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Committee Spending

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*The following information is for community titles schemes registered under the Standard, Accommodation and Small Schemes module.

Spending Limits

The relevant limit for committee spending (how much a committee can spend without having to go to a general meeting) can be set by Ordinary Resolution in a motion in either an Annual General Meeting or Extraordinary General Meeting.  There is no minimum or maximum limit that a Body Corporate can set.

If no amount is set by a general meeting resolution then the relevant limit is $200 x the number of lots in the scheme.  For example $200 x 20 lots = $4,000 committee spending limit.

The committee must allow for goods and services tax (GST) in its spending.  For example for a scheme with 20 lots the committee spending limit would be $4,000.  If the committee obtained a quotation that is $4,400 this can not be approved at committee level as it goes over the relevant spending limit.  The committee would need approval by a resolution at a general meeting for the quotation to be accepted.

The relevant limit for committee spending in a layered scheme is calculated by multiplying the number of layered lots in the scheme by $200.

For example: The principal scheme = 5 lots.  4 of these lots have 20 lots inside of them (these are referred to as layered lots).  The spending limit is calculated as: 1 (principal scheme) + 20 (layered lots) + 20 (layered lots) + 20 (layered lots) + 20 (layered lots) x $200 = $16,200.

Available Funds

The committee is not allowed to divide a single project into smaller parts to bring the project within its spending limits.  For example the project is the renovation of the foyer and there is quotations for tiles $8,000, light fittings $4,000 and painting $6,000.  Each quotation comes under the committee spending limit of $16,200 however the renovations cannot be done at committee level as the whole project is over the spending limit.  The committee would have to seek approval by resolution at a general meeting.

When can the committee spend over the committee spending limit?

The committee can only spend of its relevant limit if:

  • The spending is authorized by a resolution at a general meeting
  • The lot owners of all the lots in the scheme have given written consent
  • An adjudicator has authorised the spending to meet an emergency
  • The spending is needed to comply with a statutory order or notice given to the Body Corporate.

 

Why do I need a Strata Inspection Report?

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When buying a unit it is very important to obtain a Strata Inspection Report.  A Strata Inspection Report does not replace a building report however it provides important information about what is happening within the scheme that you should be aware of before you take the leap of purchasing the property.

A Strata Inspection Report should provide the following details but may include more information not listed below;

  • Who the current owners is
  • What the levies are for the property, when they are paid to and is their any special levies for major works
  • What your unit entitlements are
  • How much is in the Sinking Fund and the Administrative Fund and are any of these in deficit
  • Is there a Sinking Fund Forecast Report
  • Are there any legal matters or disputes
  • Does the scheme comply with fire requirements
  • Are pets permitted
  • Is there building defects
  • What are the By-Laws
  • Is there any major expenditure planned or has there been any over the past three years
  • What is the current value of the building
  • Is the building insured
  • Copies of the meeting minutes
  • Copies of building reports

A Strata Inspection Report can cost as little as $250-$350.  This is not a huge outlay when you consider you may be about to make one of the biggest financial commitments of your life.  The information you receive in the report will be far more valuable to you than the cost of the report.

For further queries regarding strata searches or to order a strata inspection report for a building on the Sunshine Coast or Brisbane contact:

Inside Out Legal Services

Sun City Legal Services

REMINDER: Changes to DEFT Payments at Australia Post

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You may be aware that on 1st October 2016 a $2.75 processing fee was introduced for DEFT payments made at Australia Post outlets.

When you pay your levy via DEFT at Australia Post, you will be charged this processing fee at the time of payment.

For example, if your levy is $100.00, $2.75 will be added to your levy payment amount at point of payment at Australia Post, so your total payment due will be $102.75.

It is important to note that if you choose not to pay the $2.75 processing fee at time of payment, this amount will be deducted from your levy payment.

This will result in a shortfall in the actual amount outstanding to your Body Corporate.  Please note that the processing fee is applied by DEFT Payment Systems, and not Sunstate Strata.

