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Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders |
Last Updated: 19 December 2006
REFERENCE: 0695-2006
ORDER OF AN ADJUDICATOR
MADE UNDER
PART 9 OF CHAPTER 6
BODY CORPORATE AND COMMUNITY MANAGEMENT ACT
1997
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Number of Scheme:
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20295
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|
Name of Scheme:
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Tahlia Court
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Address of Scheme:
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Russo Court Strathpine Qld 4500
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TAKE NOTICE that pursuant to an application made under the abovementioned Act by
Joan Kennedy, the Owner(s) of lot 9
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I hereby order that:
• A shorter term contract which brings the commitment the Body Corporate is entering to below $4,000; or
In all other aspects, the application is dismissed. |
STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF
0695-2006
"Tahlia Court" CTS 20295
APPLICATION
The applicant, Joan Kathleen Kennedy, the owner of
lot 9, has sought the following orders of an Adjudicator under the Body
Corporate and Community Management Act 1997 (the Act), quote
–
"I have concerns about the following 11 items, which are based
on the latest Minutes of the Annual General Meeting held on the 26th
of July
2006. Some of these items are in direct violation of the Act and need to be
addressed and corrected in line with the intent
of the Body Corporate and
Community Act 1997 ( A copy of the last two minutes of annual general meeting
have been attached):
1. Motion 2-1: It reads that the Motion was
accepted while the yes and No vote cancel each other out and with the
substantial number
of abstentions the motion should have been declared
unresolved. This motion was unresolved for the second time in a row at the last
two Annual General Meetings.
2. Motion 2-2: The financial
statement presented did not provide a report of the income and expenditure for
the full financial year,
01/05/2005 to 30/04/2006.
3. Motion 2-3:
The reported expenditure of $770, payments authorised and made by and to the
Body Corporate Manager was inappropriate
as these funds were not approved by the
Body Corporate. In addition it increased the deficit of the Administration Fund
in excess
of $3,000.
4. Motion 3- This Special Resolution Motion
was defeated as the number of NO votes exceeds the 33% of the votes counted.
Therefore
another audit wilt be required!
5. Motion 3-2: The
previous Annual General Meeting required an audit to be done for the previous
two year period. No report was presented
nor any record was made on when a
report as to be presented to the Body Corporate.
6. Motion 4: This
motion should have been considered as the previous Motion was declared
incorrectly.
7. Motion 5: No value has been provided for the
excess, when an insurance claim is made. This can be important as it is not
known
how much is to be paid by the owner if a claim is made.
8.
Motion 6: This Motion could not have been passed in its original form as the
Motion is in violation with Section 104 of the BCCM
Act 1997 -- Standard Module.
Two quotes were required before this Motion could have been passed or the Motion
should have been amended
to the maximum allowable period. Therefore this Motion
cannot be acted on and no contract can be signed or exists with the present
Body
Corporate Manager.
9. Motion 7-1: The levy notice issued did not
give a breakdown of the administration levy and the insurance levy to be paid.
The basis
for calculating the either value is different as the administration
levy is to be equal, contribution schedule, for all lots, while
the insurance
levy is to be based on the lot entitlement schedule, which includes additional
values for any improvements made to
the townhouse and its
fixtures.
10. Motion 7-2: At the last AGM it was raised, not
minuted, to reduce the total levies, administration, sinking and insurance, to
a
sustainable level, about $200 per quarter. The levies as invoiced are a major
burden to owners on a fixed income (superannuation
or pension). Note: The levies
charged are substantially out of step of other equivalent Bodies Corporate
within the Strathpine Gardens
Complex ($300 versus $190 per
quarter).
11. Motion 8: The Sinking Fund contribution is
exorbitant without a 10-year forecast to substantiate the level of the
contribution.
The present reported funds held in the Sinking Fund are about
$1,500 per lot. Even with the exterior painting, costing about $500
per lot, the
funds held will be about $1,000 per lot. Any funds invested at 5% interest will
substantially contribute to the balance
of the Fund. ($1,000 interest if $20,000
is invested)."
JURISDICTION
Tahlia Court CTS 20295 is a
16 lot scheme registered under the Body Corporate and Community Management Act
1997 and is operating under the Body Corporate and Community Management
(Accommodation Module) Regulation 1997. Typically, this module is intended for
residential arrangements.
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
(c) a claimed or anticipated contractual matter about-
(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)).
