Once 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

A major spending limit is not so much a limit as it is a guideline for obtaining quotes.

Like the committee spending limit via the standard module the limit is $200 per lot or $10,000. That would mean any expenditure over $10,000 exceeds the major spending limit. Before carrying out the work at least two quotes must be obtained.

Sometimes its possible to move ahead with only one quote, say for instance if the product or service can only be provided by the one contractor. This is decided on a case by case basis.

The intention here is to ensure the body corporate achieves good value. With two quotes hopefully 1) the two contain comparable works and 2) owners can be offered a choice.

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.

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.