QLD: Q&A Body corporate spending limits – What are they and when do they apply?

At our AGM, the committee are going to put up a motion to renew the body corporate manager’s contract, which expires in June 2024. The proposed two year contract is above the $10,000 committee spending limit. We advised the committee they need to provide two quotes for the motion. The body corporate manager told them this isn’t required. Who is correct? How can I stop or challenge this?

Answer: A proposal put forward by the body corporate at a general meeting that is over the major spending limit requires two quotations to be considered and circulated to owners.

A proposal put forward by the body corporate at general meeting which is in excess of the major spending limit requires two quotations to be considered and circulated to owners. In these circumstances, a single quote is only appropriate if it is not practicable to obtain two quotations.

It may be worthwhile asking the committee to explain the basis in which they believe a second quotation is not required. If their explanation does not provide a valid basis, and the motion is ultimately approved, it may be able to be challenged in the Commissioner’s Office.

Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753

This post appears in Strata News #644.

Question: Do we need more than one quote for a strata loan?

My Body Corporate needs a loan of over one hundred thousand dollars to repaint the roofs. How many quotes do we need to obtain for the strata loan to carry out this work? They obtained three quotes for the physical painting but only one quote for the strata loan.

Answer: I could see an argument that a loan could amount to the acquisition of personal services necessitating a second quotation.

The relevant limit for major spending is the threshold as to when at least two quotations need to be considered. Ordinarily, this will kick in at a cost of more than $10,000, but this will depend on the number of lots in the scheme and if the body corporate has previously changed the threshold at a general meeting. It will also only apply if a second proposal is capable of being obtained.

The threshold applies to motions that propose:

the carrying out of work or the acquisition of personal property or services.

Approving a loan is not the carrying out of work or acquiring personal property. However, I could see an argument that a loan (with an interest component of more than the relevant limit for major spending) could amount to the acquisition of personal services necessitating a second quotation – but this argument may be novel. Notably, it was not an issue that the adjudicators considered in Waimana Gardens [2003] QBCCMCmr 168 or Allen Court [2007] QBCCMCmr 296.

Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753

This post appears in Strata News #644.

Question: Our Committee received an enforcement to “repair, rectify, demolish or remove” a common property structure. Did they have authority to demolish and dispose of the common property without first obtaining approval?

Our Committee is in receipt of a local government Enforcement notice that requires the Body Corporate to “repair, rectify, demolish or remove” a common property structure so that it is no longer dangerous or dilapidated.

Did the Committee have the authority to demolish and dispose of the common property and approve expenditure for the work (which was more than twice the Committee’s spending limit), without first obtaining proprietors’ approval at a general meeting? There was an adequate time in which to obtain quotations and call an EGM before the compliance date. The relevant legislation is BUGTA.

Answer: The committee may intend to ratify the decision at the next AGM.

There are a few different approval elements to determine if a general meeting was required to properly authorise such a decision.

Committee spending

Section 47 of the Building Units and Group Titles Act 1980 (Qld) provides that the committee can expend funds:

which is below its spending limit ($200 for each lot in the scheme if not amended); or

to comply with a notice served on the body corporate by the local government.

Accordingly, the committee would have been authorised to spend the funds required to demolish the common property structure even if it exceeded the spending limit.

Improvement works

Approval of the physical works to improve (change) the common property would have only needed general meeting approval if the cost was more than $2,000 for each lot in the scheme. I suspect this was not the case.

Restricted matter

The final question is whether the decision to remove the structure was a restricted matter. A restricted matter is a decision that cannot be made by the committee and required a general meeting. Such a type of decision extends to any matter which seeks to alter the rights, privileges or obligations of proprietors.

If owners were making use of the structure – which has now been removed – this would seemingly be a change to the privileges of owners that attached to the structure such that a general meeting would be required.

However, I suspect that if this issue made its way to a referee, at worst, the referee would provide the body corporate with the opportunity to seek ratification at general meeting prior to any other action being taken – particularly in light of the consequences of non-compliance with the enforcement notice. It may be the case that the committee also intends to ratify the decision at the next annual general meeting in any event. This is generally an acceptable course of action for the committee to take.

Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753

This post appears in the March 2023 edition of The QLD Strata Magazine.

