary means of achieving this flexibility is through a legislative structure that comprises an umbrella act, supported by separate regulatory modules that are tailor-made for specific types of development.·It is intended that the legislation will commence with four modules in place…

To repeat the mistake of 1994 and formulate an act which could not separate a law governing 500 room resorts, from that pertaining to a “Six-Pack” or duplex apartment, would be useless.

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This approach is a departure from the current situation where, in the words of the Minister,·…all developments were dumped under one law without consideration of the differing needs of dwellers and investors in these developments.

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The Minister went on later in the second reading speech to outline the initial four proposed regulatory modules

The first module [emphasis added] being the standard module, will provide for significantly regulated management processes and is designed to accommodate predominantly owner occupied buildings. It may include developments which are a mix of permanent residential and holiday letting.

The second [emphasis added] is the accommodation module, which sets up management processes that are less regulated than the processes under the standard module. This module is intended for schemes that are used·predominantly as holiday letting or serviced apartment operation with the need for accommodation management.

Furthermore, Legislative Note 6/97 states: “The developer will choose the module best suited to the development type at the time of registering the plan. ·The body corporate can change to a different module by special resolution. This can be done by changing the Community Management Scheme which contains the applicable regulation module. (But does not mention that existing Management Rights contracts will remain in place) The existing schemes will convert to a standard module however the body corporate can by special resolution move to a more suitable module.”

The clear intent of the originating legislation was that the ‘ standard module’ would be the starting point, and only buildings that qualified for different modules could be proposed to the body corporate for change of module by vote by special · · · · · · · ·(75% majority) resolution.

These notes to the BCCM Bill 1997 accord with the adjudicators reasoning ·in Carrington Court and support the UOAQ position that only developments that are predominately ·accommodation (75% minimum) should be assigned to the ‘accommodation’ module.

Given the above, we would present the following extract from an Adjudication:

19th Avenue [2006] QBCCMCmr 503 (6 October 2006)·that considered the matters under review:

Carrington Court
“The final aspect I must consider in relation to the applicant’s entitlement to relief is the issue raised in Carrington Court in relation to meeting Section 3(2)(a) of the Accommodation Module. In that matter the adjudicator noted that:”

Carrington Court – Main Beach [2005] QBCCMCmr 710 (15 December 2005)·
“… … I do not consider that this Module could apply to a scheme where no more than a bare majority of lots are accommodation lots. In my view, if this was the intent of the legislation, then the word ‘majority’ would have been used rather than ‘predominantly’. I consider that the use of the word ‘predominantly’ suggests circumstances which are more substantial and the number of accommodation lots must prevail or have supremacy over non-accommodation lots. In my opinion, this prevalence is capable of being quantified by relating it to the other essential element to be satisfied to identify a different regulation module to apply to a scheme, which is the criteria used to count votes for the special resolution.

Consequently, the minimum requirement of ‘predominantly’ is the prevalence of accommodation lots which would satisfy the basic requirements of a special resolution and demonstrate supremacy or ascendancy. In quantifiable terms, this would be demonstrated if, given the number of accommodation lots in the scheme, a motion to adopt the Accommodation Module would be successful if the adoption of this Module was acceptable to a significant proportion of the owners of the accommodation lots, and the owners of the lots in the scheme which were not accommodation lots were largely powerless to prevent this outcome. Given the requirements for counting votes for a motion requiring a special resolution, I consider that the minimum number of accommodation lots must be 75% of the lots in the scheme for the section 3(2)(a) entry requirement to be satisfied. The existence of this number of accommodation lots allows the presentation of a motion to owners, and it is then a matter for all the owners to consider and determine whether to accept the module.”

Conclusion

The UOAQ represents the interests and rights of the owners of over 400,000 units in small and large schemes, residential and investment. ·The BCCM Act purports to represent unit owner’s interests and rights and provide consumer protection. ·Unfortunately the Act has been perverted for financial gain by minority vested interests numbering less than 1000 persons. ·The UOAQ is extremely concerned that the objectives of the BCCM Act are being irresponsibly re-interpreted to benefit developers and caretakers at the expense and detriment of unit owners, in monetary terms, quality of living and security of investment.

A clear example of this perversion of the BCCM Act is the misallocation of the ·’accommodation’ module to buildings that should, as provided by the BCCM Act and Introductory Notes delivered to the Parliament when the legislation was introduced in 1997, ·be assigned to the’ Standard’ module. This misallocation can only be concluded as intending to increase the value of return to the developer for the sale of the Management Rights, and provide the higher value 25 year contracts to caretakers.

The impact on residential unit owners is, degraded day to day quality of living and, for both residential and accommodation unit owners, increased caretaking costs. The unconscionable 25 year contracts unreasonably extend the dis-empowerment of owners to self-manage their property and escalate body corporate expense by annual ratchet clauses without the caretaking agreements being reasonably tested in the open market.

While these are very real and pressing concerns for all unit owners, the UOAQ is particularly concerned that the protections expected to be afforded by Government are not forthcoming. Government has a duty of care to all citizens to act fairly, democratically and without favour in the interpretation and application of legislation, and all citizens have a right, in a democratic society, to expect equal treatment.

Judging by the direction taken by the Government in this matter as represented by the correspondence to the UOAQ from the Office of the Attorney General, these expectations are not being met, and to the contrary, whatever limited consumer protection is currently afforded to unit owners in classification matters, is being eroded beyond any measure of reasonableness.

Recommendation

The UOAQ recommends that the Government review the allocation of ‘accommodation’ modules to new buildings, and issue a letter to all local councils clarifying the correct procedure for allocation of building management modules under the BCCM Act 1997.

‘All new buildings subject to the BCCM Act 1997 that require allocation of a management module must be allocated to the ‘standard module’ unless meeting the qualification requirements stipulated in another more suitable module.’

Wayne Stevens
President

 

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