21 Sunrise Boulevard [2004] QBCCMCmr 610 (2 December 2004)

Last Updated: 30 September 2005

REFERENCE: 0145-2004

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	29496
Name of Scheme:	21 Sunrise Boulevard
Address of Scheme:	21 Sunrise Boulevard SURFERS PARADISE QLD 4217

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

Mr and Mrs Mooney, the Owner(s) of lot 1

I hereby order that Owen and Shirlee Mooney, owners of lot 1 and Michael Haag, owner of lot 2 take all reasonable steps to ensure that the body corporate adopts budgets for this financial year on the following basis: 1. That the administrative fund budget cover anticipated expenditure for the scheme’s insurance, seabed lease, pest control and bank fees; and 2. That the sinking fund budget take into account anticipated expenditure of $12,000 for painting of the scheme in three years time. I further order that the application is otherwise dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0145-2004

"21 Sunrise Boulevard" CTS 29496

Application

21 Sunrise Boulevard Community Titles Scheme (Sunrise Boulevard) is a 2 lot scheme under the Body Corporate and Community Management Act 1997 (Act) and the Act’s Small Schemes Module Regulation (Small Schemes). The scheme is designed for residential purposes.

This application is by Owen and Shirlee Mooney, owners of lot 1 (applicants) seeking orders against Michael Haag, owner of lot 2 (respondent). The applicants are seeking to overturn the levies set at the annual general meeting of 8 September 2003 for the financial year 1 August 2003 to 31 July 2004.

Submissions

The applicants’ main submissions were to the effect that:

• One of the applicants attended the annual general meeting on 8 September 2003 but disagreed with the respondent about a number of matters and left the meeting because it was apparent that no meaningful decisions could be made at the meeting;
• The respondent resolved at the meeting that the administrative fund levies and sinking fund levies remain as they were for the previous year;
• These proposed levies are excessive and not in accordance with the legislation;
• The only matters that should be included in the administrative fund budget are the insurance, the seabed lease payments, pest control payments and bank fees. There is no need to make contributions for miscellaneous payments; and
• By accumulating excessive amounts in the funds the excess money is simply sitting in low interest or non-interest bearing accounts which disadvantages owners.

The respondent’s main submissions were to the effect that:

• The units are valuable and it is important to make sufficient contributions to properly maintain the units and to maintain the value of the units;
• He has obtained a quotation for repainting the units in the amount of $12,000 and would expect repainting to be necessary every seven years. The units were painted on construction approximately four years ago; and
• The applicants are currently unfinancial as they have not paid all their contributions.

Decision

Applicable law

The legislation includes provisions to the effect that:

• The annual general meeting must be called and held within 3 months after the end of each financial year (Small Schemes, 37). The notice of general meeting must be in writing and voting may be by telephone, electronic mail or another way the intention of a voter can be clearly communicated (Small Schemes 24, 32);
• The body corporate must adopt an administrative fund budget and sinking fund budget for each financial year (Small Schemes, 55);
• Contributions must be levied on owners on the basis of the budgets and a special levy must be fixed for liabilities inadequately provided for in the budgets (Small Schemes, 56);
• Contributions must be paid into accounts kept solely in the name of the body corporate at a financial institution. Funds may be invested in the way a trustee may invest trust funds (Small Schemes, 61);
• The administrative fund budget must contain estimates to cover expenditure of a recurrent nature, including insurance and maintenance (Small Schemes, 55(2)); and
• The sinking fund budget must contain estimates to cover expenditure of a non-recurrent or capital nature, including periodic replacement of items of a major capital nature and other expenditure that should reasonably be met from capital. This budget must reserve an appropriate proportional share of amounts necessary to be accumulated to meet anticipated major expenditure over a 10 year period (Small Schemes, 55(3)).

Time limit

The applicants seek to overturn the budgets and levies set in their absence at the annual general meeting on 8 September 2003. However, an application for an order declaring void a meeting or resolution of the body corporate must be made within 3 months of the meeting in question (Act, 242). This time limit can be raised for good reason (Act, 242(3)). However, I see no good reason for waiving the time limit in the present circumstances, particularly as the relevant financial year has ended. The applicants must therefore pay their outstanding contributions to cease being unfinancial.

The application also puts into dispute the manner in which budgets should be calculated for the present financial year. The applicants submit that the administrative fund should only budget for the scheme’s insurance, seabed lease, pest control and bank fees. The respondent has submitted that each owner should also submit $50 for incidental expenses that may be incurred over the financial year and that he is concerned about the body corporate having sufficient funds for painting the scheme in a few years time.

An adjudicator is required to make an order that is just and equitable to resolve a dispute (Act, 276). In this instance, it is appropriate to make an order giving the parties guidance regarding the calculation of levies for this upcoming financial year.

Setting of administrative fund budget

The applicants’ submissions satisfy me that the only known expenditure from the administrative fund in the upcoming financial year should be for the scheme’s insurance, seabed lease, pest control and bank fees. The applicants also say that the administrative fund is in surplus and that this is unnecessary. However, the respondent has submitted that it is useful to have a surplus for unexpected expenses and owners should contribute an additional $50 each year above anticipated expenses.

If expenditure is estimated properly then there should be no need for a surplus in the administrative fund and contributions can be reduced to take account of surpluses from previous years. However, I would certainly encourage the parties to slightly overestimate any expenses rather than slightly underestimate expenses as this would avoid the need for owners to hold an additional meeting and call a special levy if the amount in the administrative fund is insufficient.

I will therefore make an order that the administrative fund budget must at least cover anticipated expenditure for the scheme’s insurance, seabed lease, pest control and bank fees.

Setting of sinking fund budget

The submissions indicate that the only capital expenditure anticipated in the next ten years is painting of the scheme at an approximate cost of $12,000. I accept the respondent’s submission that the scheme was painted when originally constructed approximately four years ago and that painting will be necessary in approximately three years time in order to meet the body corporate’s responsibility to maintain the common property in good condition.

Therefore, I will order that the owners adopt a sinking fund budget that anticipates $12,000 spending on painting in three years time. If this expenditure had been anticipated from the commencement of the scheme then each owner would have been expected to contribute approximately $800-$900 each year towards painting expenditure. However, it appears that sinking fund contributions have not been properly calculated over the previous few years.

Assuming no funds presently in the sinking fund, the annual proportionate share for this financial year of the anticipated painting expense would be $4,000, of which each lot must contribute half (Small Schemes, 55(3)). However, this annual proportionate share will be lower when previously submitted sinking fund contributions are taken into account.

I note that funds can be invested in the way a trustee may invest trust funds (Small Schemes, 61). If the body corporate wishes to invest the money in its sinking fund then they can refer to The Trusts Act 1973 in this respect.

Order

For these reasons, I make the order above.

If owners require further information about administering their scheme then I would encourage them to call the information service provided by this office on 1800 060 119.