Question: Is a ‘lump sum motion’ for legal expenses valid? It states “…seek advice as is required from time to time from the body corporate solicitors and other industry experts….”.

At our recent AGM the Committee proposed the following motion:

Body Corporate Solicitors

That the body corporate seek advice as is required from time to time from the body corporate solicitors and other industry experts to assist the committee in relation to dispute resolutions, recovery of amounts owing to the body corporate, service contracts and Building Management Group issues at a cost not to exceed the major spending limit of the body corporate.

Our maximum spend limit is $395,000. Is such a ‘lump sum motion’ valid?

Answer: The motion does not describe the contractor, scope of works or amount of expenditure for each engagement and, on balance, is vague and unenforceable.

The motion does not describe the contractor, scope of works or amount of expenditure for each engagement and, on balance, is vague and unenforceable.

In Xanadu East [2011] QBCCMCmr 64 the adjudicator provides:

In relation to Motion 16, I note that no quotations were sent to owners regarding any of the proposed works. Further, I note that the explanatory notes contained no specific information regarding any of the works actually proposed by the motion. As set out above, section 94 of the Act requires a body corporate to act reasonably in anything it does. In the absence of any quotations or details regarding the works proposed by Motion 16, I am not satisfied that the level of information presented to owners regarding the proposed works was reasonable.

This is, however, a matter of interpretation and it would be open for an adjudicator to decide the motion was sufficiently certain. Even if the motion was found to be valid, it has little practical effect as it only makes a preliminary decision to seek expert advice.

In Redlynch Grove Apartments [2009] QBCCMCmr 195 the adjudicator relevantly provides (our emphasis):

As mentioned above, Motion 3 was that independent legal advice is to be obtained by the body corporate to investigate the past conduct of the current committee but this motion was ruled out of order on the following grounds:

It does not name a legal adviser or provide a mechanism for choosing a legal adviser;

It did not include quotes to enable the body corporate to approve the expenditure;

There is no provision for this expenditure in the current budget and there was no mention of a special resolution to raise funds for this proposal.

I believe it is quite plausible that the purpose of this motion was to make a preliminary decision as to whether or not legal advice should be obtained and was not an expenditure motion. In the event that the motion was carried, a further motion to engage legal representatives could be placed on the agenda for the next general meeting. Accordingly, I do not believe that this motion should have been ruled out of order.

Ultimately a further resolution is required to properly authorise the engagement and expenditure of a particular consultant. If the engagement exceeds the relevant limit for major spending for the Scheme, then a second quotation would need to be obtained and considered by the Body Corporate. The relevant limit for major spending is:

the amount set by ordinary resolution of the body corporate at a general meeting; or

if there is no amount set, the lesser of:
1. $1,100 multiplied by the number of lots in the scheme; or
2. $10,000

Holly Dunne Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753

This post appears in Strata News #625.

Question: My neighbour is in contravention of a bylaw by installing a clothesline. This affects my view. The BC has offered to extend the fence to solve the problem. Can the BC use their funds to pay for this?

I live in a body corporate. My neighbour has installed a clothesline that is visible from outside the lot and is in contravention of our by-law as set out in the CMS. The body corporate issued BCCM forms 11 & 10. The owner has not responded and the matter has been taken to the BCCM conciliator, and now the BCCM Adjudicator.

The Body Corporate has issued an agreement to be signed by the applicant and the affected party offering for the Body Corporate to pay for a dividing fence height extension to partially hide the clothesline from view.

Does the Body Corporate Committee have the authority to use Body Corporate money to rectify a contravention of the by-law or should this be the responsibility of the offending owner? The cost of the fence extension is $1500.

Answer: The body corporate only has the power to expend its funds for purposes that are permitted under the legislation.

The body corporate only has the power to expend its funds for purposes that are permitted under the legislation.

The adjudicator in Orchid Park [2013] QBCCMCmr 40 relevantly provided:

The body corporate has no authority to make improvements to any owner’s lot even if the majority view it as a good idea. If this is what Motion 10 proposed, then it was fatally flawed.

Accordingly, if the fence that is being extended is the responsibility of the adjoining owners, the body corporate is not permitted to expend its funds for that purpose.

However, if the fence is common property, it can authorise the fence works.

Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753

This post appears in Strata News #608.

