Bodies corporate and major projects
06 Mar 2013
As buildings age (like most things), they need work.
There comes a time in every building’s life cycle where that work is more than cosmetic. It is structural, and with that comes significant costs.
Bodies corporate are generally very cost-conscious creatures. That comes with the territory, but in this post-GFC world it is not an unusual frame of ‘corporate’ mind in any respect.
Having said that, penny wise can be pound foolish in the wrong circumstances.
When considering a major project some key considerations need to be taken into account:-
- Spending and contingencies – what is needed and where that is going to be funded from;
- The project team and who will do what;
- The involvement of the resident manager and / or the committee in supervision;
- The all important two quote rule – and if not, why not?
- The construction contract itself;
- How long will the project take to complete and how should any delays or extensions be dealt with; and
- What will it cost and, in particular, whether there any hidden costs.
All of these need to go into the pot and then get managed in a strategic way. Take for example the construction contract itself. You can rest assured:-
- You need one in place (don’t ever get caught with a one pager for any project work – no matter how simple the work might appear to be);
- If it is drafted by the contractor you probably don’t need two guesses as to whose favour it will start in;
- If you are having the conversation about the form of the contract after the contractor is approved at general meeting, how much leverage has the body corporate lost?
We recently successfully advised a body corporate whose approval at an EGM to spend $3.2 million on some major works was challenged on some technical deficiencies with the agenda material. In a contextual vacuum, those technical deficiencies did probably exist, but there were genuine and valid reasons for them.
We think the better approach in matters like this is to meet the challenge head on upfront, and lay out in black and white why things are being done in the way proposed. The alternative is to risk the start of the project being held up while legal deficiencies are being ruled on in the Commissioner’s Office.
It is dangerous to assume that owners will simply go along for the ride. Owners can be quite an apathetic bunch, but they will usually become quite engaged when they are asked to put their hand in their pocket for a special levy.
In circumstances where the body corporate is spending a serious sum of money it is worth the investment in some expert legal advice to ensure that the whole process is managed tightly and the body corporate is legally protected.
If you need it, we can help.