Q&As from the Financial management webinar

Budgets

Last Financial year ended 31 August 2018 - Budget for year ending 31 August 2019 is approved at AGM on 30 November 2018 - levy invoices for 2 quarters of the year ending 31 August 2019 already issued before budget approved - how is the levy amount calculated for invoices for the remaining two quarters of the year ending 31 August 2019?

The committee can vote to issue interim levies based on the period from the end of financial year to 2 months past the AGM date. Interim levies must be based on the previous year’s budget and relate to spending required for that period. (Section 141 (3) & (4) of the Standard Module).

The first two levies that have already been issued must be off set against the newly approved levies. Owners may have to pay the balance of levies for the first 2 quarters if the amounts approved are higher than what they have already been levied for in the interim levies. It is up to the body corporate to decide whether they include the extra amounts in the final two levies of the year or have a separate levy with the extra amounts relating to the first two quarters.

The remaining levies for the year are also calculated based on contribution schedule lot entitlements, other than the insurance premium portion which is based on the interest schedule lot entitlements for a Building Format Plan or proportional reinstatement costs for a Standard Format Plan. (Section 141 (5) of the Standard Module). The last 2 quarter levies must be based on the budgeted amounts that need to be raised for the year.

A motion for a budget item is not passed by owners. Can the budget amount be left in the budget if there is a reasonable assumption that the motion will be passed at a following EGM?

If the budget itself passes but a specific motion for spending does not, it is up to those who are present at the meeting as to whether they reduce the approved budget amount by 10% or less. It is not a requirement to reduce the budget if a motion for spending doesn’t pass so if majority of those present want to keep the amount in the budget, they can do so.

As a general rule, is it correct to say that budgeted funds may not be applied to non-budgeted items?

That is correct. If the body corporate needs to use budgeted funds for a purpose other than what was budgeted for the body corporate will need to pass a motion by ordinary resolution at an extraordinary general meeting to amend the budget that was approved at the annual general meeting.

Our Strata Managers understated their fees in our budget to keep the levies down but we are now 6 months into our financial year and we have spent the entire budgeted amount? What is our recourse?

A special levy must be raised (ordinary resolution motion at a general meeting) when a liability arises for which there has not been any or enough funding allowed for in the budget (Section 141 (2) of the Standard Module).

BC Manager links all items in Admin and Sinking fund to levies for the year. Is this correct? If we have excess in the budgets can we list items on the budget (as we know we want to spend the money) and not increase the levy by these amounts.

The levies must be based on the budget as it shows the amount of money the body corporate must raise. If there is an excess of funding available due to underspending for a financial year, adjudicators have stated that the body corporate can use it to off-set the levies for the next year.

Is it ok to run a contingency line in the budget?

The body corporate must include reasonable and necessary anticipated expenditure in the budget (Section 139 of the Standard Module). There is no provision for contingency amounts to be budgeted for. This has been confirmed in many adjudicators’ orders

While the sinking fund is aiming at saving money, it is still for anticipated expenditure. If a contingency arises where the body corporate must spend money on capital or non-recurring maintenance that has not been included in the budget or forecast, there may be more flexibility to adjust a budget and/or forecast instead of raising a special levy to absorb contingency spending.

The administration budget is more restricted with spending. It must be based on reasonable and necessary spending for that financial year only. The legislation clearly states that a special levy must be raised when a liability arises for which there has not been any or enough funding allowed for in the budget (Section 141 (2) of the Standard Module). However, some adjudicators have stated if there is some flexibility in the budget, it may be possible for the body corporate to vote at a general meeting to adjust the budget instead of raising a special levy.

If funds are included in a motion for a project that is not approved at the AGM, can those funds be used by the committee for other projects throughout the year?

No, funds can only be used for what they have been budgeted for. The body corporate may wish to consider amending the budget at an extraordinary general meeting to accommodate any changes to spending.

Budgeted items are estimated amounts until the end of the financial year. But then there is (up to 3 months) time till the next AGM, after the end of that year. Leaving aside notion of an interim levy, what about just keep on spending and spending using any surplus to get through those extra couple of month (paying usual wages etc); as there seems no way to budget past the year for those extra month(s). Thus we have to rely on surplus? To deliberately create a surplus to cater for extra months? Is that how it is normally would be done, as money flow cannot just stop for those couple of months?