GROUNDS
The applicant says:
"Over
the last four years the Body Corporate failed to address management problems and
now all have to pay for the resulting financial
mismanagement. I have raised
this before but had to withdraw the complaint as the complaint was deemed not to
have been lodged correctly
and I am not in a position to pay for specialist
legal cost as was intimated in the correspondence from the
Department.
For more than three years the authoritarian nature of
East Coast Property Management Pty Ltd, the previous body corporate manager,
has
put the Body Corporate into financial difficulties and the actions taken by the
buyer of East Coast Property Management, Ace
Body Corporate Management
(Brisbane) does not instil the confidence that things are improving. The
previous body corporate manager
ignored instruction from the Committee and on a
regular basis did not consult the Committee on the expenditure done, setting of
the
levies and accurate minutes were not maintained.
In addition
the Body Corporate fails to exercise its responsibility to enforce the By-laws
and refuses to maintain the TV aerials
which are a shared facility and in a bad
state of repair."
In all, these grounds present little or no
information in relation to the outcomes sought. However, I do have the benefit
of the
minutes of the annual general meeting of 26 July 2006 and these will
assist me address the issues raised by the
applicant.
SUBMISSIONS
Submissions were received from
owners of a total of 6 lots. Three of those making submissions are committee
members.
One of the submissions amounts to a complaint about the body
corporate manager rather than addressing the outcomes sought. Another
simply
states support for the applicant.
The other four lot owners made a joint
submission. Only brief comments were made regarding the outcomes sought, with
some extraneous
issues raised.
RESPONSE TO SUBMISSIONS
The
response to submissions was mainly directed at the extraneous submission
content. However, a copy of the Sinking Fund and Administrative
Fund balances
to 30 November 2005 was supplied.
DETERMINATION
Given that
there are 11 issues raised in this application, I will deal with each issue in
turn.
1. Motion 2-1: It reads that the Motion was accepted while the yes and No vote cancel each other out and with the substantial number of abstentions the motion should have been declared unresolved. This motion was unresolved for the second time in a row at the last two Annual General Meetings.
The relevant minute reads:
"Financial Statements (Ordinary Resolution)
RESOLVED that the statement of accounts for the administrative and sinking funds for the financial period 01/05/05 to 30/04/06 as circulated be approved.
Yes: 1 No: 1 Abstain: 6"
The joint submission by 4 lot owners states:
"All records were with the auditors at the time of the meeting".
The applicant is correct in asserting that the motion cannot be passed when there are equal votes for and against the motion.
The motion will again need to go to a general meeting for acceptance or
otherwise of the members of the Body Corporate. The motion
was not
passed.
2. Motion 2-2: The financial statement presented did not provide a report of the income and expenditure for the full financial year, 01/05/2005 to 30/04/2006.
This is the same minute as above.
The joint submission by 4 lot owners states:
"All records were with the auditors at the time of the meeting"
I do not understand how the Body Corporate could have considered that a vote on the financial statements could be taken when they are not available for consideration. In many ways, proceeding with the annual general meeting when crucial information is not to hand, defeats the purpose of the annual general meeting.
As stated in relation to point 1, the motion will again need to go to a
general meeting for acceptance or otherwise of the members
of the Body
Corporate.
3. Motion 2-3: The reported expenditure of $770, payments authorised and made by and to the Body Corporate Manager was inappropriate as these funds were not approved by the Body Corporate. In addition it increased the deficit of the Administration Fund in excess of $3,000.
This is the same minute as above.
The joint submission by 4 lot owners states:
"This is not completely correct the expenses are:
Management Fees $480.00
Postage, Petties & Stationary $160.00
Work Place Health & Safety $130.00
$770.00
All these have to be paid" and "Why blame the manager the only thing they did wrong was to pay for it without the approval from the A.G.M."
On this issue, I do not feel particularly enlightened by either the applicant or by the other parties making submissions.
The body corporate manager did supply me with a copy of the administration agreement it entered into with the Body Corporate. It was signed by the Body Corporate in early March 2006. There are irregularities surrounding this issue in itself, though events have now overtaken this irregularity anyway. However, the point is that for some period of time, the body corporate manager continued to act for the Body Corporate without an annual general meeting ratified agreement.
Those making submissions do not deny that the costs were not authorised by the Body Corporate in general meeting. However, the applicant has not provided me with any indication that the costs were incurred with no consideration received in return. The business of rhe Body Corporate had to continue in the interim and I note that during that time, at a minimum, a second annual general meeting was convened.
