Are you aware of these details when reading Body Corporate Minutes?
Apartment Specialists Podcast No: 116
How significant is a body corporate minutes to an apartment owner, buyer or seller? Andrew Murray shows some of the essential details that you need to look for in an AGM minutes. Find out more from this video.
Good day, Andrew Murray here for Apartment Specialists. Today, I will be talking about body corporate minutes or AGM minutes. What to look for if you are a purchaser or a vendor or an owner? What things you may want to look into further to make sure you're making either the right decision? if you're a purchaser or an owner, you should be aware of everything that's going on.
Here we can see the property is at 71-73 Bond Street. This is the Regency Apartments and the Annual General Meeting here. Firstly, you have to know who's present, then you have to elect the chairperson. That's something that's quite important. Here you can see, I am the chairperson of the Regency Apartments. Now, when you see something in the body corporate minutes. When it say "moved" here, then Derek Paine seconded it and also Christian Larsen. What that means is, you're in the AGM where there's all these people, and someone goes: "Yes, I pass that motion." It needs another person to go, "Yes, I agree," and everybody on the floor to go, "Okay." Then the motion is passed." What I've done is I've highlighted areas of note, which you should be aware of. Important notes and maybe that require as a purchaser to look into or an owner to maybe question.
Apologies and proxies : A proxy is where somebody can't be at the meeting at the AGM , so knowing they can't. They give their right or their vote to another owner. In this case, we had the building manager held a proxy for Peter Tindall of Unit 2D and apologies for Patricia of Unit 2E, for not being there from the complex. There are 41 apartments in the Regency, so that's pretty good. What you want to look here, is if there's a particular individual that's holding a lot of proxies. That may or may not be a good thing and you may want to look into that. That only means they have influence at meetings.
You have body corporate committee. It gets elected. As you can see, you've eight members here, including obviously myself, being Chairman. Anne Wood goes through minutes of the previous Annual General Meeting, as you can see here. They were moved and approved. Then the accounts and this is an important part. This is when you want to see the accounts. Here the financial accounts were gone through. At that AGM, go through them all virtually line by line. Everything that's spent and that includes income and expenditure. Making sure that's all in order. That was passed and seconded and that was all in order.
You also got the evaluation and insurance. Now, this is always talked about. Why? Because it's generally the biggest ticket item; the most expensive part of the budget. This is when you're talking about the valuation of the building. What are the terms of insurance and that is a lot. Something like car insurance. You can either have a higher value, which means you have to pay a higher excess and that kind of thing. It goes into the specifics of what the insurance covers, which is generally, for example, if there was flooding in the unit.
What would the insurance be? What would the insurance company pay out with regard to rent, if there's an earthquake? What would happen on common maintenance matters?
Now, this is very important. This is probably the most important part of the minutes. It is when you are seeing what issues are happening or if there are any issues. That kind of thing and here you can see the lift. First thing, th lift is an expensive thing. As soon as you see the lift, just think: "Okay, I need to look into this." It was noted here that, "The committee may wish to look at another brand of lift. The committee has previously agreed to engage Lionel Senior, who's a lift expert, to evaluate lift options. It was agreed to put aside $50,000 each year for the next two years, for the lift refurbishment/replacement."
It was been done in the long-term maintenance plan, but it is being moved forward a little bit. You want to look at that. You would look at the contingency fund or what it used to be called, the second fund. You can see that there is money in place and it is going to be raised by 2016. In this case, you definitely want to look into that. As soon as you see that, as a purchaser, you want more information, so ask the agent. Also, get through the body corporate or the owner, for more information on that matter.
You also want your lawyer to look through it. You then see an external repaint should be done around 2018-2019. Well, that is a good thing because it is going to raise values to the building. It is showing that the committee or the body corporate are focusing on how to raise values. Which means they must have enough money going on, otherwise they'd be looking to and producing it on issues. It could say, "External paint quality was seen as satisfactory, but the issue was the colour." Now, that's purely aesthetic, it's purely about raising the values. That is a very good sign in the body corporate.
As you can see in the budget. It's moving forward for the next 12 months and here you can see the largest ticket items being the building manager's fee. The insurance as I mentioned earlier and the long-term maintenance fund. It is good because nearly one of the most expensive parts is actually money being put away for the long-term maintenance plan. To enhance and to maintain the building. This is also a very good sign and so when you see that in those kind of figures.
You will be looking at the body corporate levy and seeing that is quite safe. You will also be looking at the long-term maintenance plan and obviously the lift. The whole painting of the building about to be done. Once that's done, it looks like you're going to have a lot more money in the kitty and maybe the levies will reduce. It would be a very good sign or put to other areas to enhance values. As you go through, there's not too much of note here. It is just talking about levies being paid. If they are not paid, then what does the body corporate do? All that kind of thing.
It is always very important, it talks about, "The long term maintenance plan, as prepared by Opus, was tabled at the meeting." As soon as you see that or "where is the long-term maintenance plan? You want to ask the agent, to go through the body corporate to get that long-term maintenance plan, so you can have a look at it. You see through here, not too much of note. Utility interest and ownership interest, then there's the body corporate operation rules. If there were changes, then what were that changes?
It is talking about the ability to remedy the availability to the body corporate. The body corporate shall be entitled to a cover from a defaulting owner. Any fees, costs or expenditure and these sort of things. Basically, giving with body corporate power to assess the damage and go straight to basically a debt agency to raise funds. If there's any damage caused by another owner. That was due to an owner that was now overseas and there was a leak from their shower; they didn't replace it in time and they kept on not attending to the matter. It says, "Tenants have damage to the unit below, and we should be able to go after them for the costs," which we have. I've just put my name in to make me feel good and "Christian Larsen thanked Andrew Murray for great work as Chairman." There you are, it has no relevance to what we're talking about at the moment.
Going through this is all about more issues being brought up. This is the building manager's report here. He is talking about the roof of the left pit lock's corroded and may need repainting or replacing. This is the very top of where the lift is. I noticed there was a little space there, which was slightly corroded. That either needed to be painted or replaced. What was done, it was just a little seal that was put on top. It wasn't a biggie. But if I were a purchaser or owner. I'd want to look into that a bit further because being new, if that was a bigger problem than it sounded like.
Another matter that was brought up was an issue with the sound of banging pipes between units I and H. Plumbing is very expensive, so you might want to look into that. At the end of the day, it was not what was called water hammer. I'd never heard of this before and that's when your pipes bang because of the pressure. That was all sorted out, so it wasn't a biggie. But as a purchaser and owner, you may want to look into that further. You can see what was at the end of the meeting. It was obviously closed at 7:30 PM and the points to be actioned was, "BCA to follow up with Lionel Senior, who's that lift expert- to obtain an evaluation of the lift." That goes to you, as you can see that money's being raised to do that by 2016.
Which is online with the long-term maintenance plan, so that all fits and "The BCA to raise an extra $25,000 for two consecutive years." This tells you that the body corporate levy is probably going to increase slightly and you're probably going to look at that. Ask your real estate agent to give you information on the body corporate and what kind of increase that would be. It only ended up being a couple of hundred dollars, but as a purchaser, you'd want to be aware of that.
Anyway, that is in a mouthful but it gives you an example of when you are reading through those body corporate minutes: what to look out for, what is happening and as things come up when to ask questions, when to look further? Not just go, "Okay, I've read the minutes. I'm fine." But you need to address them and do your all your investigations to make sure that body corporate of the property that you're looking at buying into is a healthy one.