Review of the Unit Titles Act 1972 - Discussion Document, May 2006
<< Previous | Contents | Next >>
5.3 Treating Expenses Fairly
Many people feel that the share of insurance premiums and body corporate expenses that owners of some units pay is unfair and that a better system is needed.
The proposals in this section cover:
- (a) how unit entitlement will be worked out
- (b) how insurance premiums will be divided.
(a) Unit entitlement
Issues
The Act is not very flexible about the concept of unit entitlement. Unit entitlement determines the proportion of body corporate expenses that an individual unit owner pays. Unit entitlement is based on the relative value of a unit. This usually works well, but sometimes results in unfair situations.
| The concept of unit entitlement will have two parts. |
| The first part will define a unit owner' share of the property and weighted voting rights. The first part will be based on relative value. |
The second part will be for calculating: - how much a unit owner pays the body corporate for managing and maintaining the common property
- the unit owner's share of any surplus money that is distributed.
The second part will be based on how much a unit owner uses the shared facilities and services4. Either the owners will need to agree on this or the body corporate will vote on it. The default position will be unit owner's share based on relative value. The dispute resolution process will protect minority unit owners and anyone affected by voluntary agreements. |
| The body corporate can vote to review the unit entitlement calculation at any time. The part of the unit entitlement calculation that is based on relative value can only be determined by a registered valuer. Anyone who disagrees with the review can go through the dispute resolution process. |
Effect of proposalsAn owner's share of expenses will be more closely tied in with their use of the facilities.
There should be fewer disputes because bodies corporate will be able to reassess unit entitlements from time to time to make sure expenses are being shared fairly.
| Do you agree with the proposals for unit entitlements? If you do, is there anything else we should consider? If you disagree, please explain why. |
| What are the advantages and disadvantages of the proposals for you? |
| Will the proposals have any financial implications for you? If so, please explain, giving as much information as you can. |
(b) Insurance
Issues
The Act is not flexible about insurance premiums. The share that an individual unit owner pays is based on relative value, and so an owner of a unit with a high-risk use, for example a radiator repair workshop, may not pay a higher share of the premium or any excess.
All unit developments must have full replacement insurance, but this isn't always possible. This means that some bodies corporate and unit owners are disobeying the law.
We have defined the words in bold in the glossary.
| The share of insurance premiums and excess will be based on individual circumstances. For example, the owner of a unit with a higher-risk use will pay a higher share of the premium and any excess. This will be included in the second part of the unit entitlement. |
| Indemnity insurance cover will be allowed if full replacement insurance is not available, for example for heritage buildings. |
Effect of proposal
Body corporate administration will be much more flexible. Each body corporate will be able to make its own insurance choices. The sharing of insurance premiums will be fairer.
Flexible insurance requirements will help bodies corporate to be more realistic, efficient and cost-effective.
| Do you agree with the proposals for insurance? If you do, is there anything else we should consider? If you disagree, please explain why. |
| What are the advantages and disadvantages of the proposals for you? |
| Will the proposals have any financial implications for you? If so, please explain, giving as much information as you can. |
<< Previous | Contents | Next >>