Question: When the budget is approved does that mean spending limits no longer apply?

Answer: To actually spend any of the budgeted funds, the correct spending limits still need to be observed.

In short, no.

Approval of the budgets is to calculate the levies owing by owners and anticipated expenditure. It does not provide any pre approval to spend the funds.

To actually spend any of the budgeted funds, the correct spending limits still need to be observed (improvement limit, committee limit and two quote limit).

Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753

This post appears in Strata News #593.

Question: At a general meeting, if owners vote in favour of purchasing certain capital items but the committee has made no allowance for the cost in the expenditure component of the sinking fund budget, can a committee provided the amount falls within its spending limit, purchase that equipment if either there are surplus monies in the sinking fund and/or the monies previously collected for that equipment haven’t been expended?

Answer: A committee does not need to obtain additional funding at general meeting for any and all expenses that are not specifically budgeted for.

The short answer is yes.

A committee does not need to obtain additional funding at general meeting for any and all expenses that are not specifically budgeted for. This is why it is called a budget – it is not intended to be 100% precise.

This was well discussed in Parkwood Villas [2010] QBCCMCmr 521 where the adjudicator relevantly provided:

“The legislative provisions clearly indicate that the budgets contain ‘estimates’ of necessary expenditure. There is no suggestion in the legislation, either in the provisions relating to the budgets or relating to the control of spending, that budgets set the limit of expenditure on any line item or that spending cannot be approved on any specific project if that would put the spending on that budget line item above the budget estimate for that item. The reality of budgeting is that some items will be overestimated and some will be underestimated, because in some areas it can be legitimately difficult to estimate what expenditure may be necessary. For example, it may have been difficult to predict the number of dispute resolution applications that would be lodged by the applicants against the Body Corporate in the last financial year.

I consider it would be an unreasonable expectation that a body corporate must review its accounts for every budget line item every time even small amounts of expenditure are incurred. It would similarly be unreasonable to expect that a body corporate must call a general meeting to adjust the budget if the expenditure on a budget line item had exceeded the estimate by even a small amount. This could create a requirement to call general meetings regularly throughout the year to amend the budget, which could be very expensive and is simply not required by the legislation.

What the legislation does require is that the body corporate must call a general meeting to approve a special levy if its budget will not accommodate a new liability that arises. If an unexpected expenditure arises, but existing funds will cover that expenditure because other areas of expenditure have been lower than estimated, a special levy may not be required.”

Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753

This post appears in the June 2022 edition of The QLD Strata Magazine.

Question: We recently held a general meeting to obtain approval to reline broken pipes damaged by roots. As this is an ongoing problem, do we have to hold a meeting every time this maintenance needs to be done?

Our Sinking fund is formulated each 5 years by a quantity surveyor.

In our sinking fund, we have a very large sum for “unforeseen”.

Our complex is 33 yrs old.

We held a general meeting to allow us to use these “unforeseen” funds to reline broken pipes under the complex driveway.

The problem with roots in broken pipes is a continual problem.

Do we require a General Meeting each time this happens to pass a motion to use these funds?

Answer: Approval via the committee or body corporate is still required even if you have listed an item in your budget or sinking fund.

The requirements for holding a meeting are based on the spending levels of your site.

The Committee has a spending limit starting at up to $200 per lot with an option to extend this at a general meeting if required. So, if you have a 40 lot scheme, and the Committee spending limit is $200, the Committee can authorise expenditure of up to $8000, inc GST.

Expenditure over the Committee spending limit needs to be approved at a general meeting. Here you need to consider the major spending limit which establishes if you need more than one quote. This limit is the lesser of:

$1,100 multiplied by the number of lots in the scheme

$10,000.

These figures are both GST inclusive.

It’s worth noting that the approval via the committee or body corporate is still required even if you have listed an item in your budget or sinking fund.

In your comment you mention that you have a large sum set aside for unforeseen circumstances. It’s not quite clear what this means or how this is worded in your documents. Technically, body corporates can’t budget for contingencies, with all monies raised supposed to be allocated for a specific purpose. This can get a bit murky when it comes to sinking funds, where there can be a wide ranging report covering a multitude of potential costs, but only loose regulation of how amounts are raised and actually spent.

