Maintenance
Renovating a lot in a body corporate
Share on linkedin Linkedin Share on facebook Facebook A personal approach to body corporate management Relationships are the foundation of our business, built on the
6 May 24
Individual water metering in body corporate properties continues to be a hot topic for our committees and owners.
This is a question asked of our office very regularly, and what seems like a simple question is really just the tip of the iceberg.
This is a question asked of our office very regularly, and what seems like a simple question is really just the tip of the iceberg.
Background
The way water charging has been administered has changed significantly since the strata building boom of the 1970s. Strata and body corporate developments of all ages are now subject to the 2021 standard for water charging, even if that is quite different to how those properties were originally set up.
In 2008, it became possible for landlords to charge their tenants for water consumption if the property is individually metered and water-efficient. This is often the reason that some bodies corporate are motivated to investigate and consider changing the way their water billing is set up.
In 2008, it became possible for landlords to charge their tenants for water consumption if the property is individually metered and water-efficient. This is often the reason that some bodies corporate are motivated to investigate and consider changing the way their water billing is set up.
How is water charged?
Water distributor-retailers have different methods of supply and charging for water. Depending on the local government area, your water charging will be administered by:
- Brisbane
- Ipswich
- Lockyer Valley
- Scenic Rim
- Somerset
- Sunshine Coast
- Moreton Bay
- Redland local government area
- Gold Coast local government area
- Logan local government area
For body corporate developments, water is charged in one of 3 main ways, depending on the age and structure of your body corporate development:
Body corporate pays all water
Occurs rarely
- All water for the site including common areas and individual units is paid by the body corporate.
- Owners do not receive any water bills directly.
- The water expense for the whole site makes the body corporate levies very high.
Water billed on entitlements
Common for pre-2008 buildings
- The total water for the site (including common areas and individual units) is divided amongst the lot owners based on the contribution schedule lot entitlements.
- This is the same ratio used to calculate administrative and sinking fund levies.
- Each owner receives a separate bill from the water retailer.
Separate water meters
Standard after 2008
- Each unit has a sub-meter read by the water retailer.
- Each unit owner receives a water bill for their individual unit consumption.
- The body corporate receives a water bill for the water used in the common areas. This common area bill is paid for by owners through body corporate levies.
The method for your body corporate applies to all lots within that body corporate. It is not possible to have some units with individual water meter reading, and other units in the same complex being billed on the contribution schedule lot entitlement method.
Are the water billing methods fair?
Fairness in a body corporate development is always difficult to establish. Unless your building has separate water meters, the water will be apportioned based on the contribution schedule lot entitlements.
Lot entitlements attach to each lot, and they are detailed in the community management statement. Lot entitlements are created by the property developer, and take into account the size, type and amenity of each lot. This is how a penthouse lot owner would generally pay higher levies than the owner of a smaller unit on a lower level.
Lot entitlements attach to each lot, and they are detailed in the community management statement. Lot entitlements are created by the property developer, and take into account the size, type and amenity of each lot. This is how a penthouse lot owner would generally pay higher levies than the owner of a smaller unit on a lower level.
Example:
Without actual data on the amount of water used by each unit, the total water consumption can only be pooled and then divided by the contribution schedule lot entitlements.
These lot entitlements are based on the potential use of each lot, not the actual use. Larger units generally pay a higher share of the total, even though they may have the same or lesser amount of water use.
In the same way, body corporate owners contribute to pool maintenance, even if they never swim in the pool. They contribute based on their contribution schedule lot entitlement, which recognises their ability to swim in the pool if they wanted to.
This method can result in people paying for services like water, in different proportions to how those services are used. Whilst this is an imperfect system, it is the best method available when the actual use of facilities is not known (like if there are no separate water meters).
- A developer creates a new apartment building with 25 units and some shared recreation areas.
- The total lot entitlements for the entire scheme is 100
- You buy lot 1, which is larger than some of the other units
- Lot 1 has 5 lot entitlements
- You therefore pay 5/100 of the body corporate costs, including maintaining the shared recreation areas.