In the absence of evidence that the costs incurred are not just and
equitable, I will dismiss the application on this point.
4. Motion 3- This Special Resolution Motion was defeated as the number of NO votes exceeds the 33% of the votes counted. Therefore another audit wilt be required!
The relevant minute reads:
"No Audit (Special Resolution)
SPECIALLY RESOLVED that the Body Corporate’s statement of account for the financial year from 01/05/06 to 30/04/07 NOT be audited.
Yes: 5 No: 3: Abstain: 0"
The joint submission by 4 lot owners states:
"We are at a loss about this as 5 votes beats 3 votes".
It appears those making submissions are not conversant with the following provisions:
Section 106 Body Corporate and Community Management (Standard Module) Regulation 1997 says:
(1) The body corporate must have its statement of accounts for each financial year audited by an auditor unless--
(a) the scheme is a basic scheme; and
(b) the body corporate resolves by special resolution not to
have the statement audited.
(2) If the body corporate is required under subsection (1) to have its statement of accounts audited, the auditor to be appointed must be agreed to by ordinary resolution of the body corporate.
(3) The motion for agreeing to the auditor to be appointed--
(a) must be included in the agenda for the general meeting at which the motion is to be considered; and
(b) must include the name of the auditor proposed to be appointed; and
(c) is not voted on if, under subsection (1), it is resolved not to have the statement of accounts audited.
Section 106 of the Body Corporate and Community Management Act 1997 says:
(1) This section applies if a motion is to be decided by special resolution at a general meeting of the body corporate for a community titles scheme.
(2) One vote only may be exercised for each lot included in the scheme, whether personally, by proxy or in writing.
(3) The motion is passed by special resolution only if--
(a) for a meeting notice of which is given--
(i) before the commencement of subparagraph (ii) -- the votes counted for the motion are more than the votes counted against the motion; or (ii) after the commencement of this subparagraph -- at least two-thirds of the votes cast are in favour of the motion; and
(b) the number of votes counted against the motion are not more than 25% of the number of lots included in the scheme; and
(c) the total of the contribution schedule lot entitlements for the lots for which votes are counted against the motion is not more than 25% of the total of the contribution schedule lot entitlements for all lots included in the scheme.
Therefore, in order for the Body Corporate to decide NOT to have the books audited, 66.67% or more than 5 of the people who voted at the meeting, would need to have decided against having an audit conducted. In this case only 62.5% of those in attendance voted not to have an audit. Therefore an audit is required. I will order the motion was not passed.
5. Motion 3-2: The previous Annual General Meeting required an audit to be done for the previous two year period. No report was presented nor any record was made on when a report as to be presented to the Body Corporate.
This is the same minute as above.
The joint submission by 4 lot owners states:
"Had she attended this meeting she would have known what was said. That the audit had not been completed at the time of the meeting. This has since been delivered and checked out ok."
In the circumstances of:
• the financial statements not being available at the time of the meeting;
• the assertion in the group submission that the audit has now been completed; and
• in light of the applicant not contesting this assertion in her response,
I assume this concern has now been addressed. I will dismiss this aspect of the application.
The applicant has a right to view the records of the Body Corporate under
Section 205 of the Act.
6. Motion 4: This motion should have been considered as the previous Motion was declared incorrectly.
The relevant minute reads:
"Audit (Ordinary Resolution)
That the Body Corporate’s statement of accounts for the financial year from 01/05/06 to 30/04/07 be audited by Chartered Accounts approved by the Body Corporate committee. Due to motion 3 being specially resolved this motion did not proceed.
Yes: 2 No: 0 Abstain: 0".
The joint submission by 4 lot owners states:
"No. 5 has been explained therefore making this irrelevant".
In line with the query at point 5, this should have been voted upon and resolved by ordinary resolution. However, all parties should note that the name of the auditor should have been included in the motion.
I will order the Body Corporate to vote on the selection of an
auditor.
7. Motion 5: No value has been provided for the excess, when an insurance claim is made. This can be important as it is not known how much is to be paid by the owner if a claim is made.
The relevant minute reads:
"Confirmation of Insurance/s (Ordinary Resolution)
RESOLVED that the insurances set out below be confirmed and further that the Body Corporate committee be authorised to renew such insurances.