If there is a surplus left over from the previous year’s budget, the body corporate could choose to use that money for the first quarter or half of the year. However they still have to allow for the anticipated and necessary expenditure in the budget. The surplus can be included in funds already available therefore reducing the amount which owners must raise in the levies for that year. This may mean that the body corporate only need to raise a levy for the second half of the year for example.

Adjusting Budgets

Adjusting a budget at the AGM. Did you mean that you can only adjust the draft budget by up to 10% by resolution at the AGM? How does the resolution to change get on the AGM agenda?

A body corporate considers the motion for adopting a budget at the annual general meeting. If for example, there is also a motion on the agenda for maintenance of a pergola that will cost $10,000 and that motion does not pass, the budget can be adjusted down by 10% if the costs of the pergola maintenance were factored into the budget. If the budget at the annual general meeting requires adjusting, those present at the meeting are asked to vote on a procedural motion to amend the budget. (Section 140 of the Standard Module) Procedural motions are the only types of motions that can be raised at the meeting. All other motions must be on the agenda and voting papers when they are sent out 21 days before the meeting. An explanatory note must be sent out with the AGM paperwork explaining that the budget may need to be adjusted.

You referred to Owners present being able vote on amending the budget. Do the voting papers still count as a no on the amended budget motion?

The adjustment to the budget must be approved by a majority of those present and entitled to vote on the adjustment (Section 140 of the Standard Module). This section makes no mention of voting papers or voters who are not present. Section 140 states there is no need to amend the motion to incorporate the adjustment. Only those present can vote to agree to amend the budget at the AGM if a motion relating to spending that is also on the agenda has passed or not passed.

Adjusting the budget is a separate process to amending a motion. A non-budget motion can be amended at a general meeting if it does not change the subject matter of the motion. To pass the procedural motion raised at the meeting to approve the amendment, those voters who are not present at the meeting and have already voted in writing or electronically are counted as a vote against the amendment. If a person is not present but has not voted in writing or electronically, their vote is not counted at all.

If the procedural motion to amend the original motion does pass, the same rules apply to counting the votes for the newly amended motion. Those voters who are not present at the meeting and have already voted in writing or electronically are counted as a vote against the newly amended motion. If a person is not present but has not voted in writing or electronically, their vote is not counted at all. (Section 94 of the Standard Module).

If a motion to approve a budget has already been carried, then a motion to approve expenditure is approved, have you lost the opportunity to amend the budget?

The budget motion is a statutory motion (ie required to be included on the AGM agenda) and is usually listed before other motions about spending.

The ability to adjust the budget up or down by 10% depends whether there is another motion on the agenda relating to spending. If the motion that passed is for spending, the body corporate can still amend the budget after both the motion for the spending and the budget motion has passed.

A sinking fund budget for $100k includes one motion of $20k (20%) which is not passed. Can only $10k of that motion be removed, eg. 10%

Yes. A budget can only be adjusted up or down by a maximum of 10% at the annual general meeting (Section 140 of the Standard Module).

Administrative and sinking fund budgets

What is the definition of 'recurring'?

The plain dictionary meaning of recurring is occurring again periodically or repeatedly.

Can you, and if so, how, transfer funds from sinking fund to Admin Fund and vice versa?

No. Section 146 of the Standard Module provides that funds may not be transferred between the administrative fund and the sinking fund.

Our scheme has a surplus left in the administration fund at the end of the year. Can we transfer it to the sinking fund to invest?

No, you cannot transfer funds between the administrative and sinking funds under Section 146 of the Standard Module. It may be managed by applying the surplus to the next year’s budget to reduce the levies. The effect might mean the body corporate can reduce the percentage applied to administrative fund levies, increasing sinking fund percentage of levies and keeping the total levies to similar level. Or the body corporate could reduce the administrative fund levies and leave the sinking fund levies as required and reducing the total.

If the regularity of works is less than three years, can this be done in the sinking fund or must it be funded from the Administrative fund?

