By BCCM
Community titles schemes are established under the Body Corporate and Community Management Act 1997 (the Act) by registering a community management statement (CMS) with Titles Queensland. An important part of the CMS is the schedule of lot entitlements. The schedule explains how the cost of running and maintaining the body corporate and common property is shared between the owners. This article outlines what a lot entitlement is, and how lot entitlements are decided, applied and adjusted.
Lot entitlements Lot entitlements in a community titles scheme set out each owner’s: share of the costs associated with the running of the body corporate, share of common property and the body corporate assets, lot value in order to calculate government rates and other charges and voting rights, in some circumstances.
corporate assets, the value of the lot for calculating local government rates and charges; the proportion of insurance payable for each lot and common property. Lot entitlements are set by the original owner (developer) of the community titles scheme. The schedule of lot entitlements is found in the scheme’s CMS. You can obtain a copy of a scheme’s CMS by contacting Titles Queensland (1300 255 750).
How lot entitlements are decided Contribution schedule - two principles are used for deciding the contribution schedule: 1.
The lot entitlement is a number allocated to a lot in a community titles scheme. It must be a whole number and it cannot be zero. There are two types of lot entitlements: 1.
2.
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Contribution schedule lot entitlements (contribution schedule), which are used to calculate: each owner’s proportionate share of the body corporate expenses, the value of an owner’s vote if a poll vote is held. Interest schedule lot entitlements (interest schedule), which are used to calculate: each owner’s share of the common property and the body
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BCCM REPORT
What & how of Lot entitlements
2.
The equality principle - which states that the contribution lot entitlements should be equal unless it is just and equitable for them not to be equal (for example, it may be just and equitable for one lot to have a higher contribution lot entitlement if it is a commercial lot that uses more water than other lots). The relativity principle - which states that lot entitlements should be based on the relationship between the lots according to a number of factors, which may include: the structure of the scheme, the nature, individual features and special characteristics of each lot, the use of each lot, how each lot affects the cost of maintenance of the common property and the market value of each lot.
The CMS will state which principle applies to a scheme.
capital expenditure over at least the next nine years after that.
Interest schedule
These expenses are then divided among the owners based on their contribution schedule lot entitlements.
The interest schedule is decided using the market value principle, which states that the interest schedule lot entitlement must reflect the market value of each lot included in the community titles scheme, unless it is just and equitable not to reflect the market value principle. The CMS must state whether the market value principle applies or explain why it does not.
How lot entitlements are applied Lot entitlements are relevant to a number of different aspects of the operation of a body corporate.
For example, if a lot has three lot entitlements and the total number of lot entitlements for the scheme is 30, the owner is required to pay 10 per cent of the total amount of levies for the scheme. Expenses will only be divided equally between owners if the contribution schedule is equal.
Insurance
Owner contributions
If the body corporate is required to take out building insurance, the premium may not be divided among the owners according to the contribution schedule.
Each year, the body corporate adopts an administrative fund budget and a sinking fund budget. These budgets are based on the expected expenditure by the body corporate over the next 12 months, and the anticipated
The division of building insurance costs between owners will instead depend on the plan of subdivision that applies to the scheme, and whether an owner’s lot shares a wall with another lot or common property.
INDUSTRY
ResortNews | March 2022
