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.
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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.

Sir Humphrey explains Body Corporate Committee meeting minutes

It is very important that Body Corporate Committee meeting minutes are accurate. Sir Humphrey Appleby provides his insights on the procedure for taking minutes in Yes Prime Minister ...




There have been many cases where Committee members or owners have disagreed with or disputed the published record of what actually occurred at a meeting. Although the Act requires that the minutes be complete and accurate, the reality is that once the minutes are published it is difficult to change, revise or challenge them.

Bear in mind that the minutes can often be used later in references to Disputes or other matters that affect the Body Corporate. It is best for Committees to make it very clear to the Body Corporate Manager from the outset that a draft of the minutes should be sent to the committee for approval before publication. It is more likely that this will pick up any errors or omissions. ________________________________________________

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.

Body Corporate Committee members. A thankless job

The latest events at Palm Beach North only serve to highlight why it is becoming more difficult to encourage Body Corporate Committee members to continue to serve. The Body Corporate for Palm Beach North has had a fairly colourful history, part of which is detailed in various Disputes that have been lodged with the Commissioner over the years.

The Body Corporate Committee recently had their Budget meeting at the offices of their Body Corporate Manager, Archers. In the last few years, there has been some conflict between one owner and the Committee.

At the last AGM, the owner lodged a number of motions alleging a fairly vague breach of conduct against various committee members along with pages of explanatory notes. The Committee responded to owners with a very detailed explanation of why they disagreed with the owner. All of this was published as part of the agenda for the AGM and sent to all owners.

As an owner in the complex, it is my opinion that the Committee has done a good job and the allegations were frivolous. It is certainly understandable that the Committee members were offended by the allegations. There was a concern that the published motions and explanatory notes in the AGM may have defamed the Committee members but legal action is expensive and there is never any guarantee of results.

The outcome was that all motions that the owner lodged were not carried. However, the owner was elected as a Committee member along with the other incumbent Committee members. An EGM was held a few months later resulting in the removal from the Committee of the owner who had lodged the allegations against the previous Committee.

Flash forward to the recent Budget meeting and the Body Corporate Manager advised that the owner had once again lodged a series of motions and explanatory notes detailing allegations against the Committee. It is no wonder that the Committee members at the Budget meeting asked the Body Corporate Manager to exclude these motions from the Agenda. The Committee were concerned that by including the motions on the Agenda, the Body Corporate would be publishing libellous statements. The Body Corporate Manager explained that they had to comply with the Act and had to publish the motions as they had been lodged.

After some discussion at the meeting, the Body Corporate Manager advised the Committee that they would be terminating the contract immediately and ended the meeting before completing the business on the Agenda. This obviously left the Committee and the Body Corporate for Palm Beach North in a very difficult position as they were suddenly left without a Body Corporate Manager and no budget for the upcoming AGM. I can understand that the Body Corporate Manager insisted on complying with the Act but it is also understandable that the Body Corporate Committee members were very upset at the prospect of authorising a document that would be distributed to all owners that contained possible defamation against them.

This is another example of where the Act does not encourage owners to stand as Committee members. Section 100 and 111a of The Act states that the Body Corporate cannot be held liable for a required motion that is considered to be defamatory.

The Act requires that any motion and explanatory material that is submitted by an owner must be included in the Agenda for owners to vote on. If that material defames another person, then that person can take individual legal action against the person who submitted the motion but not the Body Corporate. Basically, an owner can submit any motion he or she likes.

It is not surprising that many question the fairness of this Section of the Act. Obviously, motions should ideally be included on the Agenda as submitted but the Act leaves plenty of room for someone to abuse that privilege and submit something that is defamatory or abusive with very little chance of legal reprisals.

I guess it would be unfair to hold the Body Corporate liable for a motion that could defame someone else but it also seems unfair for the Act to "require" the Body Corporate to publish material that may defame another person.

There have been other examples of motions that have been considered defamatory with other Bodies Corporate and these motions generally cause great distress to those affected. Ultimately, this is another example of why many owners prefer to leave the role of Committee member to someone else.
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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.

Gold Coast Council Rates rise again – Owners not happy.

Owners have expressed their disgust as Gold Coast Council rates rise yet again. Many are justifiably concerned that the continuing rate increases may force them out of their homes.