The Act does not provide a definition or timeframe for what is recurring expenditure. Recurring maintenance is funded through the administrative fund. The sinking fund raised money for spending of a capital or non-recurrent nature. (Section 139 of the Standard Module) It is up to the body corporate to determine what is capital or non-recurring expenditure.

We have an excess in the admin budget that we wish to use for technical reports. Can this be approved by the committee if within spending limits or does it need to go to general meeting as it is not allocated in the budget?

The committee can approve spending under the relevant limit for committee spending if there is availability in the budget for the spending. If there is no allocation in the budget for technical reports, the body corporate can amend the budget by ordinary resolution at a general meeting to apply the excess to the technical reports.

Is one allocation for spending under the sinking fund budget OK?

The sinking fund is required to accommodate the body corporate’s anticipated spending of a capital or non-recurrent nature for the current year and at least 9 years into the future. Adjudicators have stated that sinking fund forecast is time based and must contain estimates of spending on those scheduled maintenance items. One allocation in a sinking could not satisfy this requirement.

If a sinking fund was approved in the previous financial year, and wasn't able to be accomplished in that year, can it automatically pass on to the current year.

No, a motion to adopt the administrative fund and sinking fund budgets is a statutory motion each year. This means the body corporate must include the motion on the annual general meeting agenda each year. The budgets must include reasonable and necessary anticipated expenditure for the current financial year, plus future forecasted amounts for the sinking fund. The budget does not automatically carry over. If the body corporate did not carry out maintenance in the previous year and want it to occur in the next financial year, the new budget containing the funding for the spending must be approved at the AGM. A copy of the budget must be included with the AGM paperwork.

Can the sinking fund be used for maintenance - eg replacement of a rotten fence with like for like or would this have to come from Admin?

Sinking fund monies can be used for either maintenance (like for like) or for improvements (additions, removal or changes to common property) as long as the project/s are for the periodic replacement of major capital items or are of a capital or non-recurrent nature. Maintenance can include repair or replacement of an item.

Sinking fund forecast

Our professionally prepared sinking fund forecast of 15 year has a table of planned works for each financial year (FY). We use this table as the sinking fund budget for the year. If unimplemented items remain we carry them to the next FY year. Should we prepare separate itemised budget or is this practice is acceptable?

If a budget has been passed at a general meeting based upon particular items of maintenance and then those items of maintenance are not carried out, it has to be asked – why? Is there no longer a need for the work? Is there a shortage of contractors to do the job? Have circumstances changed? These questions need to be asked because the body corporate is required to carry out scheduled maintenance of the common property based on the sinking fund forecast.

If the body corporate has not maintained the items as scheduled, the body corporate still has a responsibility to perform any required maintenance. They will need to adjust the forecast and therefore the next year’s sinking fund budget to include the items in expenditure for the next year.

If budgets and levies have been set based on reports that are not performed on true and full baseline data that has been provided for the production of reports such as a Sinking Fund Forecast, should such report be done again not depended upon into the future years?

There is no statutory obligation to obtain a professional report for a sinking fund forecast. It is only required that the body corporate has a forecast in place for the current financial year and at least 9 years into the future. If the body corporate chooses to obtain a report they can use it as a guide. The committee or body corporate manager could draft the forecast as well.

If an owner believes the sinking fund forecast does not include relevant maintenance items, an owner can propose a motion to a general meeting that a new forecast be prepared. A new sinking fund budget would then have to be based on the guide of the forecasted expenditure.

It is best practice to review the forecast each year to ensure that sinking fund monies are on track for projected expenditure because costs may increase or the maintenance needs of the body corporate may change at any time. Some items may become more urgent and the timing of those maintenance items in the forecast may need to be changed.

The body corporate committee can review the forecasted costs at any time to check the savings are still on track as long as there is always a forecast in place for raising funds for at least 9 years future expenditure.

What compliance with the sinking fund forecast is required in the development of the annual sinking fund budget?

