Building management statements – do you know what to look for?

A building management statement (BMS) is a relatively new invention in Queensland strata title law. In recent years, they have become far more prevalent in the strata industry as developers become more innovative and mix residential, commercial and retail property uses in the one development.

What is a BMS document

In very simple terms, a BMS is a document which is used to regulate the relationship between individual bodies corporate or other lots in a development (that could be other bodies corporate or separate volumetric lots). It regulates the use of facilities that might be owned by one of those parties that will be shared with others. It also then deals with how costs will be apportioned for the maintenance and management of those areas.

In legal terms there are effectively no statutory rules to regulate what goes into them (other than some limitations on content), so the terms of each BMS are usually individually drafted.

Because they are not a standard document (a little like a Community Management Statement) we quite often see strata managers who do not actually understand how a BMS actually works. If you are going to act in relation to a building with a BMS it is vital that you do understand what must and should happen.

Simple rules for strata managers

We think there are some very simple rules that every strata manager should look at when considering managing a scheme that involves a BMS:

1. Read the BMS. The number of people they don’t actually understand what the rules are is astonishing. By and large the content in a BMS is usually clearly expressed, but of course if you are not sure, get legal advice.
2. Understand how the costs are apportioned amongst the various members of the BMS. The cost can be apportioned in any number of ways, but most BMS’ have a set percentage between the members. Some also include the ability to revisit those percentages on certain grounds.
3. Understand the management group in the BMS. While the BMS is not an entity in its own right, it should have a separate set of accounts in terms of the shared expenses that are being run by it. The management group should have formal books and minutes. Treat it, in most respects, as a completely separate operating commercial entity which operates in a manner similar to a body corporate, but has its own Australian Business Number, Tax File Number and bank accounts, budgets, etc.

Don’t run the accounts through one of the bodies corporate that may be members of the BMS Management Group. There is nothing in Queensland body corporate law that allows that to occur.

From a very high level perspective, something that might be a cause for dispute in years to come will be the incorrect or inequitable apportionment of costs under a BMS.

Most BMS’ are drafted well before the member’s bodies corporate and lots are established and operational. As most readers would know there are mechanisms for adjusting lot entitlements in an individual body corporate (admittedly at a far higher threshold than was the case up until a few months ago).  Unless a BMS itself includes a mechanism to adjust the apportioning of expenses there is no other basis for doing so other than by the agreement of all members.