A body corporate manages the common property and its assets for the benefit of all lot owners. The levies paid by lot owners go to the body corporate to pay for this management. However, a body corporate does not have unlimited powers to spend – there are limits.
A body corporate can, by ordinary resolution, set a limit for major spending. If this is not done (and it often isn’t), then the general rule is the lesser of the following: $10,000, or $1,100 per lot. This means the limit for a 5-unit scheme is $5,500, but a 10-unit scheme is not $11,000: it is $10,000, as $10,000 is the maximum limit for major spending.
But what does this mean? A body corporate is allowed to spend above this amount, but there must be at least two quotes if the spending is above the limit. Assume the $10,000 limit applies, and the committee puts a motion to an EGM to engage a plumber to maintain some old plumbing. The committee only provides one quote for $5,000. As this is below the limit, this motion is fine.
But what if the committee puts a motion to do significant renovations to the community pool? The committee was told it could cost between $20,000 and $30,000. The committee finds a quote for $25,000. This goes to the meeting, and it passes – however, a lot owner notes that only one quote was presented. The lot owner goes to the Commissioner’s Office, and gets an interim order to prohibit the body corporate from acting on the resolution.
This is the likely outcome, because the motion was required to have at least two quotes. The committee then calls an EGM, and puts forward two quotes, one for $25,000 and another for $27,000. The motion can now be validly considered. These requirements must be precisely followed, as the body corporate’s money is to benefit everyone – a motion should not allow significant expenditure without owners being given the opportunity to decide on multiple quotes. This is a consumer protection provision, designed to protect lot owners.
This article is intended as general information only and should not be relied upon as legal advice. For specific legal advice please contact us here.
Hello. Thank you for your newsletter. I have a question in relation to the 2 quote rule. If there is a need for a special resolution to make an improvement (replacing wooden balustrades with aluminum balustrades) does a body corporate need 2 quotes for the wooden balustrade option and then 2 quotes for the aluminum balustrade option? Or just one for each option? Thank you Elena