Insurer: QBE Aust Ltd (through Corporate Home Unit Underwriting Ag. P/L)
Option 1: Insurance to be renews at Current Cover or
Option 2: Insurances to be renewed at Suggested Cover (Yes:8)
Please choose one option.
Due date for Renewal: Renewal date: 31/10/06
Building: $2,050,000.00
Legal Liability: $10,000,000.00
Voluntary Workers: $100,000/$1,000
Fidelity Guarantee: $40,000
Officer Bearers Liability: $500,000.00
Building Catastrophe:
Excess:
Increase the Building value to th4e value suggested in the Valuation Report.
Yes: 8 No: 0 Abstain: 0."
The joint submission by 4 lot owners states:
"This has been the same insurance policy for years. Why then now thru a dispute resolution is this question asked when a simple phone call to the manager could answers be given".
Section 126A of the Body Corporate and Community Management (Standard Module) Regulation 1997 says:
(1) This section applies to each policy of insurance held by the body corporate under this division and in force when notice of an annual general meeting is given.
(2) The notice of the annual general meeting, or a note attached to the administrative fund budget proposed for adoption at the annual general meeting, must include the following details about the policy--
(a) the name of the insurer;
(b) the amount of cover under the policy;
(c) a summary of the type of cover under the policy;
Examples of type of cover--
public risk insurance, building insurance, common property insurance
(d) the amount of the premium;
(e) the amount of any excess payable on the happening of an event for which the insurance gives cover;
(f) the date the cover expires;
(g) the amount and type of any financial or other benefit given, or to be given, by the insurer, for the insurance being taken out, to any of the following--
(i) the body corporate; (ii) a member of the body corporate; (iii) a member of the committee for the body corporate; (iv) a person engaged as a body corporate manager or service contractor for the scheme; (v) an associate of a person mentioned in subparagraph (iv).
However, I accept the point made in the group submission on this issue. The applicant has not provided me with any evidence that she has requested the Body Corporate for this information and been refused. Further, it is difficult to accept that a dispute exists, when the motion was carried by all parties voting at the annual general meeting, including the applicant.
I will dismiss this portion of the application, however the Body Corporate
should note that this information is required to be advised
at the annual
general meeting in future.
8. Motion 6: This Motion could not have been passed in its original form as the Motion is in violation with Section 104 of the BCCM Act 1997 -- Standard Module. Two quotes were required before this Motion could have been passed or the Motion should have been amended to the maximum allowable period. Therefore this Motion cannot be acted on and no contract can be signed or exists with the present Body Corporate Manager.
The relevant minute reads:
"Appointment of Ace Body Corporate Management (Brisbane) as body corporate manager (Ordinary resolution)
RESOLVED that under the authority of Section 87(1) of the Body Corporate and Body Corporate and Community Management (Standard Module) Regulation 1997, the Body Corporate engage Ace Body Corporate Management (Bne) as its body corporate manager for the supply of administrative services to the Body Corporate for a period of three years the terms of which are stated in the engagement which has been circulated to members of the Body Corporate with this motion.
Yes: 6 No: 1 Abstain: 0".
The joint submission by 4 lot owners states:
"We have explained this in the background comments".
However, in my view, the "background comments" by the group of 4 owners offer nothing relevant to the legislation. As noted earlier, I have obtained a copy of the agreement entered into with the body corporate manager. It advises that the per annum fee for the agreement is $2,560 and that the agreement is for 3 years. Therefore, the total contract value is $7,680.
Section 104 of the Body Corporate and Community Management (Standard Module) Regulation 1997 states that:
(1) This section applies if--
(a) a motion to be moved at a general meeting of the body corporate proposes the carrying out of work or the acquisition of personal property or services, including the engagement of a body corporate manager or service contractor, but not including the engagement of a service contractor who also is, or is to be, a letting agent; and
(b) the cost of carrying the proposal into effect is more than the relevant limit for major spending for the scheme.
(2) The lot owners must be given copies of at least 2 quotations for carrying out the work or supplying the personal property or services.
(3) If the motion is proposed by the committee, the committee must obtain the quotations.
(4) If the motion is not proposed by the committee, the person proposing the motion must obtain the quotations and give them to the secretary.
(5) Copies of the quotations or, if voluminous, summaries of the quotations and advice about where the complete documents may be inspected, must accompany the notice of the meeting at which the motion is to be considered.
