Vegas Building Units [2000] QBCCMCmr 360 (20 July 2000)

CG YoungREFERENCE: 0247-2000

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	14054
Name of Scheme:	Vegas Building Units
Address of Scheme:	18 Tarcoola Crescent CHEVRON ISLAND QLD 4217

TAKE NOTICE that pursuant to an application made under the abovementioned Act by

Julek LIPSKI, a co-owner of Lots 7 and 14,



CG YoungI hereby order that the application by Julek Lipski, a co-owner of Lots 7 and 14 for an order 2nthat the body corporate comply with the Body Corporate and Community Management Act 1997 with regard to the spending of money, accounting for money in the sinking fund, preparing a sinking fund budget and the correct procedure for dealing with resolutions at meetings, is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0247-2000

“Vegas Building Units” CTS 14054

The applicant, Julek Lipski of Lots 7 and 14, has sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (“the Act”), quote-

To comply with the Act with regard to spending of money, accounting for money in sinking fund, prepare sinking fund budget, correct issuing of resolutions at meetings plus any other issues.

Section 223(1) of the Act provides that an adjudicator may make an order that is just and equitable in the circumstances (including a declaratory order) to resolve a dispute, in the context of a community titles scheme, about –

(a)	a claimed or anticipated contravention of the Act or the community management statement; or
(b)	the exercise of rights or powers, or the performance of duties, under this Act or the community management statement; or
(c)	a claimed or anticipated contravention of the terms, or the termination of, or the exercise of rights or powers under the terms of, or the performance of duties under the terms of an engagement contract or an authorisation contract.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 223(2)). An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 230(1)).

In the supporting grounds, the applicant states that the body corporate committee are not complying with provisions of the Act in relation to financial management, general meetings and committee expenditure limits.

A copy of the application was forwarded to the body corporate secretary for distribution to all owners (excluding the applicant) and the committee. Responses objecting to the application have been received from four of the committee members.

The applicant has provided a number of examples of provisions of the legislation he considers are not being complied with by the body corporate. I will deal with each of these issues separately.

1. Sinking Fund Budget

Mr Lipski has stated that the body corporate does not have a ten-year sinking fund budget. It is acknowleged in the response from Mr Schmidt that the body corporate has never had a ten-year budget for the sinking fund. However, Mr Schmidt and the secretary, Yvonne Anderson state that $3000 is held for the sinking fund. I note that as at 30 September 1999, the body corporate also had $12000 allocated for the roofing fund.

Section 100(1) of the Body Corporate and Community Management (Standard Module) Regulation 1997 ("the Standard Module") provides that the “body corporate must establish and keep an administrative fund and a sinking fund”. The committee has an obligation under section 94(5) of the Standard Module to prepare proposed administrative fund and sinking fund budgets for adoption by the body corporate at each annual general meeting.

Section 94(3) provides that:

“The sinking fund budget must—

(a) allow for raising a reasonable capital amount both to provide for necessary and reasonable spending from the sinking fund 20 for the financial year, and also to reserve an appropriate proportional share of amounts necessary to be accumulated to meet anticipated major expenditure over at least the next 9 years after the financial year, having regard to—

(i) anticipated expenditure of a capital or non-recurrent nature;

and

(ii) the periodic replacement of items of a major capital nature;

and

(iii) other expenditure that should reasonably be met from capital; and

(b) fix the amount to be raised by way of contribution to cover the capital amount mentioned in paragraph (a).

Example—

Painting of the common property is anticipated to be necessary in 3 years time at a cost currently estimated at $3 000. The contribution amount for the sinking fund in the budget for the financial year must therefore include the annual proportional share for painting of $1 000. Next year, the estimated cost has increased to $3 400 and so the second year levy will be $1 200. The estimated cost in the third year is $3 500, so with the $2 200 accumulated, a levy of $1 300 is necessary to meet the cost. In larger schemes, the sinking fund will have several projects being funded for various future times.”

In broad terms, the purpose of the administrative fund is to meet expenditure anticipated to be incurred annually or more frequently. For example, expenditure such as insurance, secretarial fees and the regular cleaning of the common property swimming pool would be paid from the administrative fund. The sinking fund provides for anticipated expenditure of a capital nature, that is, expenditure not likely to be incurred annually. Examples of expenditure from the sinking fund include the painting of common property or major roof repairs. The purpose of a ten-year budget is to ensure that a body corporate has a long-term plan for the maintenance of common property, and that owners are continually contributing to meeting anticipated long-term expenses.

While it has been acknowledged by current committee members that the body corporate does not have a ten-year sinking fund budget, for the following reasons I do not propose to make the order sought by the applicant. Firstly, the financial year ends in two months on 30 September (based on the financial statement included with the application). Secondly, the body corporate has considered its long-term expenditure requirements in regards to roof repairs and has an amount of $3000 in the sinking fund. However, the body corporate must be aware of its legislative obligations to keep a sinking fund budget, and I would expect the body corporate to ensure that a sinking fund budget is prepared and considered by owners for adoption at the next annual general meeting. If the body corporate does not put this budget in place at the next annual general meeting, then the applicant could consider lodging a specific application regarding this matter and referring to this order.

