Question: Some committee members would like a pre-approved amount they can spend for emergencies. Is it common for committees to have pre-approved emergency funds?
A recent proposal from the strata committee chair and secretary in our community title scheme has sparked some debate. They’ve proposed a motion for the committee to pre-approve a set amount they could spend without needing approval.
The justification for this is to allow for a quicker response in emergencies. However, some owners feel strongly that all spending decisions, regardless of urgency, should be discussed and voted on by the committee.
Is it common practice for strata committees to have pre-approved emergency funds? Would the motion be valid?
Answer: Contingency fund, rainy day fund, slush fund – there is no provision for any of it.
What is being described here sounds like a contingency fund. Others may call it a rainy day fund, while the cynics may refer to it as a slush fund.
Regardless of the name, there is no provision for any of it. Spending, as you suggest, is highly regulated in a body corporate, whether it be spending by the committee or spending approved by all owners at a general meeting. Personally, I think there is some merit in changing legislation to allow for contingency funds or contingency spending. That’s just my opinion, though.
On the issue of ’emergency’ spending, while I can appreciate the intent, spending must still go through a correct approval process. There is scope under Qld’s legislation to obtain an emergency spending order from an adjudicator. I have seen such orders made in a matter of hours. I would caution though, what is and is not an ’emergency’ is carefully considered by adjudicators. Put it this way: if something has been known for some time and not attended to, such as an item of maintenance, then by definition, that could never be an ’emergency’. A genuine emergency is something like a flood, storm, earthquake or the roof blowing off.
So yes, I see problems with the suggested motion.
This is general information only and not legal advice.
This post appears in the June 2024 edition of The QLD Strata Magazine.
Chris Irons
Strata Solve
E: chris@stratasolve.com.au
P: 0419 805 898
There are two different articles by two different people (William Marquand & Todd Garsden) in LookUp Strata#608 of Oct5th 2022, filed under two different headings in two different categories., ie Maintenance and Common Pty (QLD, and Committee Concerns re Spending Limits (QLD). Both, however, seem to deal with variations on a common theme, ie application of BC funds to BC work -v- non-BC work.
This is not criticism of anyone. It just demonstrates to me how difficult it is to get a clear picture of what we are dealing with in QLD’s strata law, which I find endlessly frustrating. I do not know how the Commissioner’s people and how the strata professionals keep on top of things.
RE Todd GARSDEN’s blog re “Spending BC funds on maintenance of individual lots” 2022 April 13.
This scenario, where the BC with 40+ lots agrees to cover the mowing costs of just 6 lots without any mention of recovery of the costs from those 6 lot owners, is of course tainted…it is in breach of the legislation (see AM Ch8 Part 7 ss.200-203) but also offends any sense of fairness to the broader community. How that can be for the benefit of the community is difficult to see. To me, it suggests very poor advice from their BCM or wilful disregard by the Committee of good advice.
But if you change the scenario to one where there is a broad, community-wide issue easily rectified by a single BC solution, then – as we often see – the legislation pits compliance v common sense, eg where there are just 6 lots in the complex and they all agree it would be easier to have just one mowing contract covering the common property AND their own lawns.
Do you follow the law strictly, eg separate agreements with each owner and separate arrangements for payment of their share, without recourse to the BC Admin Fund?
Or do you adopt a more collegiate approach and – as long as no one demurs – simply run it through the Admin Fund, after budgeting for it, and setting the levies appropriately, at the AGM?
The current compliance method is a sensible, but clunky, step towards a legislative solution to a common problem, but it doesn’t seem to go far enough to allow, and regulate a more effective and comprehensive common sense method.
My O/C & committee have requested a lease agreement on Common property.
This has been now forwarded but no acknowledgment by O/C or Committee of recieveing the lease.
The 3 Committee members have been
Emailing myself and others in a harassing manner over this and coerced another owner to hit me with a complaints notice and funny enough the Complainant included the Committee as Respondents as well .
This made no sense at all .The complaint was regards delay in drafting lease agreement.And her sharing the expense of water usage.
Don’t know what this has got to do with me.
The 3 committee members have a history of defamatory emails about me to others.
So the question is ,
Is there a time frame for the O/C to now sign the lease as they have had plenty of time not to mention the Complainant had stated that deliberating of the lease agreement has gone on for to long & Committee have made no attempt to discuss with me terms & Conditions.
Can the O/C Manager be forced now to sign the lease without involvement of Committee.
Thanks
John
Hi,
Under a new regulation in QLD the committee can spend funds above its spending limit for insurance and it does not belong among restricted issuess any more.
Our committee spending limit is $7,800.00, insurance cost approx. $10,500.00 per year. The issue is that a few years ago Adjudicator order restricted committee to do not spend fund above the committee spending limit.
Does it mean in this case, that 2 quotes for insurance have to be on the AGM agenda and approval of spending as well?
Thank you.
Our strata committee has started to replace large lattice facade features with slats not lattice this has changed the appearance of the facade can they do this without owners approval?