The relevant limit for major spending in a Standard Module scheme is defined in the Schedule as:
"relevant limit for major spending, for a community titles scheme, means an amount worked out by multiplying the number of lots included in the scheme by $250."
Therefore, the relevant limit for this scheme is $4,000 and so 2 quotes should have been sought. As the body corporate manager should be aware of this requirement, I will rule the resolution invalid and require the matter to be returned to the Body Corporate for a vote in general meeting.
9. Motion 7-1: The levy notice issued did not give a breakdown of the administration levy and the insurance levy to be paid. The basis for calculating the either value is different as the administration levy is to be equal, contribution schedule, for all lots, while the insurance levy is to be based on the lot entitlement schedule, which includes additional values for any improvements made to the townhouse and its fixtures.
The relevant minute reads:
"Administrative Fund Budget and Contributions (Ordinary Resolution)
RESOLVED that the administrative fund budget for the financial year 01/05/06 to 30/04/07 be approved and levied to lot owners as circulated.
AND FURTHER that the levy notice of the first period of the next financial year be issued at the same rate per lot entitlement as proposed for the first quarter of the new financial year above, in the event it becomes apparent that funds will be required prior to the next annual general meeting being held.
Yes: 6 No: 1 Abstain: 1".
The joint submission by 4 lot owners states:
"Again had she been there at the meeting she would know these answers".
The applicant has not provided any evidence that the levy notices that issued were inadequate. Therefore, I will not make orders that they be issued with greater detail. However, as this scheme was created under a standard format plan of subdivision (formerly group titles plan), I will alert the Body Corporate to the following requirements.
Section 130 of the Body Corporate and Community Management (Standard Module) Regulation 1997 states that:
(1) The owner of each lot that is included in the scheme and is covered by reinstatement insurance required to be taken out by the body corporate is liable to pay a contribution levied by the body corporate that is a proportionate amount of the premium for reinstatement insurance that reflects--
(a) for a lot created under a building or volumetric format plan of subdivision--the interest schedule lot entitlement of the lot; and
(b) for a lot created under a standard format plan of subdivision--the cost of reinstating the buildings on the lot.
(2) The body corporate may adjust the contribution payable by a lot owner under subsection (1) in a way that fairly reflects--
(a) the extent to which the premium relates to fixtures and fittings that--
(i) form part of the lot; and
(ii) are of a higher standard than the fixtures and fittings of lots included in the scheme generally; or
(b) the extent to which the premium relates to improvements made to the common property that benefit the lot; or
(c) the proportion of the total risks covered by the policy attributable to activities carried on, or proposed to be carried on, on the owner’s lot.
Example of paragraph (c)--
In a community titles scheme, the buyer of a lot starts a small manufacturing business requiring the use and storage of flammable chemicals. The insurance premium for the body
corporate policy is increased by the insurer because of the increased risk of damage through fire. The contribution payable by the lot owner for the insurance premium will include the amount of the increase.
(3) The contribution for which the owner of a lot is liable may be recovered by the body corporate as part of the owner’s annual contribution to the administrative fund.
Section 96 of the Body Corporate and Community Management (Standard Module) Regulation 1997 states:
(1) At least 30 days before the payment of a contribution, or instalment of a contribution, is required, the body corporate must give the owner of each lot written notice of--
(a) the total amount of the contribution levied on the owner; and
(b) the amount of the contribution, or instalment of contribution, of which payment is currently required; and
(c) the date (the date for payment) on or before which the contribution, or instalment of contribution, must be paid; and
(d) any discount to which the owner is entitled for payment of the contribution, or instalment of contribution, by the date for payment; and
(e) any penalty to which the owner is liable for each month payment is in arrears; and
(f) if the owner is in arrears in payment of a contribution or penalty--the arrears.
(2) The written notice under subsection (1) may also include notice about an amount payable by a lot owner to the body corporate for--
(a) a specially contracted service enjoyed by the owner; or
(b) an exclusive use or special right over common property enjoyed by the owner.
The applicant has not detailed the basis of her assertion that the contribution notice should include separate details of the insurance premium payable for the lot. However, I note that as the scheme is under a standard format plan, the levy for insurance should in fact be based upon the cost of reinstating the buildings on the lot. The Body Corporate may make adjustments for the other variables detailed above, however it is not mandatory.
I will dismiss this portion of the application.
