You can view the original letter here

The Honourable Jarrod Bleilie MP
Attorney-General and Minister for Justice
GPO Box 149
Brisbane
Queensland 4001

4 November 2014

 

Dear Minister

Correspondence and Meaning of BCCM Regulation Modules

The Executive Committee of the Unit Owners Association of Queensland Incorporated (UOAQ)  is privy to correspondence between the Association – yourself and vice versa. As a member of that committee,  I personally am becoming increasingly concerned at the tone and level of correspondence emanating from your Office under your signature. Having spent most of my working life in the Australian Defense Force, I am well aware that as a Minister, a large proportion of you correspondence is drafted by your staff for your signature.

Mr Wayne Stevens as President of the UOAQ is in a similar position where correspondence is dispatched under his signature, but not necessarily drafted by himself. The consistent and persistent reference to “Mr Stevens” as proposer of all that is at fault in the Queensland unit industry, gives a false impression and conveys the perception of ‘play the man’ rather than concentrating on the subject.   All correspondence dispatched under the UOAQ letterhead is approved by the Executive Committee before dispatch and in a vast majority of cases is derived from correspondence received from financial members, or subjects raised on the UOAQ  ‘Help Line’.  Consequently the subjects of UOAQ correspondence represent the problems being experienced by a vast majority of Queensland unit owners that the Executive Committee consider warrant the attention of your Department.

The Executive Committee of the UOAQ is comprised of two retired solicitors, two retired accountants, one retired school teacher, one working electronics technician and one retired RAAF Engineer Officer, who in 1980/81 worked in the facilities area of the Department of Defence.  The entire Executive Committee pay their own expenses and work in a voluntary capacity in the interests of Queensland unit owners.  Some members of the Executive Committee have extracted their buildings from the control of the Body Corporate and Community Management Act 1997 (BCCMA) and have employed building caretakers on three year contracts. Thus there is no self interest in their endeavours to help others.

Turning to the application of the Accommodation Module.  In 1997 on introduction of the BCCMA, all existing buildings were placed in the Standard Module unless they more suitably qualified for another module. The UOAQ understands that the same qualification criteria apply to all new buildings to this time. Thus the starting point is the Standard Module.  BCCMA s.21 specifies the criteria required to satisfy the assignment of a module, other than the Standard Module,  to a scheme.

21 Meaning of regulation module

(3) A regulation module does not apply to a community titles scheme (scheme A), despite anything in the community management statement, if–

  • (a) the regulation module states circumstances that must exist for a community titles scheme if the regulation module is to apply to the scheme; and
  • (b) the circumstances do not exist for scheme A.

(4) A regulation module applies to a community titles scheme if–

  • (a) the regulation module states that it is the regulation module that applies to a community titles scheme if no other regulation module applies to it; and
  • (b) no other regulation module applies to the scheme including, for example, because the community management statement for the scheme-
    (i) fails to identify a regulation module as the regulation module applying to the scheme; or
    (ii) identifies as the regulation module applying to the scheme a regulation module that, under subsection (3), does not apply to the scheme.

The Body Corporate and Community Management (Accommodation Module) Regulation 2008 [BCCM (AM)] s.3 specifies the criteria for assignment of the Accommodation Module.

“3. Application of this regulation – Act, s21

            (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 predominately accommodation lots; or
            (b) both of the following must apply for the scheme –
                                    (i) the lots included in the scheme are not predominately accommodation lots;
                                    (ii) when the first community management statement……………………………….. identifying this regulation as the regulation module applying to the scheme was recorded, the lotsincluded in the scheme were intended to be predominately accommodation lots:”

Editor’s note – For example, although the lots were offered for sale as accommodation lots, the buyers might have chosen not to use them as accommodation lots.

The Editor of  BCCM (AM) s. 3, as displayed above, did not envisage circumstances where a residential building may be used for accommodation purposes because this would have been objectionable to the requirements of the BCA. The Editor depicted an accommodation building being used for residential purposes, as allowed by legislation.

The nebulous qualification of the Accommodation Regulation Module is: “were intended to be“. To give meaning to the thought process of the developer, the Development Application (DA) becomes relevant. As part of the DA the developer is required to disclose the intended use of the building. This intended use determines the National Construction Code (NCC) classification that in turn determines the construction standards to achieve the goals of the Building Code Australia (BCA):  “to enable the maintenance of acceptable standards of structural sufficiency, safety, health and amenity for the benefit of the community now and in the future.” If the intent of the developer is to construct a building with predominately accommodation lots, then the building must be classified as class 3. This classification allows both short and long term accommodation / residential use under the Accommodation Module.   If the intent of the developer is to construct a predominantly residential building, then the building must be classified as class 2 and placed under the Standard Module.  Class 2 buildings have, since and before, the introduction of the BCA in 1990, been intended for residential use only.

