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Our Information and Community Education Unit has noticed the terms ‘committee spending limit’ and ‘major spending limit’ are increasingly being used interchangeably. While it is true that both terms relate to body corporate spending, they are not the same. In this article we outline key information about both of these spending limits, while also highlighting their distinct functions.
Committee spending limit
The committee spending limit is used to determine how much money a committee can spend.
For example, if a committee obtains a quote for maintenance, a committee resolution will generally be sufficient to approve the work if the cost falls within its spending limit.
It is open to the body corporate to set its own committee spending limit if it wishes. To set the committee spending limit, an ordinary resolution of the body corporate at a general meeting is required. No minimum or maximum limit is prescribed under the legislation.
If no committee spending limit is set by the body corporate, it is calculated by multiplying the number of lots in the scheme by $200 – therefore, in a scheme with eight lots, the relevant limit would be $1,600.
Dividing projects
The legislation prevents committees from breaking up a single project into separate components to bring costs within a committee spending limit.
If a committee is planning to refurbish the communal gym, for example, it may need to replace worn carpets, repair ceiling fans, and repaint walls. As each of these tasks are under the umbrella of the gym renovation project, the committee must look at the cost of the whole project rather than the individual proposals that make up the project.
Committee spending that is not permitted
It is important to recognise that, even if the cost of a particular proposal is within a committee spending limit, that alone does not constitute an automatic green light for the committee to authorise the spending – there are other considerations.
Arguably, the most significant of these considerations is whether a body corporate has budgeted for the expense. Essentially, funds should be available before a committee can vote to spend them. If there is not enough in the budget for a particular expense, a special levy can be raised to pay for it at a general meeting by ordinary resolution. Alternatively, the body corporate may consider voting to amend its existing budget at a general meeting.
The legislation also sets out ‘restricted issues’ for committees. A committee cannot vote on restricted issues, even if they involve spending within the committee spending limit. For instance, where the legislation specifies that an ordinary resolution, special resolution, or a resolution without dissent is required, the committee cannot approve these motions, as they are general meeting resolutions.
A clear illustration of this point is the distinction between maintenance and improvements. On the one hand, a committee can authorise a motion about maintenance if the cost is within its spending limit and there is provision in the budget. Conversely, if the motion is about an improvement to common property, the cost of the improvement determines which resolution range it falls into – the higher the cost, the more likely it is to require an ordinary resolution or a special resolution at a general meeting.
You can read more about restricted issues for the committee and improvements on the BCCM website.
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