Still, as things stand it seems like your scheme is in good position. You have a maintenance issue that needs to be fixed and funds available to resolve it. Next step should be to organise some quotes and have the preferred option approved by either committee or body corporate.

See the BCCM website for more info on spending limits.

William Marquand Tower Body Corporate E: willmarquand@towerbodycorporate.com.au P: 07 5609 4924

This post appears in the May 2022 edition of The QLD Strata Magazine.

Question: Can the committee spend body corporate funds on the maintenance of individual lots which are clearly the lot owners’ responsibility?

Our committee has recently approved a motion to use body corporate funds to pay a contractor to mow the private lawns of about half a dozen lot owners. As our townhouse complex (48 units) is a Standard Format Plan I assumed that lot owners were responsible for the maintenance of their lot and not the responsibility of the body corporate.

The minutes of the relevant meeting stated that the body corporate made the decision to pay out of body corporate funds because it would “benefit the whole community”.

The body corporate management company state the motion was approved “…to ensure that the complex looks reasonably uniform”. I was also told that they “… had not received any other complaints.”

I was under the impression that the committee could only spend body corporate funds on the maintenance or improvements to the common property, not on individual lots which are clearly the lot owners’ responsibility.

Answer: The legislation only permits the body corporate expending funds towards a lot in very limited circumstances.

The body corporate is responsible for maintaining common property and the lot owner is responsible for maintaining their lot. This includes lawns.

The legislation only permits the body corporate expending funds towards a lot in very limited circumstances. This does not include circumstances where “it benefits the whole community”.

However, it is contemplated in circumstances where the lot owner agrees to engage the body corporate to provide a service and the committee recovers the associated costs from the lot owner. This is the most common and appropriate way of regularising the arrangements.

Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753

This post appears in Strata News #527.

Question: At our AGM, budgeting for legal services was declared out of order. How do we gain approval for the spending?

At our recent AGM, a committee motion relating to budgeting for legal services was declared ‘out of order’.

What must the committee now do to obtain body corporate/owner approval of such spending in 2021/22? Would this, for example, warrant an EGM being called?

Answer: Unless there was a fundamental issue with how the motion was drafted I am unsure as to why the motion was declared out of order.

The body corporate is entitled to budget for, and expend, costs on legal services. So unless there was a fundamental issue with how the motion was drafted I am unsure as to why the motion was declared out of order.

If the committee does want to carry out spending on legal services, and the anticipated costs are less than the committee spending limit, the committee can simply make the decision to engage a lawyer. There is no strict and immediate obligation for an EGM to be called to amend the existing budget or strike a special levy for an unanticipated cost (however depending on the amount and length of time until the next meeting this may need to be considered retrospectively).

Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753

This post appears in Strata News #527.

Question: Commercial modules don’t have spending limits but do they have to obtain more than 1 quote if they are spending over a certain amount, eg: $1100 (if not otherwise set)?

Answer: There is no relevant limit for major spending (the requirement for 2 quotes) under the commercial module. This does not mean that 2 or more quotes cannot be considered though.

Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753

This post appears in Strata News #521.

Question: The committee has been advised that approval can be given for improvements to Exclusive Use and Common Areas that exceed the $3000 limit on the condition they are then ratified retrospectively at a general meeting. Does this comply?

We are in a complex of 140 units under the Accommodation Module and Building Format Plan.

The committee has been advised that approval can be given for improvements to Exclusive Use and Common Areas that exceed the $3000 limit on the condition they are then ratified retrospectively at a general meeting. In other words, the applicant doesn’t have to wait for a General Meeting to commence the improvements but must seek retrospective approval at a General Meeting. This is in effect a workaround of Section 183 and Section 177 of the Regulations. Is the advice correct?

Answer: The ratification approach provides a helpful practical solution to avoid the need to call a general meeting each and every time a request like this is made, however……

Strictly speaking – the approval requires general meeting approval. However, the ratification approach provides a helpful practical solution to avoid the need to call a general meeting each and every time a request like this is made. Adjudicators will generally accept ratification as a way to remedy any technical issue and not invalidate the decision.

However, the risk in taking this approach is if the general meeting votes against the ratification. This means the improvement has not been properly approved and it may need to be reinstated.

Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753

This post appears in Strata News #513.

Question: Can a committee spread the spending for a project over several years so that each year the amount is less than the spending limit?

