What is a Body Corporate?

What is a body corporate?

Most people hear “body corporate” and think of the towers that dominate our city skylines

But not all high rises are body corporates and body corporates come in all shapes and sizes

To understand what a body corporate is it helps to understand how strata titling evolved

Apartments have been around a long time. The Egyptians and Romans used them to house the poor

Each building was owned by one person, what we would call a slumlord

Eventually land became more scarce and certain areas more exclusive

Apartment buildings for the upper middle class began to appear … but they could still only be rented, not purchased

Unless you bought the whole building

It’s a question of ownership. To be sold a property must have a title

Property titles are created by subdivision; selling off pieces of a large block individually

But you cannot subdivide a building

Instead some buildings became companies. Ownership was transferred via shares

But, with shares as collateral, less can be borrowed

Apartment ownership remained only for the “well-to-do”

To achieve higher density more people needed to be able to buy

In 1961, in Sydney, Australia, strata titling evolved as a way to sell apartments individually

A strata titled building has two parts: the lots and the common property

Each apartment, or lot, has a Title so ownership may be transferred

And the common property is held in trust by a new entity to benefit every lot owner

The body corporate is the entity that owns the common property

And all the lot owners are members of the body corporate

They are jointly responsible for the common property

Acting within strict rules and regulations designed to protect every lot owner’s interests

Now days strata titling is used for all sorts of property structures throughout Australia and the world

Legislative requirements change from place to place but the overall concept remains the same

A body corporate is an entity that holds and maintains the common property in a building or scheme

And the combined lot owners share the responsibilities for the body corporate

When you buy a unit you also take on a portion of the responsibility for the common property

Which is why savvy investors find out what they’re getting into … but that’s another story