Body Corporate Spending Limits

office meetingOnce the committee has been elected at the Annual General Meeting they then are solely responsible for making decisions on behalf of the body corporate.

But that doesn’t mean that they can go off and do whatever they please, upgrade this, maintain that and basically spend money willy nilly. Quite the opposite in fact.

In fact there are very specific body corporate spending limits, both for the committee and the body corporate as a whole.

Types of Body Corporate Spending Limits

There are three types of body corporate spending limits – committee spending limits, major spending limits and improvement spending limits.

Committee spending limits

The committee spending limited is contained within each regulation module of the body corporate. The committee spending limit for the standard module is $200 per lot. Refer to the various modules (link in sidebar) for their limits.

The committee may spend up to that amount without prior approval at general meeting if the funds are budgeted for and available. So if garden works have been budgeted for then the committee may proceed up to the committee spending limit, which for instance, in a 20 lot scheme would be $4,000.

Other rules apply when the works have not been budgeted for, say for instance in case of emergency repairs, and these works will need to be retroactively approved at general meeting.

Major spending limits

The body corporate as a whole may spend the major spending limit once per calendar year by resolution at a general meeting. The major spending limit for the standard module is $1,100 per lot or $10,000, whichever is lower.

So for instance, if there were issues that required repair around the scheme, a 20 lot scheme could authorise $22,000 of works once per year.

Major spending limits refer to amounts for repairs and maintenance.

Improvement spending limits 

Improvements to the common property may be made by resolution of the committee up to the basic improvement limit threshold. For the standard module the basic improvement limit threshold is $300 per lot, or for a 20 lot scheme $6,000.

Expenditure above these limits must be approved at a general meeting.

See the diagram below to see how a decision would be made.

SPENDING DECISION PROCESS

Limits can be changed

The body corporate can change the spending limits by resolution at a general meeting.

The most common change is to increase the committee spending limit to at least, if not more, than the major spending limit. Then works can be undertaken by resolution of a committee, which makes the process much quicker and more cost effective.

If the body corporate has changed the committee or major spending limits those limits remain until changed again.

 Maintenance vs Improvement

There are two types of works that would usually be undertaken by the committee – maintenance of common property and improvements on common property. The two types of works must be considered and treated differently.

In Pivotal Point Commercial [2012] QBCCMCmr 512 a lot owner objected to the scope of “repairs” undertaken by the committee. The  adjudicator noted

In considering whether proposed work is maintenance or an improvement, adjudicators have relied on the principal set by Lord Denning that if work involves the provision of something new it is an improvement, but if it is “…only the replacement of something already there, which has become dilapidated or worn out, then, albeit that it is a replacement by its modern equivalent, it comes within the category of repairs and not improvements.”

In the Pivotal Point Commercial decision  it was found that the committee authorised works to the lift foyer under the guise of repairs, however when the project was assessed by the adjudicator it was ruled that the works were so comprehensive they could only be classed as an improvement.

As such the motion approving the “repairs” and expenditure of $115,000 was declared unauthorised.

The adjudicator further ordered that the funds would need to be recouped, either through a motion at general meeting to issue a special levy to all lot owners, or perhaps the body corporate should look to the committee themselves to reimburse the cost of unauthorised works.

Conclusion

Body corporate records are private information which means there isn’t any independent oversight of what the body corporate is doing unless the lot owners initiate that oversight themselves.

Consequently its important to keep track of what your body corporate is doing and to have at least an overview of the rules and regulations regarding body corporates. Problems can be avoided or minimised by conscientious lot owners taking care of their investments.

To find out more about authorised spending limits click here.

THE BASICS OF BODY CORPORATES

A little knowledge can go a long way


I see so many stressful and frustrating issues in body corporate records that result from simple misunderstandings it hurts my head. If I could do one thing to help it would be to teach everyone the basic rules, so they can avoid all these dramas.


With that in mind I've put together a short eBook that sets out the basics everyone owning in a body corporate really should know. It won't make those big issues go away, but it will give you a firm grounding from which to communicate.


It's completely free, so please, download it now!

Download Now

Comments

  1. John Ralston says:

    In our scheme a vote was taken some time ago and the spending limit of the BC was increased to $17400. (58 lots x $300)
    Are 2 quotes still required for this limit to be used?

    The BCM proposal has been listed on the AGM minutes and it totals $19140 there has been no alternative quote provided.

    Another motion is asking for $10162 to be spent on a grass replacement. Should this have had 2 quotes?
    Thanks so much for your assistance.

    regards

    John

    • Hi John

      The major spending limit sets the requirement for when two quotes are required.

      So yes, your scheme should have two quotes for the BCM proposals but only one for the glass is fine. I’ve seen schemes put forward a motion with alternatives for BCM that is just two quotes from the same BCM, with different time frames to give different amounts. I haven’t seen that challenged so can’t speak to the validity of that sort of work around.

  2. Jude stom says:

    I have recently bought a unit and I now find that the Chairperson makes all decisions eg how much the for levies or what needs to be done and this then goes to the AGM for yes or no. I am a committee member and there is no discussion and no meetings to discuss proposed levies or anything. There are 7 units and she acts for 1 for a family member and seems to work with the person who own 3 of the 7 units which means the others 3 owners myself included are ignored.
    From what I can see there is not much that can be done. The problem is that she often does not seem to know what she is doing and goes along with excessive quotes

    • Hi Jude

      Its difficult to deal with a majority lot holder, or at least a holder who has the other’s proxies. Joining the committee is the first step. If there is an elected committee the Chairperson does not have complete say as to what will happen. They are only one vote of how ever many committee members there are. Even if they hold multiple positions its still one vote.

      You need to push the issue that decisions are made by the committee, it full, not just the Chairperson. You need to talk to the Chairperson about this. Also your strata manager if you have one.

      Start with conversations. Listen to what they have to say. Do some research if you can but also be firm about what’s going on. Being voted Chairperson is not carte blanche to do whatever they please. Keep a log of your discussions as you may need to seek Adjudication to force the issue.

Trackbacks

  1. […] All the day to day decisions, the running of the body corporate are made by the committee, within strict legislative guidelines. […]

Speak Your Mind

*