Cameron Chisolm, Body Corporate and Management Rights lawyer
Introduction
In Queensland community titles schemes, lot entitlements are one of the most important, and often misunderstood, concepts.
What are Lot Entitlements?
Each Body Corporate scheme in Queensland registered under the Body Corporate and Community Management Act 1997 has a Community Management Statement (CMS). Within that CMS, Schedule A lists all lot entitlements for each lot included in that Scheme. Each lot has two different types of lot entitlements; Contribution Schedule Lot Entitlements (CSLE) and Interest Schedule Lot Entitlements (ISLE) unless the Scheme was created prior to 13 July 1997.
CSLE
CSLE establishes how the Body Corporate divides shared expenses among lot owners. These expenses typically include general maintenance and cleaning of common property, management fees and contributions to levies including any special levies.
From 2011, the CLSE is calculated using two principles; equality (where lots should be equal unless it is appropriate for them not to be equal) or relativity (based on the relationship between lots, such as their size, purpose, market value, scheme’s key features etc). Pre 2011, the CSLE was simply based on the lots being equal unless it was fair and equitable for them not be equal. Some Schemes may still have CSLE set under this pre 2011 regime.
For instance: lots that are larger or those that cost more to maintain, their CLSE values are often higher. This makes sense as since a lot may require more resources to maintain it, then it should contribute more towards the maintenance of the overall scheme.
CSLE also plays an important role in decision-making for the scheme (except two lot schemes). In votes decided by poll, a system that can be used for certain resolutions requiring ordinary resolution, each owner’s voting power matches their CSLE value, rather than one vote per lot. This means that owners who contribute more financially have a proportionate say in these key decisions.
Example:
Imagine a community titles scheme in which there are three lots. Lot 1 has a CSLE of 1, Lot 2 has a CSLE of 1 and Lot 3 has a CSLE of 3. If a poll vote is not used, each lot will only receive one vote, however, if Lot 3 decides to have a motion determined by poll vote, it can effectively control how that motion is decided, regardless of how the other two lots vote.
ISLE
- defines each owner’s percentage share of ownership in the common property and the body corporate’s assets;
- the cost of building insurance for building format plans and the owner’s responsibility to contribute towards such insurance;
- the value of a lot which may be relevant when calculating a lot’s responsibility to pay general rates and water unless separately metered; or
- an owner’s interest on termination of a community titles scheme.
ISLE is calculated differently to CSLE and uses the market value based on the value of lots in comparison to other lots in the scheme unless it is fair not to. Different building and format plans also determine the value of the lot, i.e. standard format plans or volumetric plans do not include building or improvements on a lot.
How Do Lot Entitlements Work in Practice?
In practice, lot entitlements determine three main things:
- Levy payments or share of costs;
- Voting influence for certain resolutions; and
- Ownership value.
Together, these figures balance fairness and accountability. Without having appropriate entitlements, smaller lots might unfairly subsidise the costs created by larger lots and disputes over who should pay what would be far more common.
Why Lot Entitlements Matter
Understanding you lot entitlements helps you understand whether your levies are fair compared to other lots in the scheme, how much influence your lot has in certain body corporate decisions and what your ownership stake means if the scheme is ever terminated and sold.
Can Lot Entitlements be Changed?
Lot entitlements are not set in stone, though changing them is not simple. The law sets out strict requirements to protect all owners’ interests. Adjusting lot entitlements is a technical legal process with significant financial implications. Whether you are a part of a committee or an individual lot owner, we can provide guidance which can save time, money and avoid conflict.
How We Can Help
Whether your goal is to correct an imbalance, explore a fairer levy structure or simply understand how your lot entitlements affect your ownership rights, our team can provide clear, practical advice to guide you through the process with confidence.
Disclaimer: this article is provided for information purposes only and should not be regarded as legal advice.