A council employee stated that owners should expect increases in their rates every six months with the clear implication that the increases were just a matter of course that everyone should just accept.
The latest rate notice includes a City Transport charge of $58.50. However, many owners are questioning exactly what benefits there are for them with the Transport charge.

Patricia of Mudgeeraba sent me an email after receiving the latest notice. She states "The City Transport charge is supposed to be for "improvements" to the transport system on the Gold Coast but bus services in Mudgeeraba have actually decreased and there certainly has not been any improvement. The light rail system might be of some benefit to those who live around the Surfers Paradise area but it is no use to those who will never use it."

Patricia went on to say "It also seems unfair that only rate payers have to pay for the so called improved transport. What about people who live on the Gold Coast who don't own property? They still use the light rail but they don't contribute anything".

Patricia is not alone in her concern about the Rate increase. Another owner in Palm Beach quoted his costs. "I pay $1250.00 approx. in council rates and when you add Body Corporate Levies and Water rates to the costs, it is getting to the stage where I would be better of being a renter rather than owning my property".

Better off renting than owning?? Well, you only need to do some basic arithmetic to work out that this is true in many cases. Surely the Gold Coast City Council does not want to encourage that scenario for owners.

There is no doubt that these are genuine concerns. Water Rates will soon be issued quarterly and the cynics amongst us are expecting continuing subtle increases that will supposedly have less impact than if the bills were issued half yearly.

Mayor Tom Tate has repeatedly said that the increases are small and they are seen as a contribution to improving services but he does not appear to understand that many owners cannot continue to absorb Council Rate increases. The fact is that many owners are considering leaving the Gold Coast altogether because of the constant increases.

Mayor Tate needs to consider that when taken on a cumulative basis, the increases are not small at all. In some cases, Gold Coast Council Rates have doubled in the last ten years.

Investors are also finding things tough. Rents do not cover the increases and, in some cases, rents have actually dropped because of the over supply of rental properties on the Gold Coast.

Like most Bureaucratic organisations, there is no doubt that the Gold Coast City Council could be a lot leaner but I wonder if Mayor Tate is making any attempts at all to cut costs and actually reduce Council and Water Rates.

Recent reports indicate that the current Council would be voted out if an election was held now. Well, one way that they could improve their position would be to make a committed attempt to reduce the costs of owning property on the Gold Coast.

What can you do about Gold Coast Council Rates rises?

If you live in a Body Corporate Community, I would encourage you to contact your Committee and urge them to write to the Gold Coast City Council on behalf of the Body Corporate requesting the Council to focus on reducing costs and Council and Water Rates.
If you are concerned about Gold Coast Council Rate rises send me an email.

Footnote:

I sent the following questions to the Gold Coast City Council for their comment but have yet to receive a response.

1. Why specifically, have the current Council Rates increased?
2. A Gold Coast Council employee advised that it was likely that there would be rises every six months. Is this correct?
3. Is there any possibility that Council Rates might decrease in the next six months?
4. Is the Mayor and Council aware that many owners of Units on the Gold Coast are being forced to consider leaving their homes because of rising Body Corporate fees and Council and Water Rates?
5. Is the Mayor and Council aware that investors are finding that rents are not sufficient to cover the increases in Council Rates and Body Corporate fees?

If the Gold Coast City Council does respond to any of the questions, I will publish their answers here.

BODY CORPORATE LEVY INCREASES LETTER FROM AN OWNER

I receive many emails from owners who are shocked at Body Corporate Levy increases at their buildings. The common theme is that they wonder whether they will be able to continue to live in their homes if the fees keep rising.

The latest Letter to the Editor from Jenny states ....
"As a result of the BC increase approved by the Attorney General last Sept our weekly BC fees increased from $110 p.wk to $140 p.wk. When talking to other unit owners in Surfers Paradise there seems to be a general opinion of not having an increase at all. Our BC has recently approved another increase of $10 p. wk to increase the Administration fees due to a works project underway in the building. That increase I can accept but an extra $30 oer week has certainly changed things financially for us. We have been owners here for just over 2 yrs & have seen our BC fees increase by approx $2000 per year. Do you have any advice regarding this? I did contact the Body Corporate Manager about it but was sent an email of totally confusing figures as to how the amounts were worked out. I'm not an accountant so this was useless. Do you know of any other buildings on the Coast that have incurred this sort of increase? Any advice would be hugely appreciated. I am going to visit other owners & get their opinions on this also. Regards Jenny"

