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.”
This post appears in the June 2022 edition of The QLD Strata Magazine.
Todd Garsden
Mahoneys
E: tgarsden@mahoneys.com.au
P: 07 3007 3753
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