Body Corps: yay or nay?

[Razzzor]

So what do you fellow investers think about body corps? I've never had one before, so don't know much about them.
But if the insurance, rates, etc aren't included then it seems to me like you're paying a good bit of money, $1000-$2000 to go towards "external maintenance". But this sounds like a lot, especially for a 1 or 2 bedroom unit. That's some very expensive maintenance! Looks to me like the money just goes into holding savings accounts and does nothing.

Thoughts?

[Harvey Specter]

I can assure you most body corps will not have funds just sitting in a savings account! They generally run quite tight to budget and all money is generally accounted for. If there is any money going into a bank account as surplus I believe this is generally going to the "sinking fund". I am no expert but I believe under the Unit Titles Act body corporates are meant to put sufficient funds aside into a sinking fund to pay for long-term maintenance.

[speights boy]

Yes.
If you found a BC with 'large amounts in a savings account' which had not been allocated for immediate remedial work then that would be a good building to investigate further.

Roof, lifts, garages, painting, fire suppression up grades, earthquake strengthening; all this long term stuff has to be paid for somehow.

OTOH, if a property management company is 'creaming it' without showing suitable results then look elsewhere.

[King13]

That's right - bodies corporate have to maintain a sinking fund. This money has to remain secure so cannot be invested. Hence is kept in a savings account or in some cases, bonus bonds.

[artemis]

Lots of fish hooks in body corps. Are you looking at buying a unit titled property? If so, what size is the complex. There has to be a fair bit of documentation around BCs, which you and lawyer should look over carefully before committing to purchase. Such as rules, accounts, audit reports, minutes, long term maintenance plan. And the mandatory disclosure statement. A poorly run BC is a financial accident waiting to happen and it is the unit owners who have to pick up the pieces. Can be big and unforeseen bucks. Can you provide a bit more info about what you are looking at?

Also, good idea to knock on a few unit doors before committing to see what the real issues are. Can be v enlightening.

[Razzzor]

Well the one I was looking at had annual of around $1500. But they had an on-call account with $5000 in, then a term deposit account with over $10000 in. 8 units in total.
I think I'll continue to avoid body corps, sounds a bit risky.

[Grundy]

I've been involved and on some great body corporates with talented members, but the shocking manner some are run is a scandal.
There is no other means I know of for the sensible management of a large block with multiple freehold units. A decent sinking fund is essential and I believe now a legal requirement respective of a planned maintenance schedule. Biggest problem arises when some highfalutin types move in thinking its the end of all the usual bills a house in the suburbs generates and then bemoan the maintenance cost of a tennis court or swimming pool that they decide they don't use.

[artemis]

I've been involved and on some great body corporates with talented members, but the shocking manner some are run is a scandal.
There is no other means I know of for the sensible management of a large block with multiple freehold units. A decent sinking fund is essential and I believe now a legal requirement respective of a planned maintenance schedule. Biggest problem arises when some highfalutin types move in thinking its the end of all the usual bills a house in the suburbs generates and then bemoan the maintenance cost of a tennis court or swimming pool that they decide they don't use.

All true, not to mention the replacement of expensive items like lifts, painting and maybe leaky building. My big concerns would be loss of control and dealing with an inadequate committee or management company. (I run a small BC of 4 units. I now own all units so have complete control. But it was a nightmare with multiple owners, all perfectly lovely, but getting agreement on even quite small and obvious things was difficult.)

[Maccachic]

"To complement the long-term maintenance plan, there is also a provision to set aside money as a long-term maintenance fund – or what is often referred to as a sinking fund – into which money is paid on a regular basis by body corporate levy to provide for the maintenance requirements set out in the maintenance plan. The fund, unlike the plan, is not compulsory, although to not have a fund seems to completely negate the purpose of the plan, which aims to more efficiently plan and predict maintenance works required and the expenditure needed to fulfil the plan without having to resort to one-off, lump-sum, unplanned payments as and when issues arise."

http://www.prendos.co.nz/unit-titles...n-the-planning

http://www.nzherald.co.nz/nz/news/ar...ectid=10887861