2. Use of the number building units plan 1045.

The notice and the minutes of the annual general meeting dated 11 November 1999 make reference to the building units plan number. The responses to the application indicate that the committee are aware of the community titles scheme number (which is the same as the community management statement number).

Body corporate members should be aware that the name of the body corporate changed when the new Act commenced on 13 July 1997. The name for this body corporate now is “Body corporate for Vegas Building Units community titles scheme 14054”. This name must be on the body corporate common seal.

3. The annual general meeting dated 11 November 1999.

The applicant has stated that the notice of the annual general meeting did not include the following: voting papers; the mandatory motion regarding auditing; and there was not a quorum present. Mr Lipski has included a copy of the notice and minutes of the annual general meeting.

Section 43 of the Standard Module states that a “general meeting must be held at least 21 days after notice of the meeting is given to lot owners”. Section 42 of the Standard Module provides the requirements for a notice of a general meeting. The notice must, for example:

• Contain an agenda for the meeting prepared by the committee which includes the substance of the motions proposed by the committee and submitted by owners. The agenda for an annual general meeting must provide for the presentation of the statement of accounts for the previous financial year, approving the administrative and sinking funds budgets for the next financial year, and determining whether the statement of accounts for the next financial year are to be audited.

•	Include a proxy form.

• Include a voting paper which must state each motion to be considered at the meeting

•	Contain or be accompanied by explanatory or other required materials. Examples of explanatory or other required materials include the administration fund and sinking fund budgets, and the statement of accounts for the financial year.

Section 52(5) of the Standard Module provides that a general meeting may pass a resolution on a motion only if the motion is included as an item of business on the agenda and is stated in the voting papers accompanying the notice of the meeting.

These processes have not been complied with by the body corporate in convening and holding the annual general meeting. However, despite these contraventions by the body corporate (committee), I have not issued an order against the body corporate for the following reasons:

• the application was lodged six months after the meeting was held. Mr Lipski should have taken immediate action if he was concerned with decisions made at the meeting.

• the next annual general meeting is due in the near future. The body corporate committee must ensure, with the benefit of this order, that it convenes and holds this meeting in accordance with the provisions of the Act and the Standard Module. If the body corporate fails to convene the next annual general meeting properly, then the applicant should consider lodging an application concerning the particular matters in dispute.

In relation to its decision to impose a charge of 5% on the late payment of contributions, the body corporate should be aware of section 98 of the Standard Module which provides:

“Penalties for late payment

98.(1) The body corporate may, by ordinary resolution, fix a penalty to be paid by owners of lots if a contribution, or instalment of contribution, is not received by the body corporate by the date for payment fixed in notices of contribution given to the owners.

(2) The penalty must consist of simple interest at a stated rate (of not more than 2.5%) for each month the contribution or instalment is in arrears.

Example—

Suppose that—

 a contribution of $400 is payable in 4 instalments of $100 and the body corporate has fixed a penalty interest rate of 2% per month

 an account requiring payment of an instalment of $100 by 31 March is given to the owner of a lot

 the instalment is not paid until 27 June.

In this case, the instalment has been in arrears for 2 months and a penalty of $4 is payable.”

I would suggest that the body corporate does not apply the motion in seeking to charge a lot owner the 5% penalty. An owner charged such a penalty would be entitled to refer the matter to this office for adjudication.

4. Committee decisions.

The applicant states that the committee will be spending funds in excess of the maximum entitlement without gaining body corporate approval.

Section 103(1) of the Standard Module provides that the spending limit for the committee is the amount worked out by multiplying the number of lots included in the scheme by $100. Proposed expenditure exceeding this amount must be referred to a general meeting for authorisation. Further, the Act and the Standard Module prescribe the powers of the committee, the procedures for convening and holding committee meetings, and the information to be given to owners about committee meetings.

Mr Lipski has not provided any factual evidence to support his contentions regarding committee spending. Nor has he sought a specific order against the committee. Therefore, I am not prepared to make an order against the committee.

Conclusion

The applicant has sought a decision requiring the body corporate to comply with the Act. The body corporate and its members already have an obligation to comply with the provisions of the Act and the relevant regulation module (the Standard Module). For the reasons I have given above, I have dismissed the application. However, as I have already stated, an adjudicator may be prepared to issue an order against the body corporate if an application is lodged which relates to a specific future contravention of the legislation.

The body corporate members must make themselves aware of the provisions of the legislation. The Office of the Commissioner for Body Corporate and Community Management provides an information service which can be used by telephoning Freecall number 1800 060 119 for assistance with questions on the legislation. There are also are number of brochures available from the Commissioner’s Office on various aspects of the legislation. Further, the body corporate should also consider obtaining a copy of the Act and the Standard Module. The legislation can be purchased from Goprint (telephone[phone]).