The Body Corporate and Community Management Act 1997 (Qld) (“BCCM”) was amended by the Body Corporate and Community Management and Other Legislation Amendment Act 2023 (Qld) (“Amending Act”), which commenced on 1 May 2024 by proclamation.[1] The Amending Act introduced a number of significant new provisions to the BCCM. This two-part article series provides a brief overview, examination and discussion of some of four major changes consisting of termination of community title schemes, vehicle towing, pet approvals, and use of smoking products and what these potentially mean for practitioners and their clients. Part 1 focuses on termination of community title schemes.

Termination of community titles schemes

Prior to amendment, the BCCM provided two pathways for terminating a community titles scheme (CTS) being:

• when authorised by resolution without dissent of the body corporate, supported by an agreement between all registered proprietors and lessees under registrable or short leases, about termination issues;

• by order of the District Court.

Following continued concern that the statutory framework restricted potential redevelopment of CTSs, Chapter 2, Part 9 of the BCCM was significantly amended to provide several pathways for a CTS to be terminated.

The new Division 2 maintains the mechanism for terminating a CTS by resolution without dissent in the same terms as the pre-amendment statute.[2]

However, a new section 79 expands on the process for terminating a CTS by application for a court order. The provision maintains that the body corporate, a lot owner or an administrator may make such an application, and that the court should only make the order if it decides it is just and equitable to make a termination order.[3] The new sub-section 79(2) requires the court to consider a number of factors before it may make a termination order including:

• the percentage of lot owners voting in favour of termination (if a vote was held);

• the aggregate market value of the common property and individual lots compared to the market value of the scheme as a whole (if available);

• the economic and social effects of the termination on each lot owner;

• the economic and social effects of the termination on, if applicable—

a.    a person who has a leasehold interest in the lot, or other scheme land, created by a lease or sublease for a term of 6 months or more;

b.   the caretaking service contractor; and

c.   any other person who has a contractual or other arrangement with the body corporate if the court is satisfied the person would be adversely affected by the termination;

• any other matter the court considers relevant.

Sub-section 79(3) further enlarges the court’s previously existing powers by expressly providing that the court may:

• have regard to the views of:[4]

a.   all registered proprietors of scheme land;

b.   a lessee under a registrable or short lease to which scheme land is subject;

c.   a local government in whose local government area scheme land is located;

d.   if any scheme land is in a priority development area—MEDQ;

• appoint an administrator and give the administrator authority to put the order into effect in the way directed by the court (previously sub-section 79(5));[5]

• make any order, to the extent necessary for the effective termination of the scheme, about termination issues (previously sub-section 79(3)).[6]

A newly inserted sub-section 79(4) also specifies that the court may order the appointment of a trustee for the sale or physical division of the property if it is necessary or desirable, or make an order removing a trustee.

The most dramatic amendment to Chapter 2, Part 9 is the new Division 4 that provides for the termination of a CTS for economic reasons. For the division to operate, a CTS (other than a retirement village scheme) must prepare a termination plan and pass a motion for an economic reasons resolution.[7]

“Economic reasons for termination” is defined in section 81A of the amended BCCM and includes the following:

• that it is not economically viable for the scheme to continue (if all of the lots are used for a commercial purpose);

• that on the day a pre-termination report is given to lot owners, or within 5 years from that day, it is not, or will not be, economically viable for the body corporate to carry out repairs and maintenance to any property or assets it must maintain in good or structurally sound condition.

“Termination Plan” is defined in the new section 81B and is a document prepared by the body corporate that must provide that each lot owner and/or leaseholder must receive the minimum compensation amount (calculated pursuant to the formula in section 81B(4)) upon sale[8] and additionally outlines the following:

• the arrangements necessary to ensure the sale of the scheme to a single entity, including the name of proposed purchasing entity (if known), proposed sale price and settlement day of contract, and if by auction, marketing proposal for sale, minimum reserve price and day of auction or tender;[9]

• the proposed day on which the lots owners are to provide vacant possession of their lots;[10]

• the costs and expenses to be deducted from the sale price;[11]

• how assets and liabilities of the body corporate and proceeds of sale of the scheme will be distributed for each lot with the respective market value of a lot principle, which provides that the market value of a lot in a CTS is the value expressed as a percentage of the sum of the market value of all of the lots in the scheme;[12]

• an estimate of the amount to which each lot owner will be entitled on the sale of the scheme;[13]

• how the interests of a lessee of a lot or other scheme land or a person who has a contractual arrangement with the body corporate, that would, but for the sale of the scheme, extend beyond the proposed sale will, on the sale of the scheme, be compensated by the lessor;[14]