Without actual data on the amount of water used by each unit, the total water consumption can only be pooled and then divided by the contribution schedule lot entitlements.
These lot entitlements are based on the potential use of each lot, not the actual use. Larger units generally pay a higher share of the total, even though they may have the same or lesser amount of water use.
In the same way, body corporate owners contribute to pool maintenance, even if they never swim in the pool. They contribute based on their contribution schedule lot entitlement, which recognises their ability to swim in the pool if they wanted to.
This method can result in people paying for services like water, in different proportions to how those services are used. Whilst this is an imperfect system, it is the best method available when the actual use of facilities is not known (like if there are no separate water meters).
How do you know what method is being used in your body corporate?
For most water retailers, the current method can be deduced by looking at any water bill within the scheme. The bill should always include a meter reading, and that can be used to establish whether the water is apportioned based on actual readings, or on a percentage of the total for the site.
Let’s look at Queensland Urban Utilities:
Let’s look at Queensland Urban Utilities:
Figure 1 – Shared water meter, water is billed based on contribution schedule lot entitlements
In this image, the total water consumption for the site is shown as 54kL for the period. The particular lot owner who received this bill has 25% of the total contribution schedule lot entitlements, so the owner is paying for 25% of the total water used, which is 13.50kL.
In this image, the total water consumption for the site is shown as 54kL for the period. The particular lot owner who received this bill has 25% of the total contribution schedule lot entitlements, so the owner is paying for 25% of the total water used, which is 13.50kL.
Figure 2 – Individual water meter, water is billed based on actual consumption.
In this image, there is no calculation of percentages, and the owner is being charged for their own meter reading. The serial number of the unit is unique to the unit and will not match other owners’ bills.
In this image, there is no calculation of percentages, and the owner is being charged for their own meter reading. The serial number of the unit is unique to the unit and will not match other owners’ bills.
Whilst each water distributor-retailer’s invoice looks different, they generally show the same types of information. If the current method is not clear, you can call your local water retailer and ask them.
Water usage -vs- other related charges
A water bill includes more than just water usage. Each water bill includes:
- Water usage (based on litres used)
- Water service fees
- Sewer service fees
Any change to the water billing arrangements (separate meters or not) will not impact the water service fees, and sewer service fees.
Case study:
Figure 3 – A typical Queensland Urban Utilities water bill
In this example, the water bill splits out how much of the bill relates to water usage, water services, and sewer services.
Type
Water usage
Water services
Sewage services
Total
Amount
$57.73
$58.14
$139.95
$255.82
If water usage halved
$28.87
$58.14
$139.95
$226.96
(saving $28.87)
If water usage doubled
$115.46
$58.14
$139.95
$313.55
In this real-life example, if the water usage for this unit halved (imagine the resident only uses water every second day), the bill would only reduce by $28.87. The rest of the costs on the bill are anchored by the fixed-price water service charge, and sewer service charge.
Common myths about separate water meter billing:
Myth
If my property becomes separately metered for water, I can pass on my whole water bill to my tenant. (example: $255.82/quarter)
A separate water meter is all I need to start charging my tenant for water.
If my property becomes separately metered for water, I won’t pay for water usage at all.
I use less than the average amount of water. Separate water bills will mean my bill becomes cheaper.
Our building has water meters already, let’s just use those.
Every owner in the body corporate will agree with me and approve this project – it benefits everyone.
Reality
Only the amount for water consumption can be passed on. (example: $57.73/quarter)
A plumber must also inspect the unit, and certify that all water devices are low-flow and water-efficient. Often pre-2008 constructed buildings are not water-efficient and need to be upgraded at the owner’s cost.
Moving from contribution schedule lot entitlement billing to separate meters means the body corporate will start receiving a water bill for the common areas.
This will increase levies, and cannot be passed on to the tenant.