The body corporate must prepare a sinking fund budget that allows for the raising of funds to provide for reasonable and necessary spending for the current financial year and also meet anticipated major spending over the next 9 years after the current financial year. It would be difficult for a body corporate to do this without some type of forecast whether professionally prepared or prepared by the committee. Any forecast prepared will be a guide for the sinking fund budget spending for the current year and savings for future years.

If there is a line item of $20,000 within that budget can that amount of $20,000 be broken up into say 5 items of $4000 each, and be completed separately, or does a scope of works have to be obtained for the total spend from the owners at a general meeting or and EGM?

It may be more practical to have more specific line items in the maintenance part of the budget. It may make it easier to track costs. There is nothing that prevents the body corporate from having an extremely detailed maintenance budget or a generalised one as long as there is funding allocated for the reasonable and necessary expenditure required for the year.

Note that a project cannot be broken up to avoid compliance with legislated spending limits, resolution types etc. When a body corporate seeks approval of the spending for projects it is based on the costs of the entire project.

Levies

If a body corporate has failed to hold an AGM for a number of years and not all owners have paid the levies after the end of the financial year and they are still being sent out by the secretary are the owner[s] liable to pay?

Levies are set based on the budgets adopted by the body corporate at each annual general meeting. If no levies are set it may be difficult for the body corporate to pursue owners who do not pay. If owners continue not pay it may also be difficult for the body corporate to meet its annual expenses.

Can you please explain again how the cost of insurance is calculated and allocated to the levy?

Building insurance premiums are calculated in a community titles scheme differently depending on the plan of subdivision the scheme is registered under. If the scheme is registered as a building format plan the insurance is calculated based on an owner’s interest schedule lot entitlement. If the scheme is registered under a standard format plan the insurance premium levy is calculated based on the replacement value of each owner’s lot proportionate to the total value of all buildings insured under the policy. The insurance premiums are a paid into the administrative fund.

The premium for public risk insurance is based on the contribution schedule lot entitlements. Any other non-compulsory insurances (office bearers’ liability or fiduciary insurance for example) are based on contribution schedule lot entitlements.

More information about insurance premiums can be found on our website.

Levy Notices

If there are 2 owners not living in lot, i.e. brother and sister, should both owners get a copy of the levy notice?

Section 142(3) of the standard module provides that a notice of contribution payable must be served on an owner of a lot at the owners address for service, or in the way directed by the owner.  Section 194(3) of the standard module  provides that even if there are 2 or more co-owners for 1 lot, there must nevertheless be only 1 address for service for the owners.

Discounts and penalties

Is a discount on timely payment legislated?

Yes. Section 143 of the Standard Module provides that the body corporate may pass a resolution to apply a discount to the levies if they are received before the due date.

How are the late payment penalty percentages set up and is this done by the BC, Committee or can the Body Corporate Management company set them in their contract?

Section 144 of the Standard Module provides that the body corporate must pass an ordinary resolution at a general meeting to decide the penalty amount (up to 2.5%) that can be applied to overdue levies. The body corporate management company is unable to make a decision about the penalties applied to late payment of levies.

Committee spending

Is there an upper limit for committee spending limits to be approved - i.e. can it be $500 per lot or is $450 per lot the limit for committee spending limits

No, the body corporate can vote by ordinary resolution to increase or decrease the body corporate committees spending limit to the amount that it chooses. A decision by the body corporate must be reasonable in all the circumstances.

Does Committee ever need to notify lot owners of spending approved by Committee meetings or by flying minute or by simple email consent if all the spending is within the allowable limit?

All owners must be notified of all committee decisions, even those within the committee spending limit. Decisions made at a committee meeting must be minuted and the minutes sent to all owners (unless they request not to receive them) within 21 days of the meeting. All decisions made by vote outside a committee meeting must be recorded and a copy of the record sent to owners within 21 days of the decision. Votes outside committee meetings must also be confirmed at the next committee meeting and included in the minutes of that meeting as well. The minutes and records of decisions may be sent by email.

Our body corporate managers advise that expenditure by committee within relevant limits must be sent to all lot owners as per Voting Outside Committee - is that right?

All owners must be advised of decisions made by the committee. Please see the answer in the previous question.