Given that the committee cannot spend more than its spending limit and the committee cannot divide a project in smaller parts, can a committee spread the spending for a project over several years so that each year the amount is less than the spending limit, in order to avoid having to obtain approval by ordinary resolution at a general meeting?

Is the committee obliged to send out the Statement of Accounts with the minutes when the Statement of Accounts is an agenda item? If they are not, then when can owners have the opportunity to ask questions about expenditures?

Answer: Spending limits exist for a reason and Committees and owners should respect that.

There is always a level of concern when people are looking for ways to get around the legislation as seems to be happening here. Spending limits exist for a reason and Committees and owners should respect that. What’s the objection to calling a general meeting to approve expenditure over the limit? If it is simply the cost of the meeting that is not a valid reason – owners need to accept that there are bureaucratic costs to running a body corporate. If it is because the Committee is worried that owners will reject the proposal it suggests there is something wrong with the proposal.

For the accounts, these are included as a part of the AGM notice but there is no requirement to send them out as part of a committee meeting notice/minutes. Still, accounts should be freely accessible to owners and if they are not that is a red flag. Tower’s owners can access updated accounts on a daily basis via the online portal.

William Marquand Tower Body Corporate E: willmarquand@towerbodycorporate.com.au P: 07 5609 4924

This post appears in Strata News #498.

Question: I understand in QLD a community can decide on maintenance up to a value of $200 per lot times the number of lots in the complex. Has this changed? For decisions of a greater expense, what is the process required?

Answer: There has been an exception to that $200 per lot rule where if it’s for insurance, the committee can exceed that amount.

There has been an exception to that $200 per lot rule where if it’s for insurance, the committee can exceed that amount.

The one thing to keep in mind though, is that the $200 per lot number can be changed by the body corporate. They can go to general meeting by ordinary resolution and make it $1,000 per lot or a flat sum of $500 or $1,000,000 dollars, whatever the body corporate decides. It’s always good to check whether the spending limit has previously been changed.

What these regulation modules have done, is they’ve added an exception to that amount, which is for insurance.

Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753

This post appears in Strata News #478.

Question: Our BC and owners have called a meeting that is not legally binding but are proceeding anyway. They are also discussing major spending without comparison quotes. What do we do?

Our BC and owners have called a meeting that falls within the mandatory 21 day period and they have been advised that it is not legally binding but are proceeding anyway. The meeting notice did not come with a form 5. I understand that any decisions made at this meeting would not be binding but what would happen about the costs of this meeting?

The body Corp managers are not involved as the original request for an EGM was not supported by a list of signatures that represented 25% of owners. The BCM are taking no part as they say their services have not been requested.

Amongst other items on the agenda is the replacement of BC managers and replace security to the value of $831,000 pa without comparison quotes.

I am at a loss of what to do and what the next step would be if the EGM does go ahead. This is a large complex of around 700 units.

Answer: It may be hard to get clear information, but it would be worth starting by assembling as many definite facts as possible.

It sounds like there is a lot going on, and I suspect there is a much longer story than the question and answer format here allows.

It may be hard to get clear information, but it would be worth starting by assembling as many definite facts as possible.

For example, the question states that the meeting has not been called in accordance with the 21 day notice period. You will know the meeting date and the Secretary should be able to verify the date the notices were issued. This should be a verifiable fact.

For items such as the security, it seems likely that two quotes are required. You can check the information available against the legislation on (major spending limits) to confirm. It’s possible that the body corporate managers motion may also need additional quotes. See the government website for advice on spending limits: Queensland Government: Body corporate spending

Once you have your facts you can reach out to other owners to see if they agree. If you have concerns it is likely that others will too.

Then, you can write to the Committee via the Secretary stating your concerns over the validity of the meeting and asking them to respond.

If things are really serious it may be worth engaging a body corporate lawyer to review the notice for you and provide some advice as to how you may object if appropriate.

Otherwise you can contact the commissioner’s office and seek advice on the best time to make an application to them either to dispute the calling of the meeting, the terms of the meeting or the outcome when received via the minutes.

William Marquand Tower Body Corporate E: willmarquand@towerbodycorporate.com.au P: 07 5609 4924

This post appears in Strata News #478.

