This factsheet provides general info body corporate compliance requirements.
What is compliance in a body corporate context?
Ensuring the body corporate and property it is responsible for is conforming with all relevant laws, legislation, standards, and regulations.
Generally, what does body corporate compliance legislation include?
The primary areas of compliance relevant to the body corporate are:
- Fire Safety
- Work Health & Safety
- Insurance Valuations
- Sinking Fund Forecasts
Work Health and Safety (WHS) Compliance
Under Work Health & Safety legislation, Bodies Corporate have a duty of care as a ‘Person Undertaking a Business or Undertaking’ (PCBU).
This duty applies to all owners and managers and means that they must take reasonable action to ensure that anyone, including owners, service providers, tenants, visitors and even trespassers who come onto the common property, are not injured.
How do we meet our WHS obligations?
The first steps to mitigating the risks of injury and liability risk on the common property is keeping the property in good repair, well-serviced and regularly inspected.
Hazards must be assessed, and control measures implemented, to minimise or eliminate risks to the health and safety of personnel. Control measures must be monitored for effectiveness on a regular basis.
To make sure you are meeting your safety obligations, the body corporate should engage a qualified and experienced Safety Specialist. They will conduct a thorough on-the-ground inspection of common property and identify compliance issues and risks of liability exposure to the Body Corporate. Furthermore, they will ensure that all required documentation is accounted for.
Fire Safety Compliance
Bodies corporate in QLD are legally obligated to meet the requirements of the QLD Building Fire Safety Regulation 2008 (link).
Under the Building Fire Safety Regulation 2008 all buildings have annual fire compliance obligations. All buildings classified as class 1B to 9 must comply every year (only stand-alone houses and townhouses are exempt).
What are the objectives of the legislation?
- To ensure persons can evacuate the building safely and quickly in the event of an emergency.
- To ensure prescribed Fire Safety Installations for the building are maintained.
How do we meet our Fire Safety obligations?
All Bodies Corporate must ensure the following requirements are met ANNUALLY:
- Maintain all prescribed Fire Safety Installations (FSI)
- Complete an occupier’s statement annually
- Check defined evacuation route(s) are clear and safe and document it
- Review the fire and safety evacuation plan annually
- Appoint and re-train your Responsible Persons annually and keep records of this
- Have an evacuation practice at least annually
All the above must be completed and records kept as evidence of compliance.
What are the penalties for non-compliance?
Penalties range from $8,250 for every single offence of non compliance, and up to $165,000 and three years jail for an offence that leads to a fire causing multiple deaths.
The (other) costs of non-compliance?
Aside from the heavy financial penalties imposed by Building Fire Safety Regulations, committees should also consider the other implications for non-compliance like:
- Requiring a special levy to pay for the fine as it would not be budgeted for
- Insurance may not cover fines imposed
- Insurers may decide not to renew the insurance policy or set a higher premium to take account of any perceived increased risk.
If a fire occurred and it was evident that the fire safety systems were not maintained, the body corporate may be open to liability, and the insurance may be voided for failing to comply with fire safety legislation, leaving owners to pay for the cost of rectification works.
How do we meet our Fire Safety obligations?
To make sure you are meeting your fire safety obligations, the body corporate should engage a qualified and experienced Fire Safety Specialist annually.
A qualified and experienced Fire Safety specialist will come to the property and carry out a comprehensive inspection of documentation and Fire Safety Installations required to be on-site under legislation. They will also conduct a thorough walk-around of common property to identify areas of risk exposure to the Body Corporate.
Sinking Fund Forecasts?
What is the sinking fund?
Monies raised by the levies can be divided into two separate funds: the administrative fund and the sinking fund. The sinking fund pays for expected and unexpected long-term expenses such as repairs and maintenance (for example, driveway replacement or major external painting).
The sinking fund also needs to budget for any estimated or unexpected expenses such as structural damage due to accident or damages caused by mother nature. While these repairs are quite difficult to predict, the sinking fund is expected to have enough money in it to cover them. If not, a special levy must be raised to cover the cost.
What Is a Sinking Fund Forecast?
A Sinking Fund Forecast is a report that considers and predicts future capital expenses. It is then used to calculate how much to collect from lot owners to fund the long-term maintenance of a building during the forecast period.
Sinking Fund Compliance Requirements?
In Queensland, each body corporate is required to have a 10-year sinking fund forecast in place.
What Types of Things Are Covered in a Sinking Fund Forecast?
A Sinking Fund Forecast considers shared facilities in the body corporate complex as well as items that impact the look and feel of the property. The forecast pays particular attention to items that may require repair or maintenance for effective operation or to maintain a neat and tidy appearance.
Common items on the forecast list can include:
- Painting (Garage Doors, External Walls, Outdoor Areas, Fences etc.)
- Driveway Refurbishment
- Carpets & Flooring in Common Areas
- Roofing, Guttering, and Downpipes
- Rendering and Patching
- Recreational Facilities (e.g. Pools & Tennis Courts)
How Often Should a Sinking Fund Forecast be Reviewed and Updated?
Sinking Fund Forecasts should be updated at least every three (3) years to take into account current market conditions.
It is also advisable to update your forecast whenever major works, painting etc is carried out to retain a realistic reserve and contribution levy.
The Body Corporate and Community Management Regulations requires that a body corporate must be insured for full replacement value, regardless of the original construction cost.
Why do I need an Insurance Valuation?
An Insurance Replacement Valuation (IRV) ensures coverage for the building replacement if it is destroyed or damaged beyond repair. The insurance value must cover the amount it would cost to rebuild the entire building, or where damaged; replace elements. An IRV also takes into consideration expenses for removing debris and costs for professional contractors/services that may be needed to rebuild, replace or repair. This valuation is taken to insurers to be used for negotiation of premiums and coverage amounts.
How often must we have an insurance valuation?
The regulations require that a valuation be carried out a minimum of every 5 years.
What additional factors affecting the replacement costs of a strata scheme?
- Availability of labour
- Building costs
- Quality of finish
- Shared facilities
Why is an accurate insurance valuation important?
Poor estimation of replacement costs could result in schemes being under‐insured, and subsequently, owners being unable to afford to replace their building.