In a further email she wrote ....
"....we have reached the opinion now that as much as we enjoy the lifestyle of high rise living it seems it's not going to be sustainable if BC fees can just continue to increase as they do. When we bought this apartment it was after many hrs of doing our  figures & at the time was affordable. However $2000 increase in just 2 years worries us as we now don't know what to expect in the future. We will probably consider selling & moving back into a more affordable life style which was not the plan but needs must."

The fact is that Body Corporate Levy increases in various communities is forcing many owners to reconsider their position in owning units. A combination of factors have resulted in the increases. Some owners are affected by the Levy Equalisation legislation. There is not much that can be done about that now apart from lobbying the Government to change the legislation yet again.

The original concept of setting levies was loosely based on the value and size of the units. The higher you go in an apartment building, the value of the apartment theoretically increased. Therefore, the developers felt that the levies should increase for higher floors. This particularly affected Penthouse owners who, in some cases, paid levies that were double those of owners of smaller ground or lower floor units.

The Penthouse owners argued that levies were purely for maintenance of the Common Property and should be the same for everyone. The recent legislation supports that argument.

Irrespective of whether the legislation is fair or not, owners like Jenny are coming to the conclusion that it is just not viable to continue to pay out crippling Body Corporate Levies. Add the levies to the spiralling Council and Water Rates and owners are wondering how they can afford to live in their homes. See my recent article.

The second factor in Body Corporate Levy increases is something that owners do have some control over. Committees, who represent owners, control spending and the budget. Committees are nearly always unpaid volunteers, many of whom have limited experience in managing substantial budgets. They are usually guided by their Body Corporate Manager and the time the Committee members are prepared to spend is often insufficient to what is needed to be able to monitor and manage a budget.

There are often areas in which cuts can be made in the budget but Committees are very reluctant to propose decreases in Body Corporate Levies. You rarely, if ever, hear of a Body Corporate that has proposed decreases to the Sinking and/or Administration fund. It is particularly difficult to curtail Body Corporate Levy increases in older buildings because maintenance costs usually increase as the buildings start to age. However, if units in Body Corporate Communities are going to continue to be a viable investment for owners, then Committees will have to do everything possible to put a hold on increases to levies.

The problem with that is that it takes time and some skill to be constantly monitoring the financial statements, obtaining quotes for alternative contractors, etc. Many Committee members are simply not prepared to be involved to that extent. I would love to see Committee members starting out the year with a goal of reducing the Body Corporate Levies by, say 5%, but the reality is that levies in Body Corporate communities seem to increase rather than decrease.

Meanwhile, other charges like Council and Water Rates and Electricity continue to rise. For investors who place their apartments in holiday letting this is a recipe for disaster. Their investments become not much more than hefty tax deductions.

As far as Jenny is concerned, my only advice would be to keep appraised of the spending at her building, particularly by looking closely at the financial statements that are provided to all owners prior to AGM's. She should also talk to the Committee members and other owners and explain how the increases are affecting her position and the value of her investment.

Ultimately, owners are fairly apathetic about their investments and many don't get involved. They usually hoped for capital gain when they eventually sold their units but that is something that you can no longer rely on. If owners took the time to analyse the costs of owning their units against the actual value of the unit, many would realise that they have made a very poor investment and that it is better to move on.

BODY CORPORATE UNPAID LEVIES – THE CONCILIATION PROCESS

An owner recently lodged an Application to the Commissioner, disputing the amount owing in Body Corporate Unpaid Levies and recovery costs. The matter was referred to a Conciliation Hearing but the end result left the owner and the Body Corporate back at square one.

