M on Mary [2011] QBCCMCmr 276 (28 June 2011)

Last Updated: 19 July 2011

ADJUDICATOR’S ORDER

Office of the Commissioner

for Body Corporate and Community Management

ORDERS MADE:

REASONS FOR DECISION

Introduction

[1] M on Mary community titles scheme (M) is a 367 unit scheme in Brisbane City. Some units within M are occupied by the owners, others are let out by the owners, and others form part of a letting pool used for hotel style accommodation offered by Kim Management Pty Ltd.

[2] The body corporate recently renewed its insurance policy. The insurer imposed a special condition excluding any claim arising out of use of units contrary to the current classification of the building.

[3] M is a class 2 building. The body corporate says it has legal advice that hotel accommodation can only be offered in a class 3 building. The body corporate’s agreement with Kim Management is that Kim Management will conduct its business according to all applicable laws. The body corporate therefore seeks an order that Kim Management immediately stops offering hotel accommodation (or at least obtains its own insurance that will protect the body corporate against any liability arising from operation of the hotel accommodation business).

[4] The first issue raised by this application is whether adjudication is the appropriate jurisdiction for resolution of this dispute. Adjudicators primarily resolve disputes about the operation of the BCCMA. The body corporate argues this is a dispute about the operation of the BCCMA because it is about the insurance requirements under the BCCMA. However, I consider the dispute to be primarily about compliance with the building classification under the Building Act and compliance with the terms of the letting agreement between the body corporate and Kim Management.

[5] It is therefore not appropriate for me to determine the dispute. My reasons are provided in more detail below.

Analysis

Jurisdiction of a departmental adjudicator

[6] The Act establishes procedures that comprise an exclusive jurisdiction for the resolution of most disputes between specified parties in the context of a community titles scheme (BCCMA, 229(3)). This would include disputes between the body corporate and a letting agent about the requirement of the body corporate to take out insurance (BCCMA 227(1)(f), Accommodation Module Chapter 8 Part 9).

[7] However, for the body corporate to enforce its contract with Kim Management the body corporate would need to lodge proceedings in QCAT - or have Kim Management agree to specialist adjudication (BCCMA, 149B).

[8] An order that Kim Management is contravening the Building Act or planning scheme is also something the legislature did not intend to be determined as part of departmental adjudication (BCCMA 228, 276).

Is the present dispute about insurance?

[9] An analysis of the relevant legal obligations confirms the present dispute is not really about the body corporate’s difficulties in obtaining insurance covering the use of part of the building as a hotel.

[10] The body corporate has a legal obligation under the BCCMA to obtain proper insurance. Any obligation of Kim Management to stop operating a hotel does not arise from the body corporate’s legal obligation to obtain insurance. If such an obligation exists then it arises from the Building Act or planning scheme, and is then included in Kim Management’s contractual obligation to comply with relevant laws.

[11] The relief sought is based on these alleged obligations on Kim Management rather than the obligation on the body corporate to obtain appropriate insurance. I am therefore not satisfied I have jurisdiction to determine the present dispute. The application will be dismissed (BCCMA, 270(1)(a)).

[12] Even if I did have jurisdiction to determine the present dispute, the key issue requiring determination is whether or not Kim Management is offering hotel accommodation that requires a class 3 instead of a class 2 building. I would therefore dismiss the entire dispute as being appropriate to be dealt with in a court or tribunal of competent jurisdiction (BCCMA, 270(1)(b)).

Conclusion

[13] I am dismissing the present application as I am not satisfied I have jurisdiction to determine the subject of the dispute.

[14] It would be interesting to enquire whether M is assessable for class 3 use in addition to class 2 use. It would also be interesting to discover if Kim Management could obtain satisfactory insurance. If not, the body corporate might need to seek an order in an appropriate jurisdiction to prevent Kim Management from continuing to operate a hotel business and, if unsuccessful, might need to undertake any works necessary to upgrade the building from class 2 to class 3.