This article is about council of owners spending limits and setting the budget.
Table of Contents:
- QUESTION: What is the process for authorising expenditure over budget. How should we deal with expenditure relating to emergency situations?
- QUESTION: Who has the final say over the Council of Owners budget and how monies are expended from an administration account?
Question: What is the process for authorising expenditure over budget. How should we deal with expenditure relating to emergency situations?
Answer: In emergency situations, common sense needs to prevail and a Council of Owners should proceed with caution while documenting the decision making process.
That’s a really good question. Essentially, when we talk about expenditure approval, obviously approving the budget at an annual general meeting is approving that expenditure. The Act provides for power of expenditure above the budget for the strata scheme, which is essentially $500 per lot that the Council of Owners can approve in any one financial year. Other than that, the only other ways of expenditure approval is through written notification, which outlines that process in detail and the requirements in order to seek approval in that manner. Other than that, it’s going to a general meeting.
Obviously, common sense needs to prevail and my suggestion when we talk about emergency situations is a Council of Owners should proceed with caution and that’s difficult to say because sometimes you’ve got to act quickly. My advice is that committees should assess the situation and if they feel they have an obligation to act quickly in an emergency situation (for example a life and death situation or a situation that is likely to cost the strata company significantly more, if they don’t act), I would strongly encourage them to act. But under careful consideration.
I also encourage Council of Owners members, if they found find themselves in that position, to document the process and the decision making well so that if they are questioned on it, they can easily demonstrate the decision making process they’ve gone through before they proceeded. Everyone’s interpretation of the emergency or situation is different, that’s why I think it needs to be a collective approach from the council and be in agreement in terms of how to proceed in those situations.
This post appears in the June 2022 edition of The WA Strata Magazine.
Question: Who has the final say over the Council of Owners budget and how monies are expended from an administration account?
Does the Strata company have the final say over the Council of Owners on how monies are expended from an administration account with a large surplus that is separate to the maintenance account?
Answer: The Strata Company controls what the budget is, and that’s what gets approved at the annual general meeting, and that’s what the council is required to try and adhere to.
Section 102 of the Act says that the strata company must have a budget for each financial year that must be approved at the annual general meeting of the strata company.
It’s important the budget takes into account the 10 year maintenance plan, and also any bylaws that may stipulate other schedules that may also need to be raised where you’ve got conflicting uses within the scheme.
So yes, the Strata Company approves the budget at the annual general meeting, and then the council of owners has limited capacity to expand outside of that budget. They can identify an expenditure item and go to the strata company and seek approval for additional expenditure.
Alternatively, they do have the ability to spend up to $500 per lot on unbudgeted items as well. So there is a little bit of scope for the Council of owners with regards to expenditure outside of the budget, but without knowing the size of the scheme and what might need to be expended, that spending capacity of the council is hard to determine.
Ultimately the Strata Company controls what the budget is, and that’s what gets approved at the annual general meeting, and that’s what the council is required to try and adhere to.
This post appears in Strata News #511.
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