Background

The owner has Body Corporate Unpaid Levies plus recovery costs amounting to over $3000.00. They cited various reasons why the amount has not been paid. However, the Body Corporate Committee believe that the entire debt should be paid in full and commenced recovery action about six months ago.
In the meantime, the owner, through her Real Estate Agent, lodged an Application with the Commissioner disputing the amount owing.
It is unlikely that the owner would have been aware that the Application had virtually no chance of getting a ruling unless she paid the entire amount owing. Had she done that, then she could have sought adjudication on the debt including recovery costs.
The fact is that the Commissioner has no jurisdiction to make a ruling where Body Corporate Unpaid Levies are still owing. The matter could only proceed to Conciliation where the facilitator could try and broker some sort of agreement between the parties but there is no obligation on either side to agree on anything.
In this case, the parties simply agreed that the owner would make a formal offer to the Body Corporate. The Application was then closed without any further action.
The Body Corporate was not obliged to accept the offer. They were only required to consider it and respond accordingly. Following the conciliation, an offer was made and subsequently rejected.
The overall process took over three months to reach its conclusion. The Committee members were forced to spend their own time in participating when there was never really any chance of resolving the matter.
In the meantime, the Body Corporate Unpaid Levies plus interest and costs increased and the owner was no better off apart from receiving some advice, which could be construed as legal advice, from the facilitator.

The Next Step

The Body Corporate now has no option but to proceed with legal action. The Facilitator seemed keen to push the Body Corporate towards referring the matter to QCAT for resolution but legal advice has indicated that they would be better off going through the courts.
The costs of the legal action will be significant and the owner will have to either pay the amount in full or get her own legal representation which will only add to the costs.
The lesson from this exercise is that owners should pay their levies on time. If, for some reason, they miss payments and are charged interest and even recovery costs, then they should pay the full amount and then refer the matter to the Commissioner who has the jurisdiction to decide on whether the additional costs are justified.
If you do not pay the outstanding amount you are setting yourself up for a potentially escalating amount in recovery costs and legal fees.
Watch this space for future developments.

THE WAVE BODY CORPORATE LEVY RECOVERY SAGA

Many owners in Body Corporate Communities have been watching The Wave Body Corporate Levy recovery saga with great interest. The latest news is that Westpac is reportedly facing a payout of $450,000.00 although there is no guarantee that the matter will end there. All this as a result of the relentless pursuit of an owners' unpaid levies of $5500.00.

Background

Dr and Mrs Prins, the owners of a luxury apartment at The Wave on the Gold Coast, fell behind with their levies owing approximately $5500.00. It has been reported that they wanted to enter into a payment plan but no agreement was reached and the Body Corporate commenced legal action to recover the debt.
The owners defended the legal action and were self represented. It appears that the matter continued for some time and the legal costs and associated fees ballooned to extraordinary amounts. Owners at The Wave were quite rightly concerned at the consequences of possibly losing the battle. The Prins declared bankruptcy in April 2013 by which time the recovery costs had risen to close to $350,000.00.
In mid 2013, Westpac took over the possession of the Unit and they apparently took the view that the responsibility for the recovery costs was not their responsibility. Westpac certainly had a good moral argument. Why should they be saddled with the costs that they had no control over?
The matter continued to escalate which was of great concern to owners bearing in mind that they were up against a giant bank with huge resources. Some owners became so nervous about the possible outcome that they favoured a negotiated settlement of the recovery costs.

The Latest News

The most recent development in the long running saga is that Westpac’s appeal was dismissed on 11 April 2014. See the Supreme Court ruling. The Court ruled that recovery costs associated with pursuing outstanding levies are a debt that attaches to the Lot.
SSKB (Stewart Silver King and Burns) has sent out a newsletter welcoming the decision and congratulating the Body Corporate for the Wave. However, there are surely no winners here.
Approximately $450,000.00 spent to recover a debt of approximately $5500.00???? Onlookers can be excused for thinking that something must be seriously wrong with the legal system particularly bearing in mind that there may still be avenues of appeal for Westpac and there could be more twists to the tale.
I can certainly understand the Body Corporate for the Wave taking legal action to recover a debt but if it takes 450,000.00 to get to this stage in attempting to recover a small debt then you would have to wonder about the way in which this was handled.
The recovery of Body Corporate Levies is a big problem for Bodies Corporate. The process can be time consuming for Committee members who are unpaid and some lawyers are getting plenty of business as a result.
I am currently dealing with a levy recovery issue at another Body Corporate. The matter will be going to conciliation soon and I will be reporting on the outcome. However one thing is certain. There is no way we will be spending $450,000.00 to recover the outstanding debt (I hope!).