Nobbys Outlook [2005] QBCCMCmr 72 (9 February 2005)

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

I hereby order that within 6 weeks of the date of this order, the body corporate of Nobbys Outlook shall reimburse the owners of lots which did not receive pest control treatment, their actual contribution towards pest control treatment of the other lots in the scheme.

I further order that within 6 weeks of the date of this order, the body corporate of Nobbys Outlook shall prepare a sinking fund budget for the current financial year, and once prepared and approved by the committee, a copy of this budget must be sent to all owners whose name appears on the body corporate roll.

I further order that prior to all future AGM’s of this body corporate, a proposed sinking fund budget must be included with the notice of meeting.

I further order that in future, the body corporate committee must comply with the requirements of sections 103 and 104 of the Body Corporate and Community Management (Standard Module) Regulation and ensure that where proposed expenditure exceeds the "relevant limit for major spending", at least two quotations are submitted to a general meeting in the form of a motion with alternatives.

I further declare that except in an emergency, a person authorised by the body corporate may enter a lot and remain on the lot to carry out work the body corporate is authorised or required to carry out, at a reasonable time after at least 7 days notice of the intended entry has been given to -
(i) the owner of the lot; or
(ii) if the owner is not in occupation of the lot--the occupier of the lot.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0627-2004

"Nobbys Outlook" CTS 14822

THE APPLICATION

This is a rather lengthy application which raises numerous concerns regarding management of the body corporate’s affairs including expenditure and financial accountability. The major issues raised by the application are summarised below and are set out in more detail under the heading "background".

Firstly, it is claimed that the body corporate has expended monies for pest control and window cleaning within certain lots but not in others

Secondly the applicants seek an order that the body corporate give all lot owners at least 7 days notice before undertaking any routine maintenance work on a lot.

Thirdly the applicants raise concerns regarding the handling of sinking fund monies and the lack of a meaningful annual sinking fund budget. It is further submitted that at the 2003 AGM, members of the body corporate agreed to a 320% increase in levies in accordance with the sinking fund forecast attached to the agenda. However the applicants are concerned that the additional monies have not been expended in accordance with the forecast.

JURISDICTION

Section 227(1)(b) of the Act provides that a dispute between an owner or occupier of a lot and the body corporate, is a dispute which may be resolved under the dispute resolution provisions of the Act. As this is a dispute between a lot owner and the body corporate, it is a dispute which may be resolved under the dispute resolution provisions of the Act.

Section 276(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 the Act or the community management statement; or

(i) the engagement of a person as a body corporate manager or service contractor for a community titles scheme; or

(ii) the authorisation of a person as a letting agent for a community titles scheme.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 276(2)). An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate (section 284(1)).

In relation to 1 above, the applicants submit that the cost of fumigating lots in the scheme, excluding Lots 5, 7, 8, 23, 29, 41 and 46 has wrongly been paid out of the administrative fund. The applicant refers to an invoice dated 10 October 2003 for $616 and an invoice dated 18 May 2004 for $600.

In relation to 2 above, the applicants submit the cost of cleaning lot windows in 2003/2004 has wrongly been paid out of the administration fund.

In relation to 3 above, the applicants claim that the resident manager gave less than 24 hours notice to the occupants of their lot, and no notice to them as the owners regarding repair of a front window.

In relation to 4&5 above, the applicants submit that the sinking fund budget for the 2003/ 2004 financial year did not have a list of budgeted items and the owners were told that expenditure would be in accordance with the attached sinking fund forecast .

In relation to 6 above it is submitted that expenditure by the committee during the year has "not formally endorsed in accordance with the BCCM Act".

In relation to item 8 above, the applicant submits that motion 5 was out of order for 3 reasons viz:

However the committee acknowledges that it was not possible to gain entry to certain units at the time of fumigation and consequently the committee will, if required reimburse the owners of those units which were not fumigated.

The committee also submits that "the exterior of windows that are on title were cleaned as all windows had been affected by the exterior wash-down of the building".

The resident manager contacted the tenants of lot 7 at the beginning of the week when the work was scheduled for repair of wood rot. This repair had been requested by the owners of lot 7.

It is further submitted that section 109(f) of the Residential Tenancies Act permits the lessor’s agent to access the premises with the consent of the tenant.

4&5 In relation to items 4 & 5 above, the body corporate advise that the budget was based on the sinking fund forecast. The sinking fund levies were set at $116, 122 based on the forecasted sinking fund cash flow and quarterly contributions. A motion to replace the roof was not put to the AGM as the final recommendations of the engineer had not been received.

In relation to the applicant’s concerns regarding motion 3 on the flying minute of 12 September 2003, the body corporate advises that the motion relates specifically to the repairs caused by water damage as the committee had deferred making an insurance claim until the roof had been repaired. This was due to the insurer’s requirement, communicated in its letter dated 9 May 2003, that

"whilst the claim has been forwarded to the insurers, we would appreciate confirmation that it is the body corporate intention to replace the asbestos roof with an iron roof which would prevent on-going problems as detailed in the claim."

