Recently, we have received a few questions into the site about the spending limit on legal fees or Maintenance costs. Hynes Legal provides the following responses.
Question: Our spending limit 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 their 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 spend limit is based on the number of lots per building, see except from this post – QLD: Body corporate spending limits – What are they and when do they apply?
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
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.
As an example for this site, from what I am reading is for an Apartment block with 165 lots, the spending limit 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 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.
This post appears in Strata News #199.
QLD: Q&A Breached Spending Limit on Legal Fees
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 this spending limit, 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?
Our complex is in Queensland.
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.
This post appears in Strata News #191.
- QLD: Q&A Body Corporate Major Spending Limit
- QLD: Body corporate spending limits – What are they and when do they apply?