Question: Our caretaker’s spend allowance has been increased from $500 to $1000 per item. Is the arrangement usual, and if so, how do we best control spending?
Our caretaker contract contains a spend allowance:
The Manager shall be entitled to pledge the credit of the Owner and incur an expense on behalf of the Owner in respect of any individual transaction for any amount not exceeding five hundred dollars ($500) OR such amount as the Committee of the Owner* may from time to time authorise in writing PROVIDED THAT such credit is pledged or expense is incurred for the purpose of obtaining goods or services used in the performance of the duties of the Manager pursuant hereto (except any duties of the Manager pursuant to clause 4) of the employees of the Owner or for such other purposes as are necessary or incidental thereto. Any such expense shall be paid by the Owner or if paid by the Manager shall be reimbursed by the Owner to the Manager.
The committee has formally resolved to increase the amount from $500 to $1,000 per item.
It is not limited to isolated incidentals. There is no limit regarding an accumulated amount, or how many items at any time, or how often, or frequency eg per week, per month etc. Essentially, it is an open operating account at the Caretaker’s discretion.
The first thing the Committee hears about it is after the work has been done or the item has been purchased, and the bill is presented to the Committee for approval and payment.
In 2020/21, Caretaker spent approximately $40,000 on items < $500 without pre-approval, and, with pre-approval per item, $47,000 on items >$500.
Doesn’t seem right to me.
Is this open $500+ allowance legal in QLD?
Can the BC override the Committee decision eg by ordinary resolution at an AGM?
Answer: Such a clause is a very common (and important) clause that appears in most management rights agreements.
Such a clause is a very common (and important) clause that appears in most management rights agreements. It allows the caretaking functions of the scheme to progress without (generally) unnecessary administrative requirements.
It is important to recognise that there are a number of obligations in the caretaker spending body corporate funds in that it must be for an expense the body corporate is responsible for. It is not an open cheque book.
Regardless, it is the body corporate’s funds and the committee can exercise more control over the spending of those funds if that is what the committee is more comfortable with. The committee may be able to give a direction (pursuant to another clause in the agreement) to ensure that any such expenses are first run past the committee for approval. The downside to this approach is that it may slow down the performance of duties if the caretaker then needs to wait for the committee to provide some level of approval.
This post appears in the September 2022 edition of The QLD Strata Magazine.
Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753