• the arrangements requiring the facilitator to, at least 2 months before the day of settlement for the contract, give written notice to each lessee of a lot or other scheme land stating, inter alia, the day of settlement and the day on which the lot owner is to provide vacant possession.[15]

Before a body corporate considers a motion to decide an economic reasons resolution, it must prepare a pre-termination report.[16] That report should include at least the following information:

• market valuation of each lot and scheme land;[17]

• estimated value and nature of body corporate assets and liabilities;[18]

• information about whether economic reasons mentioned in sub-sections 81A(a) or 81A(b) exist.[19]

The body corporate must not appoint a person to prepare the pre-termination report if it knows or reasonably suspects that person may have a conflict of interest.[20] Any person who is appointed and has a conflict of interest must disclose the nature of the conflict to the body corporate and not take any further action unless authorised by the body corporate.[21]

Once a pre-termination report has been prepared, the body corporate must give each lot owner a copy of that report at least 90 days before it holds a general meeting to consider a motion about whether economic reasons for termination exist.[22] The motion must expressly state the economic reasons for termination by reference to the pre-termination report.[23] The body corporate may then pass an economic reasons resolution by majority at the general meeting,[24] and subsequently, it may also pass a termination resolution plan by majority.[25]

If the body corporate passes a termination plan resolution, within 14 days it must give notice in the approved form to:

• each lot owner;

• each person whose leasehold interest in a lot or scheme land is created by a lease or sublease for a term of at least 6 months;

• each registered mortgagee of a lot;

• the caretaking service contractor;

• the letting agent.[26]

If a lot owner considers an economic reasons resolution should not have been passed, that aggrieved party may, within 90 days of receiving written notice of the passing of a termination plan resolution, apply for an order of a specialist adjudicator to resolve the dispute.[27] Conversely, where a lot owner considers an economic reasons resolution should have passed, that aggrieved party may, within 90 days of the body corporate considering that resolution, apply for an order of a specialist adjudicator to resolve the dispute.[28] In either circumstance, where an application is made for specialist adjudication, the body corporate must not consider a motion to pass a termination resolution until the dispute is resolved.[29] Multiple applications for adjudication about the same motion to pass an economic reasons resolution may be consolidated in to a single proceeding.[30]

A body corporate must give each lot owner a copy of the termination plan at least 120 days before it holds a general meeting to consider a motion for a termination resolution.[31] After complying with that requirement, the body corporate may call a general meeting to consider the termination resolution and must not consider any other motion proposing an alternative way to terminate the scheme.[32] A termination resolution will only pass where 75% or more of all lot owners vote in favour of the motion.[33] Each lot may cast one vote, and votes may not be exercised by proxy.[34]

After a motion for termination resolution is considered, the body corporate must give notice in the approved form within 2 weeks of the decision, including whether the motion is passed, to:

• Each lot owner;

• each person whose leasehold interest in a lot or scheme land is created by a lease or sublease for a term of at least 6 months;

• each registered mortgagee of a lot;

• the caretaking service contractor;

• the letting agent.[35]

If the motion is passed, the body corporate must give notice in the approved form (at the time the notice in paragraph immediately above is given), including that the motion has passed, to:

• the registrar;

• the relevant local government;

• MEDQ (if applicable);

• the proposed new owner of the scheme (if known).[36]

Section 81M provides for the appointment of a facilitator to assist the body corporate to execute the termination plan.

A body corporate may apply to the court for the termination plan to be implemented if a resolution was considered but not passed, or seek orders that the plan be varied.[37] A lot owner may apply to the court for the termination plan to be implemented if a resolution was considered but not passed, or if a resolution was passed, apply for orders that it should not have been passed, it should not be implemented, or should be varied.[38] Leaseholders (with an interest for a term of at least 6 months), the caretaking service contractor, and the letting agent may only apply to the court for an order for the termination plan to varied.[39] A facilitator may apply for the following:

• termination of a lease (on a day not earlier than settlement for the contract for the sale of the CTS);

• require an occupier or lessee of a lot or scheme land to vacate;

• require each lot be sold under the termination plan.[40]

Each of the above applications must be made within 90 days after the body corporate gives notice of a termination decision resolution to the relevant person or another period allowed by the court.[41] A body corporate must not take any action to implement a termination plan (if one was passed) if an application is made to the court by any person.[42] Multiple applications about the same termination plan may be consolidated in to a single proceeding.[43]

