This article about body corporate decisions has been supplied by Frank Higginson, Hynes Legal.
We get an enormous range of questions on how bodies corporate go about their daily business.
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One of the most broadly asked questions is how a body corporate makes a decision.
A body corporate is a creature of statute. The Body Corporate and Community Management Act 1997 (BCCM Act) sets out the rules about how it must operate. A single person (chairperson or otherwise) can never make a decision on a body corporate matter (leaving aside delegated authority which is far too complex to discuss here and really only applies to BUGTA regulated schemes).
This will be a bit of a back to basics newsletter for strata managers (who probably know these things anyway), but it is still something that probably has a bit for everyone.
We certainly anticipate that we will be sending this newsletter at least once a week as a hyperlink to clients who ask these questions.
There are two levels of decision making. The first is at committee level and the second is at general (either annual or extraordinary) meeting level. Committee decisions are binding on the body corporate but a committee cannot (and should not) make a decision on anything that is a ‘restricted’ issue.
Restricted issues can include:
- fixing or changing levies;
- decisions that change the rights, privileges or obligations of the owners (obviously a very broad spectrum);
- matters that have been made restricted issues by the body corporate in general meeting. An example you might see here is where the assignment of the management rights (which can be consented to by a committee under the Module) is reserved for decision at general meeting;
- decisions that may only be made by a specified resolution under the BCCM Act (i.e. changing by-laws or higher levels of spending); or
- the commencement of most legal proceedings, other than for things like recovering body corporate levies.
It gets very messy when a committee makes a decision on a matter that is a restricted issue, and a third party (external to a body corporate) then acts on that. That is a newsletter for another day.
Decision making at committee level
For a committee decision to be lawful (assuming it is not a restricted issue), the following applies:
Quorum – you need to have a quorum to be able to have a meeting. This is at least half of the voting members of the committee (i.e. not the strata manager or resident manager). In a committee of six, that is three. In a committee of three it is two.
Voting – Every motion at committee level is decided purely by a simple majority of votes. If a committee has seven members and a motion is decided by four in favour to three against, it passes. It a committee has four members and there are two in favour and two against, it fails.
If there are more votes for a motion than against it, the motion it is passed. If the votes are the same the motion fails.
If the committee does not want to make a decision on something and would prefer to have the owners decide the issue it can also refer that motion to the next general meeting. There is no reason that any motion could not be referred by the committee to the next general meeting (as much as the body corporate may prefer it not to as it would then become hideously expensive to run with all of the necessary general meetings).
General meeting level
This is a bit trickier.
Quorum – for a general meeting to be valid (amongst other things) it needs two voters present in person and at least 25% of votes cast (i.e. voting papers or present at the meeting). If that isn’t the case, the meeting holds over to the same time and place the following week, where whatever votes have then been cast are then counted. The results are then based on that second meeting regardless of how many votes were cast.
Voting – There are a number of different thresholds at general meeting level. Voting is not compulsory and apathy tends to reign supreme.
Ordinary resolution – This is the lowest hurdle. A motion is passed by ordinary resolution if there are more votes cast for it than against it of those voting. So, even in a 100 lot scheme a motion could be passed by two votes in favour to one against if there were only three votes cast.
Most general meeting resolutions are decided using this as a basis.
Special resolution – Three is a three-pronged test for counting votes on a special resolution. Most people only know the first (and if you get there on that you usually get there on the other two limbs), but it does require all three. They are:
- at least two-thirds of the votes cast are in favour of the motion; and
- no more than 25% of the number of lots in the scheme vote against the motion; and
- no more than 25% of the combined contribution schedule lot entitlements in the scheme vote against the motion.
You usually see this type of resolution when it comes to changing by-laws or commencing legal proceedings.
Resolution without dissent – This means there is not a single vote against the motion. It does not mean everyone is for it – simply that no one records a vote against it. There is a means to challenge dissenting votes, but that is also a newsletter for another day.
You usually see this style of resolution when it comes to dealing with long term rights over common property (exclusive use, sale and some leasing etc).
On occasion, some decisions that are made requiring a resolution without dissent also require affected lot owners to agree to the motion before the resolution is considered, if they do not otherwise cast a vote on the motion. This can be a chicken and egg type of thing (as you may not know if an owner will actually vote with respect to the motion and if they don’t it is too late to have their agreement).
Majority resolution – this is a very rarely used style of resolution which only comes about in very limited management rights matters. This is one that passes only where the votes for the motion are more than half of the lots who are entitled to vote on the motion (i.e. in a 100 lot scheme it would need 51 votes in favour to pass).
Before anyone asks, there is no such thing as unanimous resolution under the BCCM Act. There is never a need for that.
As always, if you need help, let us know.
This article was first published to the Hynes Legal website.
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