The amount of $3,075.60 relates to repair of impact damage to lot 14 which was met from an insurance payment of $3,466.

8. In relation to the item 8 above, regarding the refusal by the Chairman at the AGM held 24^th September 2004 to rule Motion 5 (Sinking fund budget for 1/7/04 to 30/6/05) "out of order" the body corporate advises that

DECISION

Pest Control

The body corporate is responsible for maintenance of common property and is required to administer, manage and control the common property reasonably and for the benefit of lot owners (Act, 152(1) & Standard Module, 109(1)). At the same time, each lot owner has the responsibility to maintain their own lot in good condition (Standard Module, 102(2) which includes a responsibility to undertake reasonable pest control.

While the Committee submits that there have been on-going pest management issues in the scheme over the years and it has become customary for all units to be fumigated at the same time as the common property, it is clear that the responsibility to maintain individual lots rests with individual lot owners. Accordingly, as fumigation of lots is technically a responsibility of individual lot owners, I am of the view that the applicants are entitled to seek the following order:

The body corporate has acknowledged that it will, if required reimburse the owners of those units which were not fumigated.

I would point out however, that all lot owners are required to contribute to the pest control treatment of common property areas and treatment/ fumigation of individual lots should ideally be undertaken at around the same time that the common property is treated.

I note that the invoices are for cleaning of the exterior windows and also note the advice of the body corporate that "the exterior of windows that are on title were cleaned as all windows had been affected by the exterior wash-down of the building".

As the lots in this scheme are created by a building unit plan, now known as a building format plan, the maintenance obligations of the body corporate are contained in section 109(2) of the Body Corporate and Community Management (Standard Module) Regulation which provides as follows:

109 Duties of body corporate about common property
(2) To the extent that lots included in the scheme are created under a building format plan of subdivision, the body corporate must--
(a) maintain in good condition--

(i) railings, parapets and balustrades on (whether precisely, or for all practical purposes) the boundary of a lot and common property; and

(ii) doors, windows and associated fittings situated in a boundary wall separating a lot from common property;

I agree with the applicant that the body corporate is not responsible for maintenance/ cleaning of windows which open onto private balconies forming part of a lot. However, where for example, the external wash down of the building causes the windows on lots to be affected, it is reasonable for the body corporate to bear the cost of cleaning external windows that have been covered by dirt, mould etc. which has been washed off the building.

Entry Into Lots

Section 163 of the Act provides that a person authorised by the body corporate for a community titles scheme may enter a lot and remain on the lot or common property while it is reasonably necessary to inspect the lot or common property and find out whether work the body corporate is authorised or required to carry out is necessary, or to carry out work the body corporate is authorised or required to carry out.

This power of entry may be exercised at any time in an emergency and in other cases at
a reasonable time after at least 7 days notice of the intended entry has been given to -
(i) the owner of the lot; or
(ii) if the owner is not in occupation of the lot--the occupier of the lot.

Of course an occupant may consent to entry by an authorised person without requiring 7 days notice.

Sinking Fund

The applicants submit that the body corporate should explain the expenditure of sinking funds in the 2003/ 2004 Statement of Income and Expenditure, because the AGM for the 2003/2004 financial year proposed a motion agreeing to a sinking fund budget which identified no expenditure for the 2003/ 2004 financial year. In effect , the applicants argue that owners have not been provided with a sinking fund budget as required by section 94 as " there are no amounts stated" in the budget provided.

I have considered the documentation attached to the application and note that while there is a "proposed annual budget" for both the administrative and the sinking funds, the sinking fund budget contains no amounts for the listed line items. The body corporate advises that the budget was based on the sinking fund forecast and appears to be of the view that it is not necessary to list individual items of expenditure.

With respect, I am of the view that a sinking fund analysis does not supersede the need for a budget. The need for a body corporate to resolve an annual budget for both its sinking and administrative fund is provided for in the legislation ( see section 94(1-3) of the standard module). Further, (6) provides that " copies of the proposed budgets must accompany the notice of an AGM".

A sinking fund analysis differs from a budget in a number of respects. The analysis is intended to identify the anticipated capital amounts needed to be raised over a certain period while a budget is a more specific document. The budget operates on a year to year basis, whereas the analysis is a more general document in that its scope or term is a ten year period. The budget takes the information from the analysis, and adapts it to a specific yearly format. Specifically, the sinking fund budget will show the items which the body corporate anticipates will require expenditure from the sinking fund for the forthcoming financial year, and the amounts of those expenditures. The budget would allow the body corporate to make up any shortfall, or take into account any surplus, based on previous year’s expenditure. A sinking fund forecast or analysis cannot do this, unless a new one is commissioned each year. A further reason for the requirement of a sinking fund budget, distinct from the sinking fund forecast or analysis, is that it is on the basis of the budget that contributions are set (see section 95(1)).

