Bodies corporate are no strangers to carrying out large or expensive projects. These projects can include:
- scheduled body corporate maintenance work;
- unexpected work (eg building defects); or
- improvements that the body corporate might want to make.
Whilst there are a number of critically important steps in any project – for example, how to fund the project and who will undertake the work – there are 2 important matters that are commonly overlooked.
- making sure the body corporate has the appropriate approval to authorise the work to be undertaken; and
- ensuring an appropriate contract is in place to protect the body corporate’s interests.
To properly approve the project the body corporate needs to:
- determine if the project is maintenance (repair to the original standard) or improvement (increase or change from the original standard);
- confirm the scope and costs works, and the terms of any contract that would be entered into – and in some cases with multiple quotations; and
- pass an appropriate resolution which authorises the project and entry into a contract.
These issues need to be dealt with to properly determine whether a general meeting is required, what threshold of resolution is required and how many quotes are required.
In one of our earlier articles we discussed body corporate spending limits in more detail here.
The majority of issues that arise in body corporate project disputes could have been avoided if the contract sufficiently protected the body corporate. In most cases, the body corporate simply signed the contractor’s template agreement that was provided to them (if there was a contract signed).
Accordingly, it is important that the contract the body corporate enters into for the project is appropriate. Unfortunately many template agreements that are regularly used:
- are heavily weighted in favour of the contractor’s interests; and
- do not factor in the unique nature of a body corporate.
Whilst the body corporate may feel that they do not have a say in the contract they receive, it shouldn’t stop them from understanding the risks and seeking changes where appropriate to do so. If a contractor is not willing to consider reasonable and necessary changes, it may be worth finding one that will.
An appropriate contract would consider at least the following issues:
- scope and cost of work;
- timeframe and milestones;
- payment terms and conditions;
- rights to cease work, or terminate the contract;
- warranties, indemnities and insurances;
- access arrangements;
- damage caused to common property;
- latent defect identification;
- variations to work;
- remedy of defective work;
- dispute resolution mechanism; and
- practical completion.
As the contract is a legally binding document, the body corporate should always engage a lawyer to review (or preferably, draft) the terms of the contract prior to being approved and executed.
In most cases the costs of obtaining such advice:
- would be negligible when considered in the overall cost of the project; and
- can save the body corporate a lot of time and money if a dispute occurs.
Mahoneys has a specialist team of body corporate and construction lawyers who regularly advise on, review, and prepare construction contracts to protect bodies corporate.