Where a lot owner applies to the court for an order for a termination plan to be implemented in circumstances where a termination resolution was considered but did not pass, the lot owner bears the onus of proving it is just and equitable for that order to be made.[44] Other applications require the body corporate to pay the reasonable costs incurred by the proceeding and the body corporate bears the onus of proving it is just and reasonable for the termination plan to be implemented.[45]

The court has broad powers when determining an application for orders relating to a termination plan, including being able to make any order that it considers is just and equitable,[46] as well as being expressly empowered to appoint or remove trustees for the sale or division of property.[47] In determining an application, the court must have regard to a number of factors including:

• the existence of economic reasons for termination in the pre-termination report;

• the percentage of lot owners voting in favour of the termination plan;

• the aggregate market value of the common property and individual lots compared to the market value of the scheme as a whole;

• economic and social effects of termination on each lot owner, leaseholder, caretaking service contractor, and person with a contractual relationship with the body corporate who might be adversely affected;

• the terms of the termination plan.[48]

When a CTS is terminated, the body corporate is also dissolved.[49] The dissolution must also be recorded under the Land Title Act 1994 (Qld).[50] Upon dissolution, the former lot owners are entitled to the body corporate assets in proportionate shares that reflect their interests prior to termination, and the liabilities of the body corporate are vested jointly and severally in the former owners.[51] A person may seek orders from the court for custody, management and distribution of body corporate assets.[52] Termination of a CTS does not affect liability for a charge, levy, rate or tax that had accrued on a lot before termination.[53]

Footnotes

[1] Proclamation—Body Corporate and Community Management and Other Legislation Amendment Act 2023 (commencing remaining provisions) (Qld).

[2] Body Corporate and Community Management Act 1997 (Qld) s 78.

[3] Ibid s 79 (1).

[4] Ibid s 79(3)(a).

[5] Ibid s 79(3(b).

[6] Ibid s 79(3)(c).

[7] Ibid s 80.

[8] Ibid s 81B(2).

[9] Ibid s 81B(1)(a).

[10] Ibid s 81B(1)(b).

[11] Ibid s 81B(1)(c).

[12] Ibid ss 81B(1)(d); 81B(5).

[13] Ibid s 81B(1)(e).

[14] Ibid ss 81B(1)(f); 81B(1)(h).

[15] Ibid s 81B(1)(g).

[16] Ibid s 81C(1).

[17] Ibid ss 81C(2)(a), 81C(2)(b).

[18] Ibid s 81C(2)(c).

[19] Ibid ss 81C(2)(d), 81C(2)(e).

[20] Ibid s 81C(3).

[21] Ibid s 81C(4).

[22] Ibid ss 81D(1), 81D(2).

[23] Ibid s 81D(3).

[24] Ibid s 81D(4).

[25] Ibid s 81E.

[26] Ibid s 81F.

[27] Ibid ss 81G(1)(a), 81G(2), 81G(4)(a).

[28] Ibid ss 81G(1)(b), 81G(2), 81G(4)(b).

[29] Ibid s 81G(3).

[30] Ibid s 81H.

[31] Ibid s 81J.

[32] Ibid ss 81K(1) – 81K(3).

[33] Ibid s 81K(4).

[34] Ibid ss 81K(5), 81K(6).

[35] Ibid ss 81L(1), 81L(2).

[36] Ibid s 81K(3).

[37] Ibid ss 81N(1), 81N(3).

[38] Ibid ss 81N(1), 81N(4).

[39] Ibid ss 81N(1), 81N(5).

[40] Ibid ss 81N(1); 81N(6).

[41] Ibid s 81N(2).

[42] Ibid s 81O.

[43] Ibid s 81P.

[44] Ibid s 81Q(1).

[45] Ibid s 81Q(2).

[46] Ibid s 81R(1).

[47] Ibid s 81R(2).

[48] Ibid s 81R(3).

[49] Ibid s 81S(1).

[50] Ibid s 81T.

[51] Ibid s 81S(2).

[52] Ibid s 81S(5).

[53] Ibid s 81U(1).

References & Further Reading

A.     Legislation

Body Corporate and Community Management Act 1997 (Qld).

Body Corporate and Community Management and Other Legislation Amendment Act 2023 (Qld)

Residential Tenancies and Rooming Accommodation and Other Legislation Amendment Act 2024 (Qld)

B.    Other

Body Corporate and Community Management and Other Legislation Amendment Bill 2023.

Body Corporate and Community Management and Other Legislation Amendment Bill 2023 – Explanatory Notes.

Proclamation—Body Corporate and Community Management and Other Legislation Amendment Act 2023 (commencing remaining provisions) (Qld)

Liability limited by a scheme approved under professional standards legislation.