While I consider that the applicant may have been entitled to request that Motion 5 be ruled out of order, I do not consider that at this stage, it is feasible to order the body corporate to hold an EGM to consider possibly one motion. However, in the circumstances, I do intend to order that a sinking fund budget must nevertheless be prepared for the current financial year, and that a copy of this budget must be send to all owners whose name appears on the body corporate roll. At all future AGM’s however, a properly prepared sinking fund budget must be included with the notice of meeting.

Spending

The applicant submits that the committee expended funds on building maintenance in excess of their spending limit. It is submitted that although the costs of window replacement and rot repair were broken down into numerous invoices, the total value of the works undertaken by Anderson Home Improvements should have been the subject of a motion at the 2003/2004AGM with two quotations for the works.

I believe there is some substance to the applicant’s contention that in engaging Anderson Home improvements to repair wood rot in the building, the body corporate committee may have exceeded its spending limit.

Section 103 of the standard regulation module provides that the committee may only carry out spending above the relevant limit for committee spending (ie. no. of lots x $125) if the spending is authorised by ordinary resolution, or otherwise authorised by that section.

Section 104 of the standard regulation module provides that where the cost of carrying a proposal into effect exceeds the relevant limit for major spending for the scheme (i.e. no. of lots x $250), two quotations should be obtained to accompany the motion. Further, section 104(9) provides:
If a series of proposals forms a single project the cost of carrying out any 1 of the proposals is taken to be more than the relevant limit for major spending for the scheme if the cost of the project as a whole is more than the relevant limit.

I therefore propose to order that in future, where the cost of carrying a proposal into effect exceeds the relevant limit for major spending for the scheme (i.e. no. of lots x $250), the body corporate committee is to comply with the requirements of section 104 and ensure that at least two quotations are submitted in the form of a motion with alternatives.

The applicant has also raised certain concerns regarding expenditure of $1,853.06 and $3,075.60 to effect repairs to the building. While the body corporate has provided an explanation regarding the source and application of these funds, I draw the committee’s attention to section 36 of the Standard Module Regulation which requires it to keep full and accurate records of its meetings. I also draw the committee’s attention to section 105 of the regulation regarding the keeping of proper accounts.

Order

(1) I hereby order that within 6 weeks of the date of this order, the body corporate of Nobbys Outlook shall reimburse the owners of lots which did not receive pest control treatment, their actual contribution towards pest control treatment of the other lots in the scheme.

(2) I further order that within 6 weeks of the date of this order, the body corporate of Nobbys Outlook shall prepare a sinking fund budget for the current financial year, and once prepared and approved by the committee, a copy of this budget must be sent to all owners whose name appears on the body corporate roll.

(3) I further order that prior to all future AGM’s of this body corporate, a proposed sinking fund budget must be included with the notice of meeting.

(4) I further order that in future, the body corporate committee must comply with the requirements of sections 103 and 104 of the Body Corporate and Community Management (Standard Module) Regulation and ensure that where proposed expenditure exceeds the "relevant limit for major spending", at least two quotations are submitted to a general meeting in the form of a motion with alternatives.

(5) I further declare that except in an emergency, a person authorised by the body corporate may enter a lot and remain on the lot to carry out work the body corporate is authorised or required to carry out, at a reasonable time after at least 7 days notice of the intended entry has been given to -
(i) the owner of the lot; or
(ii) if the owner is not in occupation of the lot--the occupier of the lot.

Number of Scheme:	14822
Name of Scheme:	Nobbys Outlook
Address of Scheme:	122 Marine Parade MIAMI QLD 4220

(i)	The notice referred to an "attached sinking fund forecast" was not attached;
(ii)	The use of the term " total expenditure" indicates that the sum of $46,122 is to be spent during the 2004/ 2005 financial year; and
(iii)	that this "would bar the expenditure of sinking funds in the 2004/ 2005 financial year although the body corporate accounts indicate funds have already been committed".

(i)	the reference to "attached sinking fund forecast" (SFF) was a typographical error. The SFF was not attached as it had previously been distributed with the notice of meeting.
(ii)	The reference to "total expenditure" is not authorising any expenditure but rather is the total amount of the budget used to calculate quarterly levies.
(iii)	Finally, the body corporate submits that there is nothing to "bar expenditure of sinking funds in the 2004/ 2005 financial year". Expenditure may be made from the administration fund or sinking fund irrespective of the budgets passed at the AGM if the expenditure is approved by the committee (within its expenditure limit) or by resolution at a general meeting as per sections 101 and 103. For example, this is likely to happen this financial year as an EGM will be held to approve expenditure for the replacement of the roof. As the cost was not available when the AGM notice was distributed, an amount was not included in the sinking fund budget.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Nobbys Outlook [2005] QBCCMCmr 72 (9 February 2005)