QLD: Q&A Lot Entitlement Rules and Adjusting Lot Entitlements

Queensland lot owners have asked about lot entitlement rules and adjusting lot entitlements in QLD body corporate.

Table of Contents:

• QUESTION: One lot in our body corporate takes up 40% of the complex but only pays 14% of the insurance. Can we apportion the insurance premium so they pay their fair share?
• QUESTION: Over the past 20 years, lot entitlements in our building were changed three times, but I’m unable to find any mention of the changes in the body corporate records. Why is that?
• QUESTION: In our 10 level, 60 lot building, all lots are similar, but unit entitlements are not. Levies increase per level even though we all have equal access to facilities. Can unit entitlements be reviewed and adjusted?
• QUESTION: Our building is about to embark on major works. Should the cost be shared equally?
• QUESTION: My Body Corporate fees are higher per sq metre than the other 17 units in our scheme. Is there anything that can be done about adjusting lot entitlements?
• QUESTION: We need extensive repairs to the car park. As we all own equal shares of this area ie one car space plus common property, why should we pay based on lot entitlement rules?

Question: One lot in our body corporate takes up 40% of the complex but only pays 14% of the insurance. Can we apportion the insurance premium so they pay their fair share?

Our CTS says that the lot entitlements are equal and based on market value. I have an issue with the unit that used to be owned by the developer. It has two kitchens and three bathrooms, is two separate buildings and is rented to two households. It takes up 40% of the 7-unit complex, but only pays 14% of the body corporate costs and insurance premiums.

The insurance premium is, by far, our largest cost. If I get the valuers, who set the replacement value of the complex for insurance purposes, to apportion this between the units, is it possible to use section 201 to apportion the levy for the insurance premium? If so, what resolution is needed? As the owners of the large unit also own another unit in the complex, even a special resolution would be defeated.

Answer: Treat the disease rather than the symptoms – change the interest schedule lot entitlements!

The short answer is ‘No’. But there is (potentially) a better way… Before talking about that, we need to make sure our assumptions are correct! In particular:

1. your scheme is regulated by the Standard Module (I infer this because of your reference to s201),
2. we are talking about interest schedule lot entitlements (because they are mandated to be calculated by reference to market value), and
3. the lots in your scheme were created by building format plan or building units plan (otherwise you would have already apportioned the insurance premium based on the reinstatement cost under s201(1)(b)).

If those assumptions are correct, you are better off, in my view, treating the disease rather than the symptoms – change the interest schedule lot entitlements! By the sounds of things, the large, special lot will be worth much more than the other lots in the scheme. You can apply to have the ISLE changed to properly reflect market value. Here is one of mine where I did exactly that for a client; Body Corporate for Platinum Commercial CTS 33636 v Body Corporate for Platinum CTS 33635 [2022] QCAT 240.

The result, if you change the ISLE, is not just limited to shares of the insurance premium – the ISLE also have a bearing on things like land tax liability and Council rates. When I help clients with this problem, we go through a process of:

1. a ‘back of the envelope’ valuation process for all lots
2. estimating changes to the ISLE based on those rough valuations
3. estimating the savings / cost shifting based on the changes to the ISLE
4. estimating the costs of the application to change the ISLE and
5. calculating the ‘payback period’ based on savings per annum versus the once off application cost.

The ‘large unit’ owner may have two votes out of 7, but you only need one lot owner to apply to make the change to the ISLE. If the other five lot owners, you included, banded together, there would be significant advantages for all of you, including costs sharing and even increasing your chances of winning the application.

As for the alternative provided in your question, being a body corporate decision under s201(2) to adjust the lot owners contributions to the premium, while that decision can be made by ordinary resolution at a general meeting, it would not be defensible in my view, because the reason for adjusting the contribution to the premium is not a reason listed in s201(2)(a), (b) or (c)! The real reason is the cost of reinstatement is higher for the large lot, because there is more building to replace.  

Michael Kleinschmidt
Bugden Allen Graham Lawyers
E: michael.kleinschmidt@bagl.com.au
P: 07 5406 1280

This post appears in Strata News #704.

Question: Over the past 20 years, lot entitlements in our building were changed three times, but I’m unable to find any mention of the changes in the body corporate records. Why is that?

I purchased my apartment in 2020. Friends who have owned an apartment since the building was built in 2000 told me that lot entitlements were changed, but owners were not given an opportunity to vote on the decision.

After investigating, I found that since the original CMS in 2000, the lot entitlements have been amended three times – in 2009, 2012 and 2013. The minute book does not show any owner motions dealing with amending lot entitlements, and I’m unable to find any mention of a committee meeting approving a change.

The changes benefitted the majority of committee members who live in the most valuable apartments.

Is it possible to change lot entitlements without a minuted owner or committee motion?

Answer: There should be some record of the change minuted in either a body corporate or a committee resolution.

The way in which lot entitlements could be amended has undergone numerous changes since the Body Corporate and Community Management Act(BCCMA) was introduced. Each change required that the lot entitlements be determined based on different principles and provided for different mechanisms and processes to effect an amendment. Accordingly, at certain times, it was easier for bodies corporate to change the lot entitlements within the scheme. At other times, it was more difficult and more onerous obligations were placed on bodies corporate to effect the amendments.   

The amendments to the lot entitlements within your body corporate may have been made at a point and time where it was easier for the body corporate to secure the changes. However, regardless of the mechanism to change the lot entitlements in place at the time, there should be some record of the change minuted in either a body corporate or a committee resolution.

