What is a Management Corporation?

Welcome to Community Living

If you own a property with a Management Corporation you are part of the growing trend towards community living where you retain the benefits of privacy and lifestyle without the work and responsibilities of private property. Most of these community living properties have a Management Corporation which looks after caretaking, grounds maintenance and provides peace of mind on matters of insurance and the management of common property. When managed by a professional Management Corporation manager, your Management Corporation will provide maximum value and service to you.

What is a Management Corporation?

The process of subdivision of a property for multi-unit development results in the need for a "body" to manage common ownership aspects of the property. On registration of a Unit Title, a "Management Corporation" becomes incorporated. Management Corporation are regulated by legislation that has undergone many revisions both to deal with the changing property ownership trends and to adjust to the continually evolving body of knowledge and experience gained from regulating the industry. Management Corporation offer members more affordable property with reduced shared costs of property maintenance. There are different types of Management Corporation including apartment blocks, attached townhouses, double-storey villa units or mixed-use developments (residential and commercial).

As an owner, what part do I play?

If you are the owner of a unit in a property that has a Management Corporation, you are a "member" of that Management Corporation. When a lot is sold, the new owner becomes a member. A tenant paying rent to an owner is not a member of the Management Corporation and does not generally interact with the Management Corporation. The Management Corporation is responsible for a range of compliance, financial, insurance and essential services matters. These responsibilities are usually delegated to a professional manager who also looks after the insurance, manages the caretaking and handles the various Management Corporation administrative processes. An important part of being a member of a Management Corporation is that you must adhere to some guidelines to ensure that the group of people can live harmoniously together and that the buildings are maintained in an attractive and consistent way. This usually means that changes to the outside of buildings such as painting or the installation of air conditioners, satellite dishes, awnings etc must be done in collaboration with other members.

What is common property?

Most Management Corporation have "common property". This usually includes the driveway, facilities such as a laundry, gym or pool and also the open space on the property. This common property must be managed and have liability insurance so that it serves only the purposes intended and doesn’t expose the Management Corporation to unnecessary legal risks. The Management Corporation Regulations contain a set of "standard rules" - it is essential that members abide by these rules. Key aspects of the rules include not using the common property to the detriment of other members or making any noise which might disturb other members and not parking on the common property.

Insurance – the critical aspect of Management Corporation management

The Management Corporation normally pays for one insurance policy that covers full replacement insurance for all the buildings and adequate public liability insurance for the common property. When you own a unit on a property with a Management Corporation, you need to be absolutely certain that all building and liability risks are covered for the property – particularly when walls, facilities and services are shared. In the event of an insurance claim there is only one company to deal with and no doubt as to who will pay a claim. As a member of a Management Corporation you do not have to have a separate policy for building insurance if the Management Corporation has a policy. This arrangement is normally more economical than a member buying their own insurance and you are assured of adequate public liability insurance for the common property. Having adequate public liability cover for the common property is critical as a wide range of people have access to it and accidents often result in significant claims – not to mention the legal expenses. Members are still required to have insurance for their own contents and also public liability cover for car spaces and for visitors on their property.

How does the Management Corporation operate?

Management Corporations managed by Ace Body Corporate Management have an individual bank account for each Management Corporation. The strata agent is normally the sole signatory to that account under delegation from the members of the Management Corporation. An annual general meeting is held at the beginning of each financial year of the Management Corporation. This meeting sets the budget and addresses any concerns of the members. This sets the "contributions" which the members have to pay each year. The amount contributed by each member is worked out based on a table included in the plan. This table is referred to as "lot liability". Other meetings may be held if required by the members. The main component of the budget is usually the insurance premium that covers the buildings and public liability risks. Other components are the caretaking, grounds maintenance, repairs, common lighting , maintenance of essential services and the manager’s fees. Management Corporation vary in the extent to which funds are accumulated in Management Corporation account. Many operate on a small margin over the normal annual operating costs while others plan ahead and accumulate some funds for major works such as painting, guttering replacements, fencing, paving etc. Should a major unbudgeted cost occur without sufficient funds in the bank, it is normal practice to establish a special levy to pay for that particular works.

Where does the Management Corporation spend its funds?

The Management Corporation is responsible for ensuring full reinstatement insurance is in place for buildings together with insurance for public liability. It is also responsible for the maintenance of services that connect into the building and to ensure there is adequate public lighting and for the general upkeep of the exterior of the buildings and the common grounds. It is responsible for the upkeep of all common items such as car and pedestrian security gates, intercoms and public lighting

What is covered under the building insurance?

The Management Corporation’s insurance covers damage and consequential damage to the building itself and all fixtures within the units. The insurance is for reinstatement of buildings does not cover normal wear and tear, but it does cover legal liability on the common property. Damage to carpets within a unit are specifically excluded. It is highly recommended that Landlord’s insurance be taken out to cover carpets and legal liability within tenanted units and car park lots. Owners and tenants must have their own contents and public liability insurance for their own units.

What does the Management Corporation manager do?

Provides continuity of management processes and record keeping for the Management Corporation. Without a professional manager, problems can arise with frequent changes in voluntary members who undertake the duties, resulting in different standards of record keeping and potentially inadequate or missing records.

Ensures management corporation legislative matters are being adhered to

Resolves disputes and provides an objective approach to dealing with members’ concerns or disputes. While disputes are rare, some situations can cause conflict; including tenanted units, parking, noise, adjacent developments etc. An objective, professional Management Corporation manager can assist in these situations.

Looks after Management Corporation administration and handles day-to-day paperwork and requests from solicitors etc. Organises annual and special general meetings including minutes, facilitates setting of budgets, collects members’ contributions and maintains a complete set of financial statements.

Issuing leases and licences where necessary.

Administers insurance and deals with brokers and directly with insurance companies as necessary to obtain the most effective and economical coverage for the Management Corporation. Submits claims, schedules repair work and processes claims paperwork. Provides advice and options to members in relation to public liability issues. This ensures that necessary processes are undertaken for insurance cover and record keeping against possible future claims for public liability.

Administers the maintenance of Management Corporation facilities and essential services – obtains quotes and schedules works as required to ensure that the Management Corporation is maintained in good condition and presents no dangers to visitors or members. Schedules essential services reports as necessary and reviews compliance with current legislation.

Schedules grounds maintenance and liaise caretakers, gardeners and tradespersons to ensure that grounds are maintained to members’ requirements.

For more information, please contact us.