Tuesday, November 15, 2016

Body Corporate Major Spending – Two Quotes Required

The Legislation requires that two quotes are usually required for Body Corporate major spending but many either ignore the Act or attempt to manipulate the law with creative wording.

Where major spending is involved, it makes perfect sense to require a Body Corporate to obtain two quotes. That allows some transparency in the process and at least provides an option to owners to compare the services that are being offered. In some cases, the Body Corporate will obtain more than two quotes.

When a Body Corporate submits only one quote in a major spending motion, owners would be entitled to be suspicious. Apart from the fact that it can often be a breach of the Act, the impression is that there is some form of impropriety involved.

Owners would quite rightly question why alternate quotes were not sought and why the Body Corporate has not attempted to source the best price for a service and submit the quotes to owners as required. Although many of these motions are submitted by a Committee they are entitled to rely on the advice of their Body Corporate Manager to ensure that the motions are accurately worded and that they comply with the regulations.

Motions renewing Body Corporate Managers Contracts

This all sounds obvious but it is amazing how many times the Act is ignored. One of the most common examples is when the renewal comes up for the contract of a Body Corporate Manager for an Accommodation Module. In a recent case, a motion was submitted for a three year contract for a Body Corporate Manager. There were no alternative quotes although the amount specified was close to double the Major Spending Limit for the Scheme.

It is inexcusable for Body Corporate Managers to make this sort of error but it happens often and on most occasions nothing is done because most owners are not aware of the requirements. For those who are aware, the only option available to them is to lodge a Dispute within three months of the event. That costs money and time and most people come to the conclusion that its best to leave it to someone else.

Some Body Corporate Manager's fees have increased in recent times and that makes motions for contracts to extend for more than a one year term problematical because the amount quoted is the cumulative total for the term of the contract ie if the motion for a Body Corporate Manager is asking for a three year contract at a flat $5000.00 per year and the Body Corporate Major Spending Limit for the Scheme is $10000.00 then multiple quotes are required.

Obviously, Body Corporate Managers want to lock owners in for long term contracts but they don’t want alternate quotes that might mean they lose their engagement. My advice to Bodies Corporate is that they should seek alternate quotes for a Body Corporate Manager. The service is now very competitive and there can be massive differences in the amounts charged although you should also bear in mind that the level of service can vary greatly.

Motions for Body Corporate Major Spending

In recent times, I have also seen a trend where Body Corporate Managers get creative with their wording of motions, usually in an attempt to avoid getting two quotes. Here is an example: That based on the indicative tender provided for the supply and installation of a (a service) by (a specific contractor) attached with the EGM notice, that the Body Corporate committee be authorised to further evaluate and review this tender, and at least one additional comparison tender to be obtained, and following such evaluation and review, that the committee is authorised up to an amount of $100,000-00 inclusive of GST, to enter into an agreement with a reputable contractor for (the service), and that two members of the committee are hereby authorised to execute any required written agreement under the common seal on behalf of the body corporate, with the cost of the proposal, if approved, to be met from the building sinking fund. 

Similar wording was actually used for a major spending motion recently and approved by the Body Corporate. It appears to be a way of avoiding submitting alternate quotes to owners. If the wording in this motion is acceptable then the Act should be rewritten. On most occasions, the reluctance to obtain alternate quotes is simply because the Committee have a preference for one contractor. However, they cannot ignore the Act. Owners should be given alternative options so they can make an informed decision.

Information about Major Spending Limits

The Commissioners website has some excellent information to help owners and Body Corporate Managers understand the Act. Body Corporate Major Spending Note: If your Scheme is a Commercial Module, the requirements for spending limits can be different to those for an Accommodation or Standard Module.

The opinions expressed in this article are personal commentaries and not intended in to be legal advice in any way. I have spent many years participating on a number of different Body Corporate Committees and provide an owner’s perspective on Body Corporate issues.

If you have any concerns or comments about any of the issues that are raised in these articles please use the form below to contact me.

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