Water retailers have very strict requirements for water meters. In many cases even if buildings have existing separate water meters, they are often non-compliant and the water retailer will not rely on them. Usually there is an up-front cost to replace all water meters.
Separate water meters may cause bills to increase, even if the person’s actual water usage is lower than the average in the complex. This depends on how the site was structured before the change to separate water meters.
The total usage of water will not change. For every owner who is using less than average, another owner is using more than average.
For every water bill that reduces, another owner’s bill will increase.
Common myths about separate water meter billing:
For some owners, particularly investor owners, there is a genuine saving in water bills if the body corporate installs individual water meters. This benefit however must be compared against the cost for installing the water meters and other related infrastructure and plumbing upgrades.
To categorise who wins and who loses in separate water metering, let’s look at an example building:
- 10x identical townhouses
- Some townhouses are owner-occupier, some are rented
- Some residents are singles or couples, some have families
12 Example St, Brisbane
Owner occupiers
Investor owner
Tenant
Single/couple
(low water usage)
Water bill will decrease, as actual usage is below averate
Family
(high water usage)
Water bill will increase, as usage is above average
Tenant mix will change during ownership
Owner’s water bill may increase OR decrease depending on the usage by the tenant.
Levies will increase slightly due to common area usage
Owner may be able to recoup water usage portion from the tenant, if property is water efficient. It owner can recoup from tenant, owner’s cost should reduce to jus the fixed charges.
Tenant may start to receive water bills from owner, if property is water efficient.
Name on account: In Queensland, it is not possible for the primary water bill for a property to go into the name of the tenant.
Whilst in other states, tenants can be expected to put the water service into their own name (just like electricity, internet and gas), in Queensland the water account is always in the name of the owner.
For investor-owners who are entitled to recover water usage, it is up to the owner to recoup the water usage directly from their tenant.
Do I use a lot of water or a little?
Guessing whether your actual water usage is higher or lower than your estimated usage can be very tricky. Remember that when water is apportioned based on contribution schedule lot entitlements, each owner is not necessarily paying the same.
Larger units with more bedrooms generally have more entitlements and therefore pay a higher share of water, even if they are not using more water.
A unit which has a lower than average number of entitlements is actually getting a passive discount on their water consumption using the entitlement billing method. Their lower number of entitlements means they are assumed to use less water, so they pay for less water even if they use more water.
For owner-occupiers, it is difficult to predict whether your bill will go up or down after separate water metering. Just because an owner uses less water than average, does not mean the new bills will be lower – in fact, they can go up as that passive discount is taken away when actual water meter readings are used.
Larger units with more bedrooms generally have more entitlements and therefore pay a higher share of water, even if they are not using more water.
A unit which has a lower than average number of entitlements is actually getting a passive discount on their water consumption using the entitlement billing method. Their lower number of entitlements means they are assumed to use less water, so they pay for less water even if they use more water.
For owner-occupiers, it is difficult to predict whether your bill will go up or down after separate water metering. Just because an owner uses less water than average, does not mean the new bills will be lower – in fact, they can go up as that passive discount is taken away when actual water meter readings are used.
Let's look at another example
This example has a mix of 2-bedroom and 3-bedroom units, the 3-bedroom units use more water (which is to be expected)
Total water usage cost for the site = $700 per quarter
Unit 1
2 bedrooms
5 entitlements
Unit 2
2 bedrooms
5 entitlements
Unit 3
2 bedrooms
5 entitlements
Unit 4
3 bedrooms
8 entitlements
Unit 5
3 bedrooms
10 entitlements
Amount of water used
50L per day
60L per day
70L per day
80L per day
90L per day
Before separate water meters
50/350L
$100.00
60/350L
$120.00
70/350L
$140.00
80/350L
$160.00
90/350L
$180.00
Let’s look at what happened:
Unit 1, 2 and 3 – These owners were previously paying the same amount for water ($106.06) as they had an equal number of entitlements, even though their real water usage was different. All of these owners were using less than the average consumption. After water meters, only the lowest water user made a saving.
