Question: Our treasurer approved a reimbursement to themselves for a community party paid from body corporate funds. Is this legal, and does it create a conflict of interest?
Our scheme has 127 lots. Over several AGMs, motions to have the body corporate’s financial statements uploaded to the owners’ portal were defeated, with both the committee and the body corporate manager recommending that owners vote against the motions.
Some documents have been uploaded with limited detail. Reviewing these, we identified a substantial reimbursement paid to a husband-and-wife lot owner for expenses associated with an owner’s party. At the time, one of those owners was the treasurer of the committee.
We have three questions:
- Is it legal to use body corporate funds for an owners’ party?
- Does a conflict of interest arise when the treasurer authorises a reimbursement to themselves or their household?
- Did the body corporate manager have any obligation to question or advise against this expenditure?
Answer: Using body corporate funds for a party is technically a misuse, but transparency around reimbursements is the real issue here.
Most body corporate companies provide access to standard scheme financials via a portal or an app. There’s no requirement to do this, but if those basic details are difficult to review, committees and body corporate managers should expect some unhappy owners.
Parties should not be paid for with body corporate funds. However, many body corporates do put on occasional functions, and there can be many benefits from this. It’s usually a good thing for neighbours to talk to each other. If your body corporate has used collective funds for a body corporate party, you are technically correct that those funds have been misused. At the same time, if you push to stop community events that neighbours enjoy, be prepared for some pushback. Not everyone will see it as a governance issue.
It is common for committee members to incur costs on behalf of the body corporate to be reimbursed later. Any approval for these costs should be transparent. If any committee member is approving their own expenses, that is likely to lead to issues. The matter can be simply resolved by having reimbursement applications like this declared to the whole committee. You could write to your committee to ask them about the process they have adopted for approving these transactions.
It seems there is a fundamental tension between you and the committee over how you want the scheme to operate. That’s not unusual, but if it is causing a bigger issue, try talking to people to resolve it. Ask for a meeting and state your issues clearly and without prejudice. Be prepared to be flexible in your responses.
In this case, your request for better access to financial records is fair and reasonable. You are probably not the only person at the scheme who wants this, and if your body corporate managers aren’t providing this information, you are not being unreasonable in asking why. The committee should listen to owners on issues like this and help to resolve their concerns.
For matters like the party, you may be technically correct, but that is not always enough. If events like this add value to your community, do you want to actively stop them? Be prepared to listen when people present the benefits of holding an event like this.
Lastly, you ask about the role of the body corporate manager and whether they should be regulating the committee. We don’t know what advice has been provided here or what the relationship between the manager and the committee is like. Generally, managers should advise committees when they are acting outside the law, but the role of managers is advisory. Managers are not the police for your scheme and they shouldn’t be considered an enforcer.
This post appears in Strata News #797.
William Marquand Tower Body Corporate E: willmarquand@towerbodycorporate.com.au P: 07 5609 4924
