Has There Been A Contribution Lot Entitlement Change?

When a body corporate is registered the schedule of interest and contribution lot entitlements are set out in the CMS. But who sets those lot entitlements?

The first lot entitlements for any body corporate are set by the developer.

Now days contribution lot entitlements are required to be equal, unless being equal would then result in inequity. But that wasn’t always the case.

Once upon a time the developer could set the entitlements however they wanted to, which suited them, because they could then manipulate the system to suit themselves and their needs, rather than those of the lot owners.

Inequities in contribution lot entitlements affect a lot of body corporates, particularly those registered prior to 1997.

Changes to contribution lot entitlement legislation

In a 2004 landmark case the court was presented with a scenario where contribution lot entitlements for a body corporate, as set by a developer, where challenged as unfair. In  the Centrepoint Decision the court agreed that the entitlements were unfair and should be changed. They further set down a plan for equitable re-calculation of contribution lot entitlements.

The Centrepoint Decision opened the floodgates and many body corporate’s applied to the court to have their contribution lot entitlements changed, which they subsequently were.

In 2011 legislation was passed that reversed the Centrepoint Decision completely. Further those body corporates that had had a lot entitlement change ordered through the court could now apply to have those lot entitlements overturned and previous entitlements put back in place.

The process was called reversion and subsequently many body corporate’s had their unfair (as decided by the court) contribution lot entitlements reinstated.

In 2013 legislation was passed that overturned the 2011 legislation.

The new legislation basically re-instated the principals of the Centrepoint Decision regarding  contribution lot entitlement changes and also allows for those body corporates that have had lot entitlements reverted under the 2011 legislation to revert to their court ordered schedule.

What it all means for buyers

There are a couple of issues that buyers need to be aware of with contribution lot entitlement changes:

1. whether or not the matter is finalised
2. the ongoing harmony of the scheme

Unfinished contribution lot entitlement changes

When contribution lot entitlements change so to do the levy proportions paid by the various lot owners. Some will suddenly have to pay more, and some a lot less.

And those changes can be substantial.

If a contribution lot entitlement change has happened in a body corporate you’re considering buying into, be aware that it may not be final. If the change was made under the 2011 legislation then it’s possible that the lot entitlements may be changed again at some time in the future.

Ongoing harmony of the scheme

With any lot entitlement change there are winners and losers in the scheme, and that creates ill will.

In fact this whole business of lot entitlement changes has polarised communities all over Queensland and created a real environment of Us vs Them, being the wealthy vs the poor. Lot entitlements used to be set to enhance sales, which means the cheaper units had lower contribution lot entitlements to sell quicker and the more expensive units higher entitlements since they turnover slower anyway.

For buyers its important to consider whether this disharmony may effect your enjoyment of the property.

As with every purchase in a body corporate, arm yourself with all the information and then discuss your circumstances with your Solicitor or Conveyancer.