If proposed expenditure is higher than BOTH the committee spending limit and the major spending limit, does s.149(1)(a) Accommodation Module allow the body corporate to specifically authorise the committee to spend the money, or does it have to go to a general meeting for approval?

Section 149(1)(a) specifically states that the body corporate would have to authorise the committee to spend over their spending limit by an ordinary resolution vote at a general meeting.

When the spending is over the committee spending limit, if the expenditure is also over the major spending limit the committee would need to obtain 2 quotes to be included with the motion on the general meeting agenda.

You explained that lot owners have to be informed of all spending approved by the Committee outside a meeting. Does that mean that if the Committee approves all spending at Committee meetings no notice to lot owners is required?

There are two processes for how the committee can make decisions, including approving expenditure. The secretary must give 7 days’ written notice of a committee meeting to all owners and committee members. (Section 45 of the Standard Module). The minutes of that meeting must be sent out within 21 days of that meeting. If a committee is voting on a motion outside committee meeting in writing, all lot owners must be given a copy of the notice of the motion at the same time as the committee and then a copy of the decision/minutes must be sent to all owners with 21 days of the vote. Minutes must be sent to all owners for both types of decisions unless the owner has advised that they do not want to receive those minutes (Section 55 of the Standard Module).

Spending approval. So obviously needed for large items! But what about smaller bits and pieces? Office supplies for example. Does the committee need to approve buying paper supplies for example?

Yes, every expense of the body corporate must be approved by either the committee or all owners at a general meeting.

Body corporate spending

General ledger on portal is showing debits from the administrative fund to the chairman's account on a monthly basis without any description. Can lot owners request that these amounts be verified and invoices displayed on the portal? The body corporate manager stated at the AGM that there was no need for an audit and it was a major expense at around $8,000.

A committee member can be paid money from the body corporate for remuneration, expenses or allowances if approved by ordinary resolution at a general meeting. The motion must state the full amount of the remuneration, allowances or expenses. If the payment relates to expenses, the reason the expenses were incurred must be included in the motion. An explanatory schedule stating full details of the remuneration, allowances or expenses must also accompany the relevant voting paper. (Section 43 of the Standard Module).

A committee member must disclose in their nomination any payments that they want for being a committee member (Section 18 of the Standard Module).

The statement of accounts which must be presented in the AGM paperwork and approved must specifically disclose all remuneration, allowances or expenses paid to members of the committee. (Section 154 of the Standard Module)

Major spending limit

A self-managed body corporate raised the major spending limit to $4000 per lot at a general meeting. They also made the committee limit the same as major spending limit ($4000). Do we need to repeat the resolutions every year or it's good till the limit is changed?

The body corporate only needs to pass a motion to increase the committee spending limit and major spending limit once. A motion remains in effect until it is amended or revoked.

Is the committee required to get 2 quotes for repairs and maintenance that is more than $500?

All expenditure over the major spending limit for your body corporate requires two quotes. The major spending limit is calculated by multiplying the number of lots by $1,100.00 up to a maximum of $10,000.00, unless another amount has been set by the body corporate by passing a motion by ordinary resolution.

Spending limits for maintenance

Can both maintenance and improvement motions be passed by special resolution if the committee wishes, to avoid a 51/49 vote by owners.

All motions approving body corporate maintenance over the committee’s spending limit are to be passed by ordinary resolution. The committee does not have the authority to change the resolution type under any circumstances.

A 51/49 vote will pass by ordinary resolution if there are 51 yes votes to 49 no votes.  It would not pass is there was a 50/50 outcome to the vote as there are not more yes votes than no votes.

The resolution type for motions authorising improvements to the common property by the body corporate are determined by the value of the improvement. As the body corporate is only able to have one improvement approved by ordinary resolution in a financial year the committee may choose which motion, if any, is to be passed with that resolution type. If an owner proposes a motion for the body corporate to make an improvement to the common property, and there have been no other improvement motions considered by the body corporate in that financial year, the owner might reasonably expect that their motion be considered by ordinary resolution, if the ordinary resolution improvement limit applies.

When contractors seek to enter into contracts with a body corporate (e.g. lift maintenance - 5yrs) are such valuable contracts considered a body corporate asset?

