What is a Building Management Statement?

Ensuring Corporate Documents' Enforceability - What to Know

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Commercial | Property

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21/05/2024

If your strata title building includes a large commercial component for office or retail, chances are your Body Corporate is a party to a Building Management Statement (BMS).

A BMS is a document used to regulate the relationship between two or more large users of a building, such as residential on the one hand and retail on the other. They are common in “mixed use” volumetric subdivision plans.

The BMS defines and regulates the use of shared facilities, and it deals with the costs of maintaining those areas and facilities.

The most common shared services or facilities covered by a BMS include:

Car parks
Fire services
Lifts
Water and sewerage services and pumps
Access ways and foyers

There are no statutory rules regulating what goes into a BMS, and as they are not a standard document, there are some strata managers who don’t understand how the BMS works. The site developer gets to determine what goes into a BMS, so there can be unfair outcomes, either intentionally, for some financial benefit to the developer, or through lack of experience on their part

A BMS is normally used in strata-titled properties, but a property does not have to be strata-titled to be regulated by a BMS.

Most people think a BMS is governed by the Corporate and Community Management Act, but this is not the case. That can be a huge concern, particularly when shared costs are not allocated correctly. That can leave one party with a large bill, and one party out of pocket.

A BMS must contain provisions about the following:

Supply of services
Rights of access
Rights of support and shelter
Insurance arrangements

Occasionally, a BMS will also contain information about:

Establishing and running a management group
Levies – who collects them, how they are kept, and spent
Property maintenance
Landscaping standards
Dispute resolution
Admin arrangements
Rules for common areas and facilities
Proposed future development

BMS financial management:

There are two different methods for cost recovery. The most common method is one entity pays for a service upfront, and recovers the costs as outlined in the shared costs schedule from the other parties. The second method is that a BMS budget is set, and contributions made by each party proportionate to the shared costs schedule and payments received in advance, then costs paid as received. In either case, it is imperative that an accurate and transparent method is established to avoid disputes.

BMS decision making:

The BMS terms specifies how meetings are convened, as well as the details of owner representation and voting rights. These terms are unique to each BMS and need to be fully understood when considering decisions.

What about disputes:

A BMS is required to have dispute resolution provisions. However, the dispute provisions cannot include debt disputes. The dispute provisions usually refer to the appointment of an independent party to mediate. The resolution process will not decide whether the terms in place are fair and or reasonable.

Depending on the complexity of the situation, a legal opinion should be sought on the commercial viability of pursuing a dispute, particularly involving debts. If you think it’s best to change terms or terminate the BMS altogether, this is possible with the consent of all registered owners and all owner mortgagees.

Note also that the title to all lots will disclose if a BMS affects that Lot, and the BMS MUST be disclosed as an encumbrance in your sale contracts, otherwise your sale contract may be voidable by the Buyer.

When it comes to property law, regulations surrounding Body Corporates and/or Building Management Statements can be complicated.

GLG has the experience and extensive knowledge needed to ensure you can get the advice you need.

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