When will you encounter BMCs?
You will find Building Management Committees (“BMCs”) in stratum developments (also called part strata plan developments). Land can be subdivided by a strata plan or by a part strata plans. In subdivision by a strata plan, the land and building are divided into lots and common property. Stratum developments occur when you have a building or buildings that are subdivided into part strata plans. Stratum subdivision is a subdivision of height and the lots created are known as stratum lots. Stratum lots may have different uses. For example, a building may have a retail stratum lot on the ground floor, a commercial stratum lot on the first floor and a residential stratum lot on the second floor. Stratum lots can subsequently be subdivided into strata plans.
Stratum lots will share common facilities that may be located in one or several of the stratum lots, for example – the entrance/foyer, building façade, fire systems, car parking areas, storm water drainage system, air-conditioning systems and rooftop pool. gardens.
Why does the BMC exist?
The BMC exists to regulate or manage the shared facilities and the shared costs of those facilities. Unlike an owners corporation, a BMC is not a separate legal entity. Each owner of a stratum lot is a member of the BMC unless:
- It is an owners corporation and it passes a special resolution not to be a member and all other members agree; or
- A person (individual or company) states in writing they do not want to be a member and all the other members agree. Note a company would have to pass a resolution to give effect to its wish not to be a member.
Each owners corporation that is a BMC member must by special resolution or under the terms of a by-law elect a representative to sit on the BMC. A lot owner that is a company must also pass a resolution to appoint a representative to sit on the BMC.
The key documents that regulate a BMC in order of priority are:
- The Strata Schemes Development Act 2015;
- The Strata Schemes Development Regulations 2016;
- The original development consent conditions; and
- The strata management statement.
What is a strata management statement (“SMS”)?
The SMS is the day to day guide for managing the BMC. It has the effect of an agreement under seal on lot owners (both stratum and strata lot owners), occupiers, mortgagees, chargees and lessees.
The SMS should contain provisions regulating the establishment of the BMC, holding of meetings, the functions of the BMC, how the SMS can be amended i.e. a unanimous, special or ordinary resolution, how disputes are to be managed, the method of allocating the costs of shared expenses (arising from shared facilities), a fair allocation of the costs of shared expenses and a review process to ensure the allocation of shared costs remains fair.
Generally, the shared facilities and shared costs of those facilities are listed in a schedule registered with the SMS. Shared facilities can be physical items or services. Shared costs are the costs related to the shared facilities. They generally are not just the cost of repair and maintenance but also the costs of operating, inspecting and cleaning the shared facility. The BMC does not own the shared facilities. Shared facilities are owned by the relevant stratum lot owner however their ownership may be limited by requirements of the SMS.
To authorise a change in the SMS, each owners corporation must pass a special resolution. In addition, the BMC must also approve the amendment by passing the type of resolution required by the SMS. Generally, to register a change in the SMS each owners corporation and lot owner must sign the request form and provide their certificate of title to the NSW Land Registry Services.
Authors: Jasmin H. Singh and Allison Benson