Question: Should a top up for a management rights agreement be listed as an ordinary motion? I thought this would be a Special Resolution and thus require a more positive vote from the owners.

I have been looking at past AGM minutes and noticed a top up for a management rights agreement motion listed as an ordinary motion. The motion was a top up not an option from the contract. I would have thought that granting a 5 year extension that costs 5 x annual payment would equal $400,000. Should this have been a Special Resolution and thus require a more positive vote from the owners.

Answer: No, ordinary resolution is the correct resolution threshold for this scenario.

Chris Irons Hynes Legal E: chris.irons@hyneslegal.com.au P: 07 3193 0500

This post appears in Strata News #473.

Question: We are about to repair our driveway for cracks and leaks to the underground car park. We are looking at carrying out the repair in three stages. Can this be treated as three separate expenses or is this in breach of the regulations?

We are about to repair our driveway for the cracks and leaks to the underground car park. What we are looking at is to repair it in three stages. Find and fix the cracks that are causing the problems. Then do the same to the other smaller ones. After this is accomplished we will have the surface done with three coats of different sealants and membranes.

Quotes for the different stages will be received at three different times. It will be almost impossible to do a total quote as we have to complete each stage before we can go to the next stage.

Can we treat this as three different items of expense and not a single item of expense? If we take this to our body corporate for approval in three separate stages, will we be in breach of the regulation?

Answer: Improvements to common property are generally considered as a whole and not as a series of individual works.

You’re right. For the purposes of approval by the body corporate, improvements to common property are generally considered as a whole and not as a series of individual works. I note you also refer to stages, which suggests that things will occur over a period of time and not all at once, which further reinforces the idea that this is a series of individual works.

I note your final comment that quotes will be ‘almost impossible’ until after each preceding ‘stage’ is complete. The key here is your reference to ‘almost impossible’. So that suggests it is in fact possible. You’d need to have some good reasons to back up ‘impossibility’. For example, if you ask several contractors and every single one of them says they can’t quote until the previous work is done, and you have some emails to that effect, then perhaps it might be reasonable to argue that treating quotes separately would be ok. If ‘almost impossible’ means that it is a lot of hassle but the quote for all 3 works is obtainable, I don’t think it would be reasonable.

We have previously written about spending limits here: Body corporate spending limits

Chris Irons Hynes Legal E: chris.irons@hyneslegal.com.au P: 07 3193 0500

This post appears in Strata News #454.

Question: Our new Chairperson has raised the question on contract work of less than $3300 requiring a formal quote and contract. What are our spending limits?

Our new Chairperson has raised the question on contract work of less than $3300 requiring a formal quote and contract. See extract and attached link, prompting this.

QBCC Small Building Projects Contract (For Domestic Building Projects Not Exceeding $3,300)

NOTE: This contract is strictly for domestic building work with a contract price of $3,300 or less (including labour, all materials and GST). Although Queensland building legislation does not regulate contracts priced at $3,300 or less, this brief contract is provided to help homeowners and contractors to accurately record their agreement.

Our scheme has 41 lots all with private lots of their own. Being registered as a Building Format Plan, Standard Regulation the Body Corporate has responsibility for maintenance of roofs and the supporting structure of each privately owned building.

As I understand, the committee has a spending limit of $8200 + or – 10% outside of budget.

Answer: The default spending limit for this committee would appear to be the $8,200 mentioned.

We first covered spending limits here: Body corporate spending limits – What are they and when do they apply?

The default spending limit for this committee would appear to be the $8,200 mentioned. I do not think there is a contingency added to the spending limit. So in the context of what the committee can spend, they could make a decision on anything under that.

Frank Higginson Hynes Legal E: frank.higginson@hyneslegal.com.au P: 07 3193 0500

This post appears in Strata News #405.

Question: The body corporate is considering replacing the old timber decking with tiles. As we are not replacing like for like, is the work permitted without seeking approval at an AGM?

Adjacent to our swimming pool is a timber deck nearing the end of its life.

The body corporate is considering replacing the timber with tiles for durability and to reduce maintenance costs. How would we proceed? As we are not replacing like for like, is the work permitted without seeking approval at an AGM?

Answer: Approval is not needed at an AGM if the cost of the improvements is not more than the ‘basic improvements limit’ for your scheme.

I am assuming the timber deck is common property.