Section 11 of the Act provides for the definition of a body corporate asset. Body corporate assets are items of real or personal property acquired by the body corporate, other than property that is incorporated into and becomes part of the common property.

Is there a list about what is maintenance or what is an improvement - example road repair or fencing?

There is not a list. Maintenance is repair or replacement ‘like for like’. An improvement is a change, by removal, addition or upgrade, to what is already there. For example, if you were to replace a rotting timber fence for another timber fence it would be considered maintenance. If you were to replace the same rotting fence with a colorbond fence it would be considered an improvement. Even though the fence is being replaced because it needs maintain one situation is ‘like for like’, the other is a change to what is already there.

Spending limits for improvements

The body corporate is authorising an improvement made by the body corporate that costs over the basic improvement limit therefore must be approved by ordinary resolution and is limited to 1 ordinary resolution improvement in a year. Does the decision have to be the first ordinary resolution at the annual general meeting (AGM) or can it be held at an extraordinary general meeting (EGM) during the year?

A motion about a body corporate improvement to the common property can be considered at either the AGM or an EGM. As improvements should already be planned in the sinking fund forecast, it is up to the body corporate to decide which motion will be decided by ordinary resolution, noting that any other improvements in the ordinary resolution range to be decided in the same year will need to be authorised by special resolution.

What are the rules for improvements to common property by an individual owner for the individual owner?

The committee can approve an owners request for an improvement to the common property for the benefit of their lot if the improvement:

• Costs less than $3000 and
• Does not detract from the appearance of the lot or the common property and
• The body corporate is satisfied that the use and enjoyment of the improvement is not likely to promote a breach of the owner’s duties as an occupier.

Otherwise, approval can be granted by ordinary resolution of the body corporate at a general meeting.

Audits

What is the reasoning behind reverse motion on audits?

The default position for bodies corporate is to conduct an audit (Standard, Accommodation and Commercial Modules) therefore the motion is that the body corporate will not audit the accounts. The resolution to not audit the accounts is a special resolution making it somewhat harder to pass.

If at the AGM owners approve to have an audit, however then do not approve the auditor put forward, does the selection of the auditor have to be passed another general meeting?

Yes. A motion to engage an auditor is passed by ordinary resolution at a general meeting. If it does not pass another general meeting will have to be called.

What would be the consequences if owners did not approve the prior years audited financial statements?

The statement of accounts for the financial year must be presented as a statutory motion and a copy of the statement of accounts must accompany the notice the AGM immediately after the year the statement is for.

The statement of accounts lists the actual spending that occurred in the previous year. There is not much effect if it is not passed as the spending has already occurred. There presumably would be a reason for owners to not pass the statement. If they believe the spending itself was incorrect, it is not the statement they should be objecting to, it is the process of expenditure itself that needs to be dealt with. If there is a simple error in the statement, the body corporate can correct the statement and it can be voted on at an EGM during the year.

Financial reporting

Is the treasurer or Body Corporate Manager required to forward reconciliation statements to all committee members?

Section 149 of the Standard Module provides that a reconciliation statement is produced by the body corporate manager if there is one or by the treasurer if the body corporate decides by ordinary resolution that the treasurer is to provide one. The section does not provide for the distribution of the reconciliation statement. It may be provided for in the terms of the engagement of the body corporate manager with the body corporate. The body corporate committee may make a decision on how the reconciliation statement is to be distributed i.e. to all committee members. Even if it is not distributed, the reconciliation statements can be obtained by owners or committee members by accessing the body corporate records.

Debt recovery

Does recovery of debt require a flying minute to BC committee?

The committee can make a decision to start a proceeding for the recovery of a liquidated debt (owing levies and interest) against the owner of a lot within the scheme, provided the costs involved (court application and legal costs) do not exceed the committee spending limit and no special levy is required to cover the costs. Otherwise an ordinary resolution of the body corporate is required. The committee can make this decision by vote outside a committee meeting (flying minute). A special resolution of the body corporate is required to start a proceeding to recover any unliquidated debts (recovery costs) owed by a lot owner.

Unliquidated debt - can this be recovery by Committee via a VOCM in conjunction with the motion to appoint a debt collect agent?