This understanding then leads to explanation of BCCM (AM) s. 3 (3) (a):

“In this section – 

accommodation lot means a lot that is either or both of the following-

(a) the subject of a lease or letting for accommodation for long or short term residential purposes,……..”

(b)………………..

The logical conclusion from the above paragraph is that a developer cannot have split intent under the Regulation. Either he has the intent to develop a class 2 residential building to be placed under the Standard Module, or he has the intent to develop a class 3 accommodation building to be placed under the Accommodation Module. A developer cannot advertise a building as ‘residential’ and then place it in the accommodation module without perpetrating a fraud on unit purchasers.

In reality developers have one intent……. and that is to sell their development and achieve the maximum profit from sale of 25 year Management Rights contracts.  This clearly is the intent of the developer of the V77 building previously drawn to the attention of your Department.  Also with Palm Springs Residences CTS29467 where the scenario documented by Griffith University1 was experienced first- hand by the writer.

In summary, developers can classify an accommodation building as class 3, or a residential building as class 2. The class 3 building can be allocated to the Accommodation Module and the class 2 building to the Standard Module. The only exception to this rule is if a class 3 accommodation building is, after completion, occupied by “predominantly” long term renters. This accords with the “Editor’s note – ” to BCCM (AM) s. 3 where the only scenario envisaged by the editor was an accommodation building being occupied as residential – that is provided in the legislation at (AM) s.3(3)(a).

The second operative word in this Regulation is: “predominately”. Predominately is given meaning by Carrington Court – Main Beach [2005] QBCCMCmr 710 (15 December 2005). To avoid confusion (as your Office appears to be reluctant to acknowledge the existence of the quoted reference) the relevant part of the Adjudicators determination is quoted:

“The word ‘predominantly’ is not defined in the Act or the regulation module. The ordinary meaning of ‘predominantly’ is defined as “in a predominant manner or degree; preponderatingly, chiefly” [13]. ‘Predominant’ is defined as “Having supremacy or ascendancy over others…Constituting the main or strongest element; prevailing”[14]. I consider that the word ‘predominantly’ must be given its plain meaning and that the meaning should be given to the word “that will be best achieve the purpose of the Act”[15].

The Act is supported by 4 distinct regulation modules designed for specific types of schemes and which make provision for varying levels of regulation. In my view, the introduction of these regulation modules provides flexible administrative and management arrangements for schemes and provides bodies corporate with the flexibility to accommodate changing circumstances with the schemes[16]. However, it is also an objective of the Act to provide an appropriate level of consumer protection for owners and intending buyers of lots in schemes. In my view, the prescription of specific circumstances which must exist in the scheme before a module can apply to the scheme and the extensive administrative controls relating to a body corporate’s consideration of the adoption of a regulation module[17]clearly indicates intent to strictly regulate any consideration to change regulation modules and underlines the legislative objective to provide security or protection to owners and intending buyers. (emphasis added)

Therefore, given the criteria ofsection 3(2)(a)of the Accommodation Module, 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 criterion 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[18], I consider that the minimum number of accommodation lots must be 75% of the lots in the scheme for thesection 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.”

Albeit that the BCCM Commissioner’s Adjudicators do not comprise a ‘Court of Record’. Also the Adjudicator should have used the Government standard reference;  the Macquarie Dictionary rather than the New Shorter Oxford English Dictionary.

[13]The New Shorter Oxford English Dictionary, 1993 edition, p 2329
[14]The New Shorter Oxford English Dictionary, 1993 edition, p 2329
[15]Section 14A(1),Acts Interpretation Act 1954.
[16]Section 4, Act.
[17]Section 62(3), Act;Section 41(4), section 42C(1)(d) and (5), section 74(3)(d)(ii), Standard Module.
[18]Section 106, Act.

The self-evident reality is that, Government Departments become implicated in the fraud (and corruption by inaction) when they knowingly ignore breaches of legislation. The Queensland public is entitled to expect that their elected representatives will enforce legislation. The department responsible for legislation is usually responsible for enforcing the legislation or having it enforced by an enforcement authority. Citizens, or citizen’s representatives, should not be required to approach multiple Government Departments requesting satisfaction on matters of concern.

The final matter from your letter of 23 September 2014, that must be elucidated, is the number of development schemes being allocated to each Regulation Module. The UOAQ agrees with the table presented in your referenced letter.  However, that table does not reflect the statistic, also provided by the Land Registry of the Department of Natural Resources and Mines, that in 2014 the rate of new registrations of Accommodation Module to Standard Module was 1 to 3 compared to a historic ratio of 1 to 9.  Clearly indicating that developers are ignoring the legislation and allocating schemes to the Accommodation Module to gain personal financial benefit from the sale of 25 year Management Rights.

Your correspondence with the UOAQ is greatly appreciated by the Executive Committee.

 

Sincerely,

Wing Commander Gregory J. Carroll (Retd)

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