10. Motion 7-2: At the last AGM it was raised, not minuted, to reduce the total levies, administration, sinking and insurance, to a sustainable level, about $200 per quarter. The levies as invoiced are a major burden to owners on a fixed income (superannuation or pension). Note: The levies charged are substantially out of step of other equivalent Bodies Corporate within the Strathpine Gardens Complex ($300 versus $190 per quarter).
This is the same minute as above.
The joint submission by 4 lot owners states:
"This was not able to be done at this time and is to be looked at again in 2007 budget".
The applicant has given me no material on which to assess her assertions. While Sections 269 and 271 of the Act empower adjudicators to make investigations, it has been indicated by the courts that there remains an onus on applicants to make a case:
".........s 271(1)(c) makes clear that seeking information from the parties to the application was a valid means for the adjudicator to pursue the investigation he was required to carry out under the Act. The second is that, while the adjudicator had other powers at his disposal, the introductory words to the provision stating that an adjudicator "may do all or any of the following" mean that the adjudicator was not required to make use of any more of these powers that he considered were necessary in order to carry out an effective investigation" [1]
and, under the equivalent provisions of the previous legislation:
"In my opinion, under s.220 and s.221 it is for the adjudicator to determine what ought to be done by way of investigations and there is no error of law by an adjudicator who determines that the evidence available is insufficient to justify a necessary conclusion and does not actively seek further evidence to support the application". [2]
This is a matter for the joint wisdom of the owners, based on those aspects of the scheme that are peculiar to the scheme.
I will dismiss this aspect of the application.
11. Motion 8: The Sinking Fund contribution is exorbitant without a 10-year forecast to substantiate the level of the contribution. The present reported funds held in the Sinking Fund are about $1,500 per lot. Even with the exterior painting, costing about $500 per lot, the funds held will be about $1,000 per lot. Any funds invested at 5% interest will substantially contribute to the balance of the Fund. ($1,000 interest if $20,000 is invested)."
The relevant minute reads:
"Sinking Fund Budget & Contributions (Ordinary Resolution)
RESOLVED that the sinking fund budget for the financial year 01/05/06 to 30/04/07 be approved and levied to lot owners as circulated.
AND FURTHER that the levy notice for the first period of the next financial year be issued at the same rate per lot entitlement as proposed for the first quarter of the new financial year above, in the event it becomes apparent that funds will be required prior to the next annual general meeting being held."
The joint submission by 4 lot owners states:
"This is a matter of opinion on her part".
At this point, I am lacking any information from either the applicant or the Body Corporate for the basis of their opinion as to what the balance of the sinking fund needs to be.
Section 94 of the Body Corporate and Community Management (Standard Module) Regulation 1997 states that:
(1) The body corporate must, by ordinary resolution, adopt 2 budgets for each financial year--
• the administrative fund budget
• the sinking fund budget.
(2) The administrative fund budget must--
(a) contain estimates for the financial year of necessary and reasonable spending from the administrative fund to cover--
(i) the cost of maintaining common property and body corporate assets; and
(ii) the cost of insurance; and
(iii) other expenditure of a recurrent nature; and
(b) fix the amount to be raised by way of contribution to cover the estimated recurrent expenditure mentioned in paragraph (a).
(3) The sinking fund budget must--
(a) allow for raising a reasonable capital amount both to provide for necessary and reasonable spending from the sinking fund38 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 $3000. The contribution amount for the sinking fund in the budget for the financial year must therefore include the annual proportional share for painting of $1000. Next year, the estimated cost has increased to $3400 and so the second
year levy will be $1200. The estimated cost in the third year is $3500, so with the $2200 accumulated, a levy of $1300 is necessary to meet the cost. In larger schemes, the sinking fund will have several projects being funded for various future times.
I note that the minutes of the annual general meeting refer to a sinking fund budget that covers only one year. This is clearly not in accordance with the requirements of Section 94(3) which states that the sinking fund budget must look forward for a period of 10 years. The Body Corporate will need to address this possible inadequacy in their administration.
However, I am not in any position to form an opinion as to the adequacy or exorbitance of the levy proposed. As stated earlier, neither the applicant nor the Body Corporate has assisted me in that regard.
I will therefore dismiss the orders sought by the applicant, however I will order that the Body Corporate proceed with the preparation of a 10 year sinking fund budget.
[1] Hablethwaite & Anor v Andrijevic & Ors [2005] QCA 336 paragraph 31
[2] K.G. Tully & Anor. v. The Proprietors The Nelson Body Corporate [2000] QDC 31 paragraph 11
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