This article about the differences between Queensland and Victoria for strata committee spending limits has been supplied by Deryck Walker, RMIT.
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QLD VS VIC
Committee Spending Limits
What is the extent of your committee’s default decision-making powers for spending? At what point should committee consult the wider Strata Scheme?
This is a regular discussion point and one area where a Strata Manager will be called upon by Committee to provide guidance. The short answer is, there is no single answer. It will vary per scheme depending upon the property, the powers delegated to the committee, and extent and cost of intended works. You could also add in it depends on the dynamic and political landscape of the Strata Scheme.
In this specific example, the difference in default powers between Queensland and Victorian Committee’s is quite astounding. It would seem at polar opposites.
In the blue corner..
In Victoria, Committee is by default delegated all of their powers and functions under the Owners Corporation Act 2006, which is the equivalent of any decision which can be made by Ordinary Resolution of the Strata Scheme (Note, this is the case unless specifically restricted by resolution of the Strata Scheme). Drilling down on that one step further, Committees therefore (unless restricted) have the ability to spend up to double the annual fee income. So take a Strata Scheme with 16 lots, and $150,000 of annual fee income. In this situation, the committees spending limit is $300,000.
Additionally, the Owners Corporation Act goes no further to state how and where that money is drawn from; whether existing funds, or special levies, or very little about what the funds are to be used for. Therefore in Victoria, the Committee could commission works of any type (within reason!) and either draw funds from monies held, or raise a Special Levy to fund the project without requiring a decision or permission from the Strata Scheme.
In the red (maroon?) corner…
In Queensland, the Committee is subject to far more stringent spending limits, with a dizzying array of requirements and restrictions. The default delegation states that Committee’s spending limit will be based on a calculation of $200 per lot, and unlike Victoria, the Committee cannot make a decision which is the equivalent of an Ordinary Resolution.
Therefore, let’s take the above Scenario with the default legislative delegation in a Scheme of 16 Lots and $150,000 of annual fee income. This would grant a spending limit of $3,200. Additionally, funds must be pre-allocated from the budget for the specific purpose. The Act goes further to state that a project cannot be broken into several pieces in order to by-pass the spending limit. So if a single project was $5,000 consisting of $3000 carpentry and $2000 painting, the Act specifically prevents the Committee from trying to “pull a shifty” and proceed with the two jobs separately.
So there you have it! On one end, the Committee in Victoria is the lumbering heavyweight, taking massive powerful hooks with extensive default financial decision making powers. Whilst in Queensland, the Committee is represented by a welter-weight dishing out multiple jabs, very restricted and bound to consult the Strata Scheme on most matters (unless a specific additional delegation has been made in advance).
Which Committee Spending Limits System is Better?
Which system is better? Neither. My gut feeling is Queensland is overly restricted, and Victoria is providing too much by default. So something halfway between the two may strike a good balance.
I would be interested to hear from QLD Strata Managers to see if this default delegation hamstrings the Committee’s ability to act on simple decisions? Or is it a case where the common committee is delegated powers greater than the standard provisions to circumvent this issue and increase the default limit? These days, in large schemes it is common to see R&M contracts in 6 figures and more, and I imagine it would be cumbersome for the Committee to have to call a General Meeting each time they wanted to retile a floor, refurbish a cooling tower or commission roof repairs.
Some traditionalists may argue the whole reason you have a Committee in a Strata Scheme is to make housekeeping decisions for the Strata Scheme. The only difference is that in the intervening period since the Owners Corporation Act was created in Victoria, fee income and “housekeeping” projects can now commonly exceed a million dollars, where previously in the “old days” there were far fewer large schemes, therefore large repair bills and 7 figure fee income was less common.
There is another factor to consider with a high spending limit and that is trust and proficiency. My experience is the majority of lot owners are happy to go along with committee decisions, including additional levies, if they trust the committee is meeting its fiduciary duties, acting with diligence, and making balanced decisions. Much of this is in the eye of the beholder. I have witnessed perfectly reasonable lot owners tearing each other to pieces over housekeeping decisions made by the committee. In some cases, due to a disagreement on what is deemed a “high priority in the best interests of the Strata Scheme”.
I am hoping to stir up some conversation and connect with other like-minded professionals in the Strata industry. I would love to hear from you, please share your thoughts and experiences. Great things come out of debate. Whether I have something wrong, you agree or disagree with me, please post a comment.
This article first appeared on LinkedIn Pulse.
This post appears in Strata News #146