Section 163 of the Standard Module (equivalent provisions of other Modules) provides for how the body corporate can make an improvement to common property. The committee can approve this and approval not be needed at an AGM if the cost of the improvements is not more than the ‘basic improvements limit’ for your scheme. That limit is the number of lots multiplied by $300.

If this doesn’t apply then that same section outlines the type of approval required depending on your circumstances.

Chris Irons Hynes Legal E: chris.irons@hyneslegal.com.au P: 07 3193 0500

This post appears in Strata News #347.

Question: Can the spending limit for the committee be raised to $35,000 so that the committee can purchase the insurance instead of the decision being made by the body corporate at the AGM?

The committee has proposed a motion for the upcoming AGM whereby the spending limit for the committee be raised to $35,000 so that the committee can purchase the insurance instead of the decision being made by the body corporate at the AGM.

Another proposal is that the end of the financial year be changed so that the AGM can decide on the insurance.

Can you please advise on the pros and cons of each.

Answer: It’s imperative that all owners know of the proposed premium and be given the chance to vote upon it.

Your committee may not be able to do this, regardless of pros and cons. Section 177 of the Body Corporate and Community Management (Standard Module) 2008 provides that the proposed insurance cover must be presented to the Annual General Meeting, where all owners can vote upon it.

Think of it another way: insurance is one of the most essential obligations of a body corporate and it has a direct impact on every owner. Therefore, it’s imperative that all owners know of the proposed premium and be given the chance to vote upon it.

Chris Irons Hynes Legal E: chris.irons@hyneslegal.com.au P: 07 3193 0500

This post appears in Strata News #339.

Question: The body corporate exceeded their approved spending limit for our embedded electricity system by $4000 without seeking approval. Is this legal?

Our Body Corporate committee has a spending limit of $22,500.00. The approval was given for the committee to spend $25,000.00 on the embedded electricity system.

The system ended up costing $30,000.00. No approval was sort from the body corporate. They went ahead and spent the extra $4,000.00 without approval. Is this legal?

Answer: The committee would probably need to ratify the additional spending.

The committee would probably need to ratify the additional spending. It is not ideal to have to do that after the spending takes place but ultimately it is something that is relatively commonplace (even though it is not technically correct).

If the ratification is not obtained that is when the issue becomes significant.

Frank Higginson Hynes Legal E: frank.higginson@hyneslegal.com.au P: 07 3193 0500

This post appears in Strata News #266.

Question: Our Committee is proposing Building Manager spending limits to reduce the time and expense of Votes Outside Committee. Is the body corporate allowed to authorise these spending limits?

I am in a complex with 50+ units, Accommodation Module.

I am aware the body corporate may change the Committee Spending Limit and the Major Spending Limit by ordinary resolution at a general meeting.

Our Committee is now proposing an AGM Motion authorising a ‘Building Manager (with Chairman Approval) Spending Limit’ of $2,200 (GST incl) and another AGM authorising a ‘Building Manager Spending Limit’ of $660 (GST incl) – to reduce the time and expense of Votes Outside Committee.

Is the body corporate allowed to authorise these spending limits?

Answer: If the motion is drafted properly there is probably a way that this can be achieved.

Those spending limits are not amounts that relate to the spending limits of the committee.

We presume there is some mechanism in the management rights agreements to allow the building manager to spend the funds of the body corporate? In theory, what that would be achieving is an adjustment to the committee spending limit for caretaking purposes. So if the motion is drafted properly (and the management rights say what I suspect they say) there is probably a way that this can be achieved.

Frank Higginson Hynes Legal E: frank.higginson@hyneslegal.com.au P: 07 3193 0500

This post appears in Strata News #262.

Question: I have questions around the decision making process for the replacement of our roof which was damaged by a recent hail storm.

In December, our building consisting of two towers undertook a full roof replacement. The roof was damaged in a hail storm and the insurance company agreed to pay for a partial roof replacement.

The committee held an EGM where they presented a single quote for a full roof replacement, partially covered by the insurance payout and the rest (just under $100,000) from the sinking fund. This motion was passed.

We have recently seen the contract and it appears that the then chairman and the roofing contractor signed the contract before the EGM. Another committee member signed the contract after the EGM and it looks like the chairman has amended the date next to his signature to match this date.