A special resolution of the body corporate at a general meeting is required to pass a motion to recover unliquidated (recovery costs) body corporate debt (Section 312 of the Act). A committee can start proceedings to recover a liquidated (levies and interest) debt provided the costs of the proceedings are provided for in the budget and are within the committee spending limit.

Who lodges for conciliation of a debt?

Either party to a dispute can lodge an application for conciliation if they have firstly undertaken self-resolution. If the applicant is going to be ‘the body corporate’, a resolution authorising (from either a committee meeting or a general meeting) the lodgement must be attached to the application form.

Can a BC approve a generic motion to approve all non-liquidated debts (recovery costs) for all lots, or is it only recognised on a case-by-case basis?

The body corporate must pass a motion by special resolution at a general meeting to recover non-liquidated debts (Section 312 of the Act). The body corporate must authorise commencing debt recovery individually for each proceeding as needed IE on a case by case basis. Having a blanket motion to cover all lot owners may not be seen as reasonable.

I understand the body corporate must pass a special resolution in order to authorise proceedings seeking recovery of an unliquidated debt i.e. recovery costs in levies recovery proceedings. Would it be possible for the body corporate to pass a resolution once a year authorising such proceedings even though the specific proceedings may not be contemplated at the time the motion is passed, rather than require a special resolution each time debt recovery proceedings are needed?

The body corporate must pass a motion by special resolution at a general meeting to recover non-liquidated debts. (Section 312 of the Act) The body corporate must authorise commencing debt recovery individually for each proceeding as needed so they would not be able to rely on one resolution at the AGM for all proceedings that may occur during the year. The body corporate needs to ensure there is legal funding available in the administrative budget. If there were no proceedings anticipated at AGM time, the budget would probably not include the funds therefore a general meeting would be required for raising a special levy.

The body corporate must also obtain quotes from solicitors for a specific case. There may be different jurisdictions, solicitors or debt recovery agencies involved so the costs may vary.

Does the Special Resolution for recovery of legal fees from owners in regards to debt collection cover all debt collection commenced, or does there have to be a special resolution each time the body corporate commences legal action against an owner?

There must be a special resolution motion for each separate proceeding that the body corporate is commencing against the specific lot owner to recover non-liquidated debts (recovery costs) (Section 312 of the Act). It is best to consider this on a case by case basis as the circumstances of each individual who owes a debt may differ. The body corporate committee may also make a decision to waive recovery costs in special circumstances for individuals who ask.

Back to the debt recovery motion. The special resolution at a general meeting to approve the debt collection of non-liquidated debts, is this ok for a one off motion similar to the interest penalty and/or discount motions or should it be voted on each year?

Section 312 of the Act provides that a body corporate may start a proceeding if the proceeding is authorised by special resolution of the body corporate. This requires the body corporate to pass a resolution for each proceeding it wishes to start. The body corporate cannot pass one resolution to cover multiple proceedings.

Exclusive use areas

Exclusive use payments - As it is impossible to recover exclusive use can a payment be ascribed to the lot even though the lot has had exclusive use for some time?

It is not impossible to recover exclusive use areas. The owner of the lot to which the by-law applies would need to agree in writing to rescind the exclusive use by-law and the body corporate must pass a motion by resolution without dissent.

Conditions, (including conditions requiring the owner to make a payment to the body corporate) can be imposed on an owner to whom an exclusive use by-law applies if that owner agrees in writing. This is most likely to be achieved before the granting of an exclusive use area. If the owner agrees to the amendment of the by-law to include a financial liability of some sort, the body corporate would still need to authorise the amendment to the wording of the by-law by resolution without dissent and record the amended by-law on the community management statement within three months of the decision. (Section 171 of the Act)

No payment was ever assigned to the exclusive use - it was passed at a general meeting and is not in the by-laws?

If there has never been a financial liability recorded in the by-law, then a general meeting decision would need to amend the by-law by resolution without dissent to include the requirement for payment. The owner of the lot to which the by-law applies would need to vote yes or agree in writing and the amended by-law would need to be recorded in the community management statement within three months of the decision. (Section 171 of the Act)