This article discusses whether a committee exceeding an approved project budget is legal and what owners can do about it.
Question: The committee received approval for $35k expenditure on a project. Without approval, the chairperson has added extra components to the project now expected to cost over $50k. Is this legal?
The committee received approval from lot owners at an EGM for expenditure on a project of $35k. Not only have the costs on the original project scope increased but without consultation, the chairperson has added extra components to the project so that it is now expected to cost over $50k. Work has proceeded and been approved retrospectively by a majority of the committee. Is this legal?
Answer: The retrospective approval can be legal.
The retrospective approval can be legal. Whether you are happy about being asked to grant it is another question and what might happen if you don’t is another one still.
Of course, in the ideal world the project would have proceeded as originally planned or any variations would have been voted on. It is reasonable to ask why this didn’t happen. Possibly there is a good explanation. I can have some sympathy with Committees trying to organise major works in the current climate – costs are changing quickly and availability of contractors is tight. It is often necessary to make quick decisions around which it is difficult to accommodate the stately times of legislated body corporate decision making. This doesn’t mean that Committees have carte blanche to just change projects and add costs, but if they can demonstrate that they have been making reasonable decisions it isn’t necessarily a bad thing for them to have been reactive to a developing situation. As a minimum, I would suggest that any retrospective approval also include a frank explanation as to why that approval is required.
Then, it is up to you as an individual to decide if you are happy with that. If you and a majority of other owners vote yes the matter can end there.
If you are unhappy or owners vote no, the next steps are much more uncertain. You can’t undo the works, but you might move to change or replace the committee so that a more responsible group is installed.
You might also consider whether your insurance could come into play – the Committee have acted outside of their authority, so perhaps there is a loss that has been experienced by the body corporate that could be covered by the office bearers liability. However, pursuing this line could be a dangerous game as the insurer could have many questions about how this happened and there is likely to be a future impact on premiums and your capacity to arrange insurance.
If other owners were happy with the works done, but individually you weren’t, you could take the matter to the Commissioner’s office to see if anything can be done. Again, they can’t undo the works, but they might reprimand the Committee and that might trigger a change in personnel if that is what you were after.
This post appears in Strata News #620.
William Marquand Tower Body Corporate E: willmarquand@towerbodycorporate.com.au P: 07 5609 4924