Question: Can the body corporate spend money on gifts or throwing a party?
Last Christmas, the body corporate bought gifts for the strata manager and the caretaker. Recently, our chair held a farewell party for the caretaker. Food and drinks were supplied for approximately 45 guests for three hours.
The members decided to reimburse the chair at a subsequent committee meeting.
- Q1. Can the body corporate (BC) spend approx $600 on gifts?
- Q2. Can the BC spend approx $3,000 on a party?
Without disclosing the cost of the party, can the committee vote to reimburse the amount spent on the party after the event and without advertising the motion to owners?
Answer: While social cohesion in a community titles scheme is a laudable goal, spending money on Christmas parties, and by extension, other parties, is not a valid use of lot owners contributions.
‘Nothing is easier than spending public money. It does not appear to belong to anybody. The temptation is overwhelming to bestow it on somebody.’ Calvin Coolidge, 30th President of the United States of America.
Bodies corporate are creatures of statute and have only the powers granted to them by those statutes. Under the Body Corporate and Community Management Act 1997, there is no general power of taxation, or for that matter, general power to spend. The legislative schema is to establish bodies corporate to fulfil stated purposes, empower them to fulfil those purposes, grant them authority to raise necessary funds through budgeting and contributions (levies), and then to spend those (lot owners) funds by following stated processes.
When answering the question ‘can the body corporate lawfully spend money on X?’, a good place to start is to see if ‘X’ is, or relates to, a stated function or power of the body corporate. For example, there is no doubt that a body corporate can raise and spend money on common property maintenance. The issue, of course, is when, after having looked for ‘X’ everywhere in the legislation, you cannot find it. There may be something similar, but you are not sure. Take the issue of a body corporate that objects to a proposed new development next door that will block views and erode occupier’s amenities. The body corporate can make an objection, and bring a ‘submitters appeal’ against the development approval, but cannot do the same thing indirectly, by donating to a GoFundMe campaign to fund another submitter bringing an appeal (contrast Quay Terraces [2016] QBCCMCmr 91 with Paradise Palms Country Club – The Keys [2022] QBCCMCmr 130). Why? In the former case, there is a statutory head of power for the body corporate to bring proceedings, and therefore, it must be able to spend money for the purpose of those proceedings. In the latter case, there is no statutory head of power to make donations to the cost of proceedings under someone else’s control.
If you cannot find ‘X’ or something similar, then odds are, body corporate funds cannot be spent on it, no matter how it may seem beneficial to the body corporate or lot owners and occupiers. In this vein, while social cohesion in a community titles scheme is a laudable goal, spending money on Christmas parties, and by extension other parties, is not a valid use of lot owners contributions; see Kensington Gardens Retirement Village [2005] QBCCMCmr 269 (20 May 2005). As for the matter of gifts, where the statutory function or power is missing, it does not matter whether there is some collective interest of lot owners in making such a gift. The gift or donation will be unlawful. For example, if a community titles scheme is used for beachside holiday letting, with the bonus of a patrolled beach in front of the complex, lot owner’s contributions cannot be donated (i.e. gifted) to that surf living saving club; see Edgecliffe Apartments [2021] QBCCMCmr 30 (20 January 2021). Disclosure of the spending decisions, in this case, simply follows the normal rules; minutes of general or committee meetings (or votes outside committee) must be distributed to lot owners. As with any body corporate decision, a decision to spend on gifts or a party can be overturned by a subsequent body corporate decision of the same or ‘higher’ type, and an Adjudicator can, on an application made within the 3 month time limit, overturn unlawful decisions.
This post appears in Strata News #723.
Michael Kleinschmidt
Bugden Allen
E: michael.kleinschmidt@bagl.com.au
P: 07 5406 1280
My BC hired a gardener in December 23 and because there was not allocated funds for this, they paid his invoices for Jan-March from the sinking fund. When it came time for the 24/25 budget, they still didn’t include his expenses therefore paying again from the sinking fund. ($7920). It has also been disclosed that he was over servicing and they have terminated his employment.
There is not really a question here but it might be something you want to have a talk to the committee about. Generally, regular gardening is paid for from the admin fund but landscaping or one-off improvements can be paid for from the sinking fund. So you may want to have some discussion about that.