Should they have taken multiple quotes to the owners? Do we have any recourse for the extra money paid for the full roof replacement? Is there any recourse if the signature on the contract was changed? What are the body corporate spending limits we need to respect?

Answer: For any spending above the body corporate major spending limit, a second quote needs to be considered (unless it isn’t practicable).

The body corporate needs to comply with the major spending limit. For any spending above the limit, a second quote needs to be considered (unless it isn’t practicable).

So the answer is going to depend on whether the body corporate has ever changed its major spending limit and whether a second quote was practicable. If the insurer was insisting on a particular contractor then it may not have been practicable for a second quote. This is probably the most likely situation.

If the motion was eventually approved, there is little recourse if the contract was prematurely signed. Signing on behalf of the body corporate needs two committee members and the seal for it to be considered valid.

Frank Higginson Hynes Legal E: frank.higginson@hyneslegal.com.au P: 07 3193 0500

This post appears in Strata News #150.

Question: Our body corporate spending limits for each of our three buildings in the scheme is only $500. As each building has quite a few lots, this seems too low.

I am a Building Maintenance Manager for a site in Queensland that has 3 Apartments blocks on the 1 site and each Apartment block has its own Body Corporates. The company I work for has Management rights for the entire complex so we are responsible for sourcing quotes for any maintenance issues that arise.

The Buildings consists of:

165 Lots

160 Lots

195 Lots

Currently, our spend limit for each building is $500 total before we need to source 2 quotes.

I have read on this site that the 2 quote body corporate spending limits are based on the number of lots per building see except from the post above:

Major spending (also known as the two quote rule)

The limit for major spending is also found in the Regulation Module. This sets out whether two quotes are needed before the body corporate can spend its funds and this limit imposes conditions about needing two quotes irrespective of whether the spending is considered at committee or general meeting level.

The default position is that the limit for major spending is the lesser of:

$1,100 for each lot in the scheme; or

$10,000.

So if the scheme has 20 lots, the body corporate can spend up to $10,000 before needing a second quote.

If a scheme had 8 lots it would need two quotes before it spent $8,800.

Again, this can be changed by the body corporate at general meeting by an ordinary resolution.

The exception to needing two quotes for major spending is if there are exceptional reasons and it is not practicable for two quotes to be obtained. The example in the legislation is that the body corporate is looking for a type of good with particular characteristics and there is only one supplier.

From what I am reading, for an Apartment block with 165 lots the body corporate spending limits before I would need to source 2 quotes is $10000 as it would be the lesser of the 2 above. If this is the case then by law, the Body Corporate has to allow this to happen?

Answer: You might be looking at the spending limit imposed on the manager pursuant to the management rights agreements.

That’s the starting position for body corporate spending of its own accord (assuming the body corporate hasn’t previously changed it at a general meeting).

However, you might be looking at the spending limit imposed on the manager pursuant to the management rights agreements – that is a different spending limit altogether set out in the contract.

Frank Higginson Hynes Legal E: frank.higginson@hyneslegal.com.au P: 07 3193 0500

This post appears in Strata News #199.

Question: A maximum spending limit on legal fees was passed at an AGM some time ago because of reckless spending by a previous committee. The committee has breached this spending limit. What can we do to rectify this …. and what could the consequences be if we don’t?

A resolution to limit committee spending to a maximum of $500 on legal fees was passed at an AGM some time ago because of reckless spending by a previous committee.

Our committee was aware of the body corporate spending limits, but not aware that it had been made by a meeting of the body corporate.

Our managing company was also not aware that it was a restricted issue and therefore advised the committee they could vote to exceed this spending limit.

The committee subsequently went ahead and spent $660 on legal advice …. $160 more than allowed.

What can we do to rectify this …. and what could the consequences be if we don’t?

Answer: Put everyone on notice of the restricted issue and then move on.

They have clearly breached the spending limit.

In terms of what to do, I would simply put everyone on notice of the restricted issue and then move on.

It is simply not worth fighting about the $160.

Frank Higginson Hynes Legal E: frank.higginson@hyneslegal.com.au P: 07 3193 0500

This post appears in Strata News #191.

Have a question about the way body corporate spending limits are applied at your scheme, or something to add to the article? Leave a comment below.

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