Alternative payment methods are;

  • A direct credit into the Body Corporate’s bank account.  This can be done via the internet through your internet banking or in person at your bank.  You will need to contact Sunstate Strata for your Body Corporate’s bank account details prior to using this option.
  • Send a cheque to DEFT at GPO Box 141, Brisbane QLD 4001
  • Use one of the other options on the bottom of your levy notice
  • Set up a direct debit through DEFT or Stratapay

There is no $2.75 processing fee on the above options.

Can you build a contingency into a Body Corporate Budget?

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Contingency – a future event or circumstance which is possible but cannot be predicted with certainty.

Can you have a line item as a contingency in a Body Corporate Budget?  The short answer is no. Having a line item called Contingency in your budget is not lawful.

The legislation focuses on anticipated expenditure and a contingency is not that.  Some relevant comment from adjudicators includes:-

‘Contributions can only be raised to cover the estimated expenditure on specific budget items and should not be raised for unknown or uncertain contingencies.’

and;

‘I consider it is contrary to the financial provisions of the legislation for a Body Corporate to deliberately seek to amass a surplus for unspecified or very loosely defined contingencies.  Section 92 refers to budgets covering estimates of ‘necessary and reasonable spending’.  Certainly it can be difficult to estimate exact costs and may be reasonable to estimate at the higher end of the anticipated range to cover normal increases in the costs of budgeted items.  However, contributions can only be raised to cover the estimated expenditure on specific budget items and should not be raised for unknown or uncertain contingencies.’

Rather than building contingency into your budget as an actual line item, it is recommended that it is built into each line of expenditure.  If you think it may cost $10,000 for the lifts to be replaced, make the anticipated expenditure $110,000.  In that way you create a contingency without actually calling it that.

For the full article visit Hynes Legal

Living or investing in a community titles scheme

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Owning a lot in a community titles scheme brings certain obligations beyond those of owning a detached house.  You should carefully consider whether living or investing in a community titles scheme suits your lifestyle and financial needs.

When you buy a lot in a community titles scheme you are automatically a member of the Body Corporate.  You cannot ‘Opt Out’ of being a part of the Body Corporate.

Legislation

The BCCM Act is the legislation that regulates most Bodies Corporate in Queensland it sets out the rights and responsibilities of people involved with Bodies Corporate.  Each Body Corporate is registered under a regulation module.  The regulation module sets out rules for committees, general meetings, financial management, property management and insurance.

Maintenance

The Body Corporate is responsible for maintaining the common property and in some situations certain elements of a building that are not common property.  You will have certain rights and responsibilities for your own property  and also for the common property shared with other owners in your complex.  Common property ranges from a shared driveway or letterboxes to elevators, stairways, swimming pools, tennis courts and roadways.

Levies

As an owner you will need to contribute financially to the day to day running of the scheme by paying regular levies.  Levy amounts vary between scheme depending on the conditions and age of the common property and shared facilities.  Running costs almost always increase over time.

When considering to purchase a unit in a community titles scheme, you should find out if there are any levies and charges still owned by the current owner.  The levies run with the lot, therefore the new owner would be liable to pay any outstanding amounts.  It is highly recommended that Body Corporate searches are undertaken by your conveyancing solicitor and/or a Search Agent prior to purchasing.

By-Laws

By-laws are an additional set of rules particular to each scheme that regulate the behaviour of owners, occupiers and their invitees on the common property and within their lots.  By-laws cover a range of issues such as noise, pets and parking.  You should find out the By-laws for the scheme you are considering buying into so you can see what you can and can’t do or what you need to ask permission for once you become an owner.

Reference: https://www.qld.gov.au/law/housing-and-neighbours/body-corporate/

Insurance: Changes in Terrorism Act

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Changes to the Terrorism Insurance Act 2003 (Cth)(the ACT) become effective from July 2017, and some mixed-use commercial and residential strata buildings will see new terrorism levies of up to 16%, plus statutory charges on affected policies.

These changes broaden the definition of eligible property to include buildings with at least 20% of floor space being used for commercial purposes, or schemes which have a single building sum insured of at least $50 million (whether used for commercial or other purposes).

