Who can approve significant body corporate spending?
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A body corporate committee can generally approve spending that falls within its committee spending limit, provided the decision is within the committee’s authority and the necessary funds are available. If the cost exceeds that limit, owner approval at a general meeting will usually be required.
However, the amount being spent is not the only consideration. The type of decision, the scheme’s regulation module and the quotation requirements can also determine how expenditure must be approved.
For schemes operating under the Standard, Accommodation or Small Schemes Module, understanding these limits before committing to significant expenditure can help ensure the decision is properly authorised.
What is the committee spending limit?
A body corporate can set its own committee spending limit by ordinary resolution at a general meeting. If no different limit has been set, the default limit under the Standard, Accommodation and Small Schemes Modules is generally calculated by multiplying the number of lots in the scheme by $200. For example, if a scheme has 20 lots, the spending limit is $4,000 (20 lots x $200).
This means the committee can generally approve expenditure of up to $4,000 including GST, provided the decision is otherwise within the committee’s authority and sufficient funds have been budgeted and are available.
If several expenses are part of the same project, they need to be considered together. A project cannot be split into smaller amounts simply to keep each expense below the committee spending limit.
Being under the spending limit does not always mean the committee can approve it
The committee spending limit is only one part of determining who can make a decision.
Even where expenditure is below the limit, the committee cannot decide a matter that legislation requires owners to consider at a general meeting.
Depending on the proposal, a different type of resolution may also be required, like some improvements to common property that require approval by ordinary resolution or special resolution depending on the cost and circumstances.
This means committees need to consider both:
- how much the proposal will cost; and
- whether the type of decision is within the committee’s authority.
What happens if the cost is above the committee spending limit?
If proposed expenditure is above the committee spending limit, it will usually need to be specifically authorised by ordinary resolution at a general meeting.
However, there are limited exceptions under the legislation. These can include:
- written consent from all lot owners;
- expenditure authorised by an adjudicator to meet an emergency;
- expenditure required to comply with certain statutory notices, legal orders or judgments; and
- some expenditure necessary to obtain or renew required insurance.
For most planned projects that exceed the committee spending limit, the practical next step will be to prepare a motion for owners to consider at a general meeting.
The committee spending limit and major spending limit are different
It is important not to confuse the committee spending limit with the major spending limit as they serve different purposes.
The committee spending limit determines how much the committee can approve.
The major spending limit determines when quotation requirements apply. If no different limit has been set by ordinary resolution, the major spending limit is the lesser of $1,100 multiplied by the number of lots or $10,000.
If proposed expenditure at a general meeting is above the major spending limit, at least two quotes must generally be obtained and provided to owners with the meeting material.
The committee can recommend a preferred quote, but owners must be given all the required information so they can make the decision.
What happens after owners approve the expenditure?
Once expenditure has been approved, the committee can generally manage implementation within the authority given by the resolution.
The wording of the motion matters. If the approved motion includes a contingency or gives the committee authority to manage certain variations, the committee may be able to deal with those changes without returning to owners.
If the cost, scope or funding changes beyond the authority provided by the original resolution, further committee or general meeting approval may be required.
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