Developers – are you going to join the body corporate committee?

devlopersDevelopers commonly become members of the body corporate committee, especially if units remain unsold or it is a staged development, so as to retain control.

There has been a recent case (Guardian Retail Holdings Limited v Buddle Findlay High Court, 27 June 2013) considering body corporate committee member’s personal liability. The underlying issue was the collection of levies from commercial unit owners who did not use the body corporate’s water and gas supply. The committee members’ whose decisions were being questioned owned residential units.

The Court was not making final decisions on liability as it was an originating application. The Court was determining whether the committee members were entitled to have defence costs paid by the body corporate. The decision was no, they were not.

Body corporate committee members:

  • have personal obligations to act in accordance with the Unit Titles legislation and the body corporate’s operational rules
  • might be personally liable to the body corporate or to other unit owners if they breach these obligations
  • if in breach, cannot look to the body corporate to indemnify them
  • must act in good faith and in the interests of the body corporate as a whole, not in their own individual interests.

A developer on a body corporate committee has potential conflicts of interest e.g. if completing a staged development or trying to maintain the original concept, say a managed hotel structure, where low-occupancy means no return for investors. There is a very real risk of personal liability if the developer acts to further these individual interests.

There might be better ways of achieving the necessary control without the need for the developer to be a committee member post-completion.

And a good clear structure so the potential for these kinds of disputes are minimised.

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