Two key changes in terms of classification of strata buildings from the Australian Reinsurance Pool Corporation (ARPC) are:

  1. Commercial Strata – Commercial buildings now defined as greater than or equal to 20% commercial floor space ratio, irrespective of tenancy.  The result is that all Strata Community Insurance Commercial Strata policies will attract the ARPC terrorism levy.
  2. Residential Strata –  (i) ARPC terrorism levy to be charged on residential schemes where one or more single buildings has a sum insured equal to or greater than $50 million.  (ii) Where ARPC coverage under the Act does not apply for schemes consisting of multiple residential buildings having a combined sum insured greater than $50 million, these schemes remain protected under Strata Community Insurance’s specially negotiated terrorism cover up to $100 million.  (iii) Schemes consisting of single or multiple residential buildings with a combines sum insured of less than $50 million also remain protected under our specially negotiated terrorism cover.

Tiered approach

Location of the schemes will be a significant component with this upcoming change, given application of a tiered levy model under which physical location is used to determine the rate of levy applicable:

  • Classification A 16% levy – capital cities with a population over 1 million
  • Classification B 5.3% levy – urban areas with a population over 100,000
  • Classification C 2.6% levy – rural areas plus all other areas not captured by A and B

From 1st July  2017 Bodies Corporate will be liable to pay terrorism levies for all renewals and new business if the scheme meets the ARPC criteria.

For schemes that fall outside of the criteria for ARPC cover under the Act, Strata Community Insurance’s terrorism cover will continue to apply – up to $100 million.

*Information supplied by Strata Community Insurance

 

Smoke Alarm Requirements from January 2017

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For dwellings being sold, leased or an existing lease renewed;

  • Existing smoke alarm manufactured more than 10 years ago must be replaced with photoelectric smoke alarms which comply with Australian Standards.
  • Smoke alarms that do not operate when tested must be replaced immediately.
  • Existing hardwired smoke alarms that need replacement, must be replace with a hardwired photoelectric smoke alarm.
  • For best protection smoke alarms should be installed on each storey, in every bedroom and in hallways which connect bedrooms.
  • It is also recommended that smoke alarms be either hardwired or powered by a non-removable 10 year battery and ionisation smoke alarms be replaced with photoelectric type as soon as possible.
  • All smoke alarms should be interconnected
  • A well practiced fire escape plan is highly recommended
  • Property sellers must continue to lodge a Form 24 stating the requirements of the legislation have been met.

Click here for detailed information from the Queensland Government.

 

Detector placement

 

Detector placement

 

 

 

 

 

Warning: Marblesheen Pool Coatings Containing Asbestos

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What is Marblesheen/Marblelite?

Marblesheen also known as Marblelite is a decorative coating applied to the surface of concrete pool shells with the average thickness between 5-25mm.  It is primarily composed of white cement and white marble chips between 1-2mm in diameter.  If the Marblesheen coating was applied prior to 1990, it may include asbestos.

Cross section view of concrete pool shell

Example of older marblesheen coating

How do I identify if a pool coating contains asbestos?

The only way to confirm if a Marblesheen coating contains Asbestos is to have a sample analysed by a National Association of Testing Authority accredited laboratory.

Is there a risk of exposure to asbestos from Marblesheen coatings?

If the Marblesheen coating is in good condition and left undisturbed, it presents as low risk as it is non-faible and the asbestos fibres are bound to the cement.  However if the surface is deteriorated in the way of cracks, breaks and chips or delamination of the coating there may be a risk.

Maintenance, renovation or demolition of Marblesheen containing asbestos

Any work involving the removal of disturbance of Marblesheen coatings assumed or confirmed to contain Asbestos must be done in accordance with the Work Health and Safety Regulation 2011.

To read the complete Queensland Government article click here

 

 

Smoking in Strata (Qld)

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A Body Corporate cannot ban smoking in a scheme altogether and similarly, owners and occupiers may not just smoke wherever they want to.

Smoking on common property can only be restricted if it unreasonably interferes with the enjoyment of another lot or the common property.  However this is not the case when there are substantially enclosed areas of the common property.  Smoking on those areas would be unlawful under the Tobacco and Other Smoking Products Act .

Bodies Corporate need to make sure they do not act unreasonably or in an oppressive manner when dealing with smoking in strata.  If considering a by-law to handle this situation, care should be taken to ensure the by-law is reasonable.  Adjudicators have previously held that a by-law could only regulate smoking on common property such that is not inconsistent with the standard in the Body Corporate Community Management Act.