At present, the process of changing lot entitlements is more difficult than it historically has been. The BCCMA provides for specific requirements and processes to change or challenge an amendment of the lot entitlements. Generally speaking, any change can be made by way of resolution without dissent (meaning that no owners can vote against the motion to change it) or by an order of a special adjudicator of the Office of the Commissioner for Body Corporate and Community Management or QCAT, in limited circumstances.

The body corporate records should be reviewed in detail to ascertain whether there is any explanation or context as to the changes that have previously been made. Depending on the findings within the body corporate records, it may then be worth seeking legal advice to confirm the next steps and ability to challenge or revert any improperly changed lot entitlements.

Katya Prideaux
Mahoneys
E: kprideaux@mahoneys.com.au
P: 07 3007 3753

This post appears in the June 2024 edition of The QLD Strata Magazine.

Question: In our 10 level, 60 lot building, all lots are similar, but unit entitlements are not. Levies increase per level even though we all have equal access to facilities. Can unit entitlements be reviewed and adjusted?

Our 60 lot scheme with lots distributed evenly over 10 levels is about 20 years old. It is administered under the BCCM legislation as an Accommodation Module. All lots are similar but their lot entitlements for the admin fund and sinking fund are not. Each level pays about 2.5% more than the one below.

This year, for example, the level 10 lots are paying about $2,500 or 24% extra. We all have equal rights of access to the same facilities, e.g. lifts, pool, gym, boat pontoon, etc. Can the lot entitlements be reviewed so that each lot pays its fair share?

Answer: This is in the ‘too hard’ basket for government, and it has been since 2011.

This would appear to be a very clunky way to attribute a proportionate share of the body corporate costs. As it sits right now, the only way to change it is really by a resolution without dissent, meaning the lower level owners would have to agree to pay more as the upper level owners paid less. As you would expect, these types of motion rarely pass. This one is really in the ‘too hard’ basket for government at the moment, and it has been since 2011.

Frank Higginson
Hynes Legal
E: frank.higginson@hyneslegal.com.au
P: 07 3193 0500

This post appears in the March 2024 edition of The QLD Strata Magazine.

Question: Our building is about to embark on major works. Should the cost be shared equally?

Answer: Costs will be split as per unit entitlements or any other cost specification that may exist and apply on your title documents.

Costs will have to be split as per your unit entitlements or any other cost specification that may exist and apply on your title documents.

This split may be exactly equal in some buildings but not in others. You would need to check your CMS to do this. It should be possible to produce a table of costs detailing what the cost for all lots will be.

It’s worth noting that while the legislation here is pretty clear, this is a fairly common question. Depending on the situation, Committees and owners sometimes feel it would be more reasonable for costs to be split equally regardless of the entitlements. An example might be if the complex were looking at installing a new intercom system to a block of units. Because everyone will get one intercom, some people view it as fairer that everyone pays one equal share of that cost. A motion to approve this could be drafted, but it would require 100 per cent of owners to agree. The likelihood of that is usually slim as some owners would have to pay more than under the entitlements system if they agreed – typically they don’t but it does happen on occasion. If this is not possible, the default applies.

William Marquand
Tower Body Corporate
E: willmarquand@towerbodycorporate.com.au
P: 07 5609 4924

This post appears in Strata News #581.

Question: My Body Corporate fees are higher (per sq metre) than the other 17 units in our scheme. Is there anything that can be done about adjusting lot entitlements?

My Body Corporate fees are higher (per sq metre) than the other 17 units in our scheme. The fees were allocated around 2000. 

I understand the QLD law has closed on making old Body Corporate fees equitable. Is there anything that can be done about adjusting lot entitlements?

The Body Corporate Committee isn’t interested in changing everyone’s fees to make mine equitable. I’m finding it difficult to sell because my fees are so much higher. I feel the inability to adjust lot entitlements is unfair.

Answer: There is nothing you can do about it.

To be honest, I agree that it is potentially unfair too, but there is nothing you can do about it.

Contributions schedule lot entitlement adjusted are effectively closed unless the other lot owners agree – which means their levies will increase. So, as you acknowledge, that is unlikely to happen.

We wrote a summary here at the time: That’s it for contribution schedule lot entitlement adjustments.

Frank Higginson
Hynes Legal
E: frank.higginson@hyneslegal.com.au
P: 07 3193 0500

This post appears in Strata News #482.

Question: We need extensive repairs to the car park. As we all own equal shares of this area ie one car space plus common property, why should we pay based on lot entitlement rules?

In our apartment block, we need extensive work doing to the walls of the car park. The car park area does not form part of the main building. All owners have one parking area and the rest is common property. The tennis court and pool areas are above the car park.

It would seem unfair to me that if we have to pay an extra levy, some owners would have to pay more than others under lot entitlement rules when we all own the same portion of this ie. a parking spot and the rest is common property.

Has there ever been a ruling on this type of problem?

Answer: This has been a highly contentious issue for several governments for many years in Queensland and will likely be into the future.

It seems from your query that you’re referring to contribution schedule lot entitlements. Suffice to say that this has been a highly contentious issue for several governments for many years in Queensland and will likely be into the future.

If you’re after a ‘ruling’, you can research this database, potentially, using keywords.

For a fulsome overview of the topic, you might like to read this article: QLD: That’s it for contribution schedule lot entitlement adjustments.

Ultimately if you’re wanting to go down the path of considering an adjustment, you’ll need to seek legal advice.

Chris Irons
Hynes Legal
E: chris.irons@hyneslegal.com.au
P: 07 3193 0500

This post appears in Strata News #378.

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