Unit 2 water cost increased, even though their personal water consumption was 60L per day, which is less than average for the building, and less than average for their local area. This probably came as a shock to this owner, who would have expected their water bill to reduce.
Unit 4 and 5 – These owners are high water users, using 15% more and 29% more than the average household water user. Despite being higher water users, the move to separate water meters actually benefitted these two owners, because the old method of contribution schedule lot entitlements had assumed their consumption to be even higher than it was.
The saving in this example for high water users, is subsidised by units 2 and 3 who pick up the difference
Impact of empty units on average
It is logical to think that when based on entitlements, lower water users may be subsidising higher water users.
In reality, both high and low water users are also being subsidised by units with zero actual consumption (including empty units, for rent or for sale, units being renovated, and units where the resident spends time away from home).
All unit owners pay for water under the entitlement method, even if their unit used zero water during that time. During the time that the consumption is zero (or very low), these owners are subsidising everyone else in the complex.
Remember the principle that:
In reality, both high and low water users are also being subsidised by units with zero actual consumption (including empty units, for rent or for sale, units being renovated, and units where the resident spends time away from home).
All unit owners pay for water under the entitlement method, even if their unit used zero water during that time. During the time that the consumption is zero (or very low), these owners are subsidising everyone else in the complex.
Remember the principle that:
- Separate water meters don’t change the total water consumption of the complex
- Every litre comes off your bill, goes into someone else’s bill
Tenants, leases, and water efficiency
As mentioned earlier, investor owners face some additional challenges before they can start to recover the water usage component of bills from their tenant.
What does the lease include?
Leases in Queensland are regulated by the Rental Tenancy Authority (RTA). The standard form lease includes a question about whether the tenant is to pay for water consumption.
If you have an existing lease that was signed before the separate water meters were installed or commissioned, the lease may say “NO” – the tenant does not pay for water usage.
Even after the separate water meter project is completed and the billing is adjusted, investor owners may need to wait until the existing lease finishes before recovering from their tenant.
If you have an existing lease that was signed before the separate water meters were installed or commissioned, the lease may say “NO” – the tenant does not pay for water usage.
Even after the separate water meter project is completed and the billing is adjusted, investor owners may need to wait until the existing lease finishes before recovering from their tenant.
Water efficiency
Rental tenants can only be charged for water consumption if the property is separately metered, and water efficient.
In Queensland, a plumber must certify that a property is water efficient by inspecting the property, and issuing a water efficiency certificate. This is a service which the owner of the lot must pay for.
If the property is not water efficient, the plumbing fixtures must be upgraded and re-certified before water can be charged. This may mean the owner is required to replace:
In Queensland, a plumber must certify that a property is water efficient by inspecting the property, and issuing a water efficiency certificate. This is a service which the owner of the lot must pay for.
If the property is not water efficient, the plumbing fixtures must be upgraded and re-certified before water can be charged. This may mean the owner is required to replace:
- Kitchen sink taps
- Bathroom taps
- Toilets
- Showerheads
Who will charge the tenant?
Even after separate water metering, the water bill cannot be put directly into the tenant’s name. If the owner is entitled to recover the water consumption from the tenant, that process needs to be managed by someone.
For owners who use a real estate property manager, generally they are capable of recovering the water usage cost in addition to rent. They may however charge an additional fee for this service, if it is not part of the owner’s rental service agreement with the agent.
For owners who use a real estate property manager, generally they are capable of recovering the water usage cost in addition to rent. They may however charge an additional fee for this service, if it is not part of the owner’s rental service agreement with the agent.
Share This Post
Subscribe To Our Newsletter
More To Explore
By-laws
Faster pet approvals in body corporate schemes
On 24 April 2024, the Queensland Government announced more changes to the legislation regarding pets. Taking effect from 1 May 2024 these will impact nearly all body corporate communities in Queensland. This article touches on those changes, how they compare to the previous legislation, and what it means for body corporate committees.
29 Apr 24