My guess is that whatever has happened the Committee has chosen the pathway in a bid not to raise levies in some way. So any conversation you have might involve you saying that if following correct procedures means increases in the levies you are happy with that. Committees often work on the basis that owners don’t want any increases so it is important to let them know that is not the case.
If you can speak to the committee members directly. If not send through a letter and ask for it to be tabled or request a formal response. If necessary submit an owner’s motion and thereby mandate a response. By raisingthe issue you may bring about a change in policy.
To Peter Hunt re using BC funds for ‘quarterly drinks’ and ‘Xmas parties’.
I’ve had a look at several Adjdns, including Kensington Gardens 2005/268, and the common denominator seems to be prohibition of use of BC funds on drinks etc at what are primarily SOCIAL EVENTS.
Is it alright to use BC funds – in moderation of course – to provide some drinks and refreshments at more formal/official functions like AGMs, EGMs and perhaps even committee meetings (especially if a number of owners make a practice of attending these meetings as ‘visitors’).
If so, could this be extended to an end-of-year get-together by all owners for the purpose of the Committee providing a bit of a round-up of what has happened over the last 12 months and what is planned for the next year. Or is it a simple case of NO BOOZE, NO NUM-NUMS from BC funds, regardless of the nature and purpose of the function.?
Frank
Just to let you know that our BC did purchase a defibrillator-approx. $3,500- then someone promptly stole it. When an item like this is ‘portable,attractive and valuable’, do you secure it so tightly that it can’t be accessed when needed, or do you just hang it on the wall for all takers-including the scallywags in our midst?
Ross
I am amazed by the reply of the lawyer. If you were to look a few Q&A above, it clearly specifies thst OC funds should be spent on administrating Common property and enforcing by laws. With all due respect, it is a debatable wuestion, unless it went to the AGM and it was proven necessary
AED (Automated External Defibrillators) mostly come with a system of spoken word instructions to guide the operator. In controlled testing performed overseas, untrained civilians were able to correctly use AEDs 96% of time on the first attempt. The “up to” is based upon the model selected, and it is quite important to pick the right model. At the company at which I work we have two AEDs in our office, which contains around 100 staff. Both are a unit that has ranked highly for each of use by untrained personnel.
I commend the questioner and their body corporate for their proactive approach to maybe saving the life of one of their residents at some stage, by this purchase.
I received a comment on this article via email:
As a CCU nurse I just wanted to let all know that the beauty of those Automated defibrillators (AED) is that there is nothing to do but put the 2 pads on an unconscious persons chest as per the instructions on the pads.
The pads will then read what is happening to the persons heart rhythm.
If it is a dangerous rhythm (and there are only a couple of those), it will recognise it, and give instructions to stand clear, push charge, and a small charge (I believe only around 100 joules) is given.
This can definitely save a persons life while waiting for an ambulance.
If it is not a dangerous rhythm, it will also say to not charge, and to wait.
It will also instruct if CPR is necessary.
An AED is a good investment for all units actually, and definitely saves lives.
When a person goes into a dangerous rhythm, shocking them out of it as soon as possible can be the difference between life and death. Every second counts.
They are a very basic machine and so long as people listen to the instructions that the machine gives, they have nothing to fear.
They can also be used on a person with a pacemaker without fear. Sometimes a person’s pacemaker fails, hence why they may collapse if it is due to a dangerous rhythm.
If a unit does purchase one they could also have a lesson on it, so they have nothing to be afraid of.
Deb, CCU Nurse
Frank……good advice as always, with an appropriate cautionary message about the risks involved. Reminds me of the Elvis song “Fools rush in, where wise men never go…”. May be why some jurisdictions have introduced Good Samaritan Laws to protect a well-intentioned bystander from any unfortunate consequences caused by their actions, no matter how qualified that bystander may be.
A funding question for you: is this the type of expense eg $3000 – $4000 which should be provided for in the Sinking Fund Budget, or just something you can scoop out of ‘The Lolly Jar’ ie the Contingency Fund?
Hi Ross
This reply from Frank:
Ross, you know as well as I do that there is no such thing as a contingency 🙂
If the body corporate wants to spend money it needs to budget for it. If $4,000 was taken from the sinking fund for an unbudgeted expense, there is a $4,000 hole then against a future budgeted expense….