In 2015 the Queensland Government said the discussion paper to ban smoking on balconies had taken 18 months and any formal decision would take quite some time.  To date no decision has been made.

Ridiculous Motions

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Can the Committee refuse to accept motions?

When such motions are submitted to the committee for inclusion on the next general meeting agenda, committees are left wondering how they are meant to deal with them. This is particularly so when the motions submitted are defamatory of owners or occupiers within the scheme.

The first idea that comes to mind is to completely reject the motion and not include it on the general meeting agenda…unfortunately though; this approach will breach the relevant regulation module that applies to your scheme.

The regulation modules require that all motions (provided they are submitted in time) be included on the next general meeting agenda. This rule applies regardless of the content of the motion.

This approach was confirmed by the adjudicator in Circle on Cavill [2015] QBCCMCmr 409.

In that case, the committee had refused to include the applicant’s motions on the AGM agenda because, in their view, the motions were defamatory. The applicant applied to the Commissioner’s Office for various orders including declarations that the committee had acted unreasonably in rejecting her motions and that an EGM be convened to consider her motions. The adjudicator ordered that:

  1. The body corporate failed to comply with its statutory duty to include the motions submitted by the applicant on the agenda for the AGM; and
  2. The body corporate must include the applicant’s motions on the agenda for the next general meeting on which it is practicable to include the motions.

In considering the committee’s concerns about the allegedly defamatory motions, the adjudicator stated:

…there is simply no discretion for a committee to decide not to include a motion, regardless of the substance or impact of the motion. 

If a committee is concerned that a motion submitted by an owner is invalid or unenforceable, that is not a basis to include the motion on the agenda. Rather, the motion must be listed on the agenda and then the chairperson can rule the motion out of order at the meeting.

We understand the hesitation felt by committee members when an owner submits motions for a general meeting that are impractical, unkind, defamatory or unenforceable.  However, it is important for committee members to know that the legislature did cater for these situations in drafting section 111A of the Body Corporate and Community Management Act 1997 (BCCM Act).

Section 111A is titled ‘Protection of body corporate and committee from liability for defamation’ and essentially provides that the committee and body corporate will not be liable for defamation in circumstances where an owner submits a defamatory motion (including the explanatory note) for consideration at a general meeting.

It is absolutely crucial to understand that section 111A only applies to motions submitted by owners. As such, any motions submitted by the committee must not be defamatory; there is no protection from liability in circumstances where a committee submits a defamatory motion for consideration at a general meeting.

Whilst there is (unfortunately) no basis for refusing to include ridiculous motions on a general meeting agenda, in some circumstances, the person chairing the meeting may be able to rule the motion out of order. On this point, the adjudicator in Circle on Cavill relevantly stated:

“If a committee is concerned that a motion submitted by an owner is invalid or unenforceable, that is not a basis not to include the motion on the agenda. Rather, the motion must be listed on the agenda and then the chairperson can rule the motion out of order at the meeting.”

Unfortunately, ruling motions out of order is not as straightforward as it sounds. It can only be done in certain circumstances and there is a specific procedure that must be followed which we will discuss in a later article.

In concluding, we reiterate that:

  1. All motions submitted by owners for consideration at a general meeting, must, no matter how ridiculous, be included on the next general meeting agenda on which it is practicable to include the motions;
  2. Failure to include an owner’s motion on a general meeting agenda could result in an adjudicator finding that the committee failed to comply with its statutory obligations;
  3. A committee will not be liable for defamation in circumstances where an owner submits a defamatory motion for consideration at a general meeting; and
  4. Just because a motion has to be included on the agenda for a general meeting does not necessarily mean it will be voted on. There may be a basis upon which the chairperson can rule the motion out of order.

You can read more of the adjudicator’s reasoning the Circle on Cavill case here.

We have advised many committees on issues pertaining to defamatory motions, ruling motions out of order and general meeting procedures. Please don’t hesitate to get in contact with us if your committee would like our assistance.

Article written by Hynes Legal http://hyneslegal.com.au/