Re the Q about contract work <$3,300 and its relevance to the Committee Spending Limit (CSL) of $8,200, ie $200 x 41 lots. It may be useful to check back through the Minutes for the AGMS and EGMs that the DEFAULT CSL of $8,200 has NOT been changed by ordinary resolution of the owners in general meeting. At the same time, check whether there has been any variation of your default Major Spending Limit (MSL) of $10,000, ie the so-called 2 Quote Rule. I would also recommend that if you go to this trouble and establish exactly what the current CSL and MSL are, you include a declaratory motion in each AGM from now on confirming the current CSL and MSL – including details of when they were varied if they are no longer the default limits.
The Unit Owners Association of Qld (UOAQ) can supply copies of draft Motions if necessary.
Our Building Manager has a spend limit of $350 for outlays for materials and services for their contracted duties and R&Ms, (specifically – arranging for repairs and maintenance that are not the responsibility of the Caretaker.) The committee has increased this spend limit to $1000 so the Building Manager can arrange R&Ms without having to ask Committee approval up to the $1000, this was done at a committee meeting, not an AGM. The CSC has not been amended with a Deed of Variation. Is the Committee allowed to increase the Building Manager’s spend limit without it going to an AGM?
Hi Matilda
The following response has been provided by Frank Higginson, Hynes Legal:
The first thing is what the clause actually says. They can all be different and it might be ‘$300, or an amount agreed with the committee’, in which case, the sky is (theoretically) the limit.
But what I would say is if the committee trusts the manager to do the right thing, and the manager does the right thing, I don’t see what the issue is. There is always going to be R&M needs. If the committee and the manager have a working relationship where the interests of the body corporate are at the forefront, then whether the spend is $300, or $350, it shouldn’t matter. The other thing would be that it is more than likely the spending could be per individual item, so 3 items of $300 would still comply with the clause.
Are there spending limits when it is in an EGM motion for caretaking when the current managers neglect to submit their motion alongside?
Hi Marie
We have received the following reply from Frank Higginson:
Where the agreement/arrangements also authorise the caretaker/manager as letting agent there is no need for a second quote which is usually required for other types of service contract.
There has been explained a lot about spending limit. I am not sure, how does it work with expenditure IN THE COMMITTEE LIMIT. Budget of admin. and sinking funds stays expenditure for many items. There are sums of the money in each item. So the committee may decide, how these funds will be spent. Does it mean that they have to vote in advance how specifically and how much for each expense they want to spend fund and after that work on it)? Does it mean that it is the authorisation? What if there is not expenditure in the budget for example Maintenance and Repair Additional Services but the committee have spent money for it? Unfortunately, there are not any minutes or records about decision of the committee., what and how much they spend. I hope I will understand better. Thank you for any help.
We have received the following reply from Frank Higginson:
Have a look at the Commissioner’s website on Committee Spending.
Frank…hi.
I am aware of the 2015 Adjudication involving Noosa River Gardens where the discretionary add-ons for disbursements by the Body Corporate Manager (BCM) were not included for purposes of calculating the proposed cost of the BCM’s contract. Rather, the Adjudicator only included the set expenses which, when added together, came in below the complexe’s Major Spending Limit (MSL) and therefore 2 quotes were not required.
Another variable with BCMs, for MSL purposes, involves the term of their contract. Which years do you use to calculate the proposed cost?
Most are for a set period, up to 3 years max., and the set expenses in the set period would be included in the MSL calculation.
But some BCM contracts include an element of discretion. One version combines a set 12 month term with an option vested in the BCM to renew for another 12 months. This optional period, I would assume, should not be included in the MSL calculation.
Another version, however, includes a set 12 month term plus an automatic renewal for another 12 months unless the Body Corporate decides against it. I am assuming here that the set expenses included in the automatic renewal term should be included in the MSL calculation.?
I would appreciate your thoughts, please.
Ross Anderson.
Hi kcharms
Thanks for your question. We have received the following reply back from Todd Garsden, Hynes Legal:
When carrying out an improvement to common property – both the committee spending limit and the improvement limits need to be complied with.
An increase to the committee spending limit does not affect any of the improvement limits. So even if the improvement spending is less than the committee spending limit, but above the basic improvement limit, it still needs general meeting approval.
The “minor improvement” relates to owners making an improvement and is set at $3,000.
In relation to Improvements to common property by the Body Corporate, if the Body Corporate at a General Meeting has “approved the Committee Spending Limit to be increased to $25,000 ($500 x 50 lots)” will this apply to “Improvements on Common Property” such as changing aesthetics of common areas i.e. concreting driveways (instead or relaying pavers), erecting retaining walls, structural repairs?
The BCCM Act Standard Module s.163 stipulates authorisation spending levels for improvements especially the thresholds allowed by Committee.
What does ‘Basic Improvement’ mean? Does this mean that the ‘Basic Improvement Limit’ legislative clause prevail over the Committee Spending Limit when it related to “Improvements”.
When will “improvements spending” require to be approved at a General Meeting instead of at a Committee Level? What is considered as “Minor” vs “Major” Improvements on Common Property?
Thanks