This article is about what happens if Queensland owners vote no to the budget at the AGM.
Table of Contents:
- QUESTION: The body corporate put forward a vote to increase our admin fees. Our caretaker is an owner. Are they able to vote, or is this a conflict of interest?
- QUESTION: What happens if lot owners vote no to the administration fund budget at the AGM?
Question: The body corporate put forward a vote to increase our admin fees. Our caretaker is an owner. Are they able to vote, or is this a conflict of interest?
At the last AGM, the body corporate put forward a vote to increase our admin fees.
A substantial amount of admin fees go towards our caretaker, who is also a lot owner. Is the caretaker excluded from voting due to a conflict of interest? Essentially, they are voting for their caretaker fees to go up. Is $200k pa. for caretaking normal?
Some lot owners were not notified about the voting. Does this make voting invalid?
Answer: Most of the key items on your admin budget are non-negotiable.
While owners can vote yes, no or abstain to levy motions, this process creates an illusion that the expenses these motions raise money for are optional.
The reality is that most of the key items on your admin budget are non-negotiable – your scheme is required to pay insurance, caretaking contracts are legally binding, and the body corporate is obliged to maintain the common property in good condition.
These costs are fungible to the extent that if you want to save money, you can select the cheapest insurance policy on offer or choose a lower priced maintenance contractor, but for the most part, you are committed to these expenses. As the costs increase, so will your levies.
Regarding caretaker contracts, there is even less flexibility. They have guaranteed annual increases written into the contract for the term of the contract. These are fixed costs and must be considered in your budget each year – or if they are not considered, you will soon find your scheme is out of money and facing legal jeopardy.
If you are concerned about this, it is probably worth calculating how much the caretaking contract will cost over the contract’s lifetime. See a blog we wrote about this here: The caretaker crunch: Schemes with caretakers may be particularly affected by high inflation.
Given this, it seems reasonable that the motion for your admin budget is proposing an increase to accommodate increases in the caretaking fees.
And, if the caretaker is an owner, they are allowed to vote on this. There is no conflict of interest exclusion here. They are not really voting for their increase as it is already guaranteed as part of their contract.
There is also no standard amount for caretaking contracts. Ideally, they should be a fair reflection of the work done, but there is little place for idealism in body corporate. Some contracts are reasonable and some less so, but unless your contract is within its first three years (Something can be done about unfair and unbalanced Caretaking Agreements ) the contract you have with your caretaker isn’t going to change just because you think it seems unfair.
In terms of owners not being notified about the voting, this would indicate a serious flaw in the meeting process if the claim was correct. However, you would need to substantiate what you mean when you say some owners did not receive notification. It is not unusual that some mail gets lost in the post, other mail is received and forgotten about, and some email gets blocked or pushed into spam inboxes. It’s difficult to control the delivery process completely, so unless there has been a systematic failure, it’s hard to say a vote is invalid. You can go back to your committee and body corporate manager with a list of owners who didn’t receive correspondence and ask them to check the records. If there is time, they can be resent the notice. And, for what it is worth, as a manager, I would recommend all owners sign up for email receipt of documents as it is far more reliable than snail mail.
William Marquand
Tower Body Corporate
E: willmarquand@towerbodycorporate.com.au
P: 07 5609 4924
This post appears in Strata News #726.
Question: What happens if lot owners vote no to the administration fund budget at the AGM?
Answer: Bear in mind that it will cost the scheme to call an EGM to consider a new budget, and there will be delays in issuing levies until a new budget is agreed upon.
If a majority of owners vote no to the budget or any of the levy motions at the AGM, the main impact is that the body corporate does not have any authority to raise levies as per the motion.
This, in turn, can have a range of effects, starting with the restriction of cash flow to the body corporate and subsequent inability to pay bills and organise works. The scheme’s savings will cover it for a period but they can’t last indefinitely.
As a result, most schemes will try to rectify this by calling an EGM to present and confirm a budget or rerun the original to see if owners will vote for it a second time.
The committee and body corporate must consider why owners are voting no and whether they can reach an alternative.
At the least, the no vote suggests a disconnect between the committee and owners regarding what they think is the best direction of the scheme. Try to understand why and whether there is a compromise position that can be reached. Sometimes the resolution is simply in better communication about the budget and its intent.
Otherwise, has the committee put forward a budget that owners don’t want or are owners being unrealistic about how much money is required for the scheme? From an owner’s perspective, it is important to remember that most items on a budget are not optional. Schemes are obliged to have insurance. You have to maintain the property in good condition. Contracts for caretakers will go up every year. It may not be a good enough reason if you are voting no just because you don’t like paying more.
On the other hand, the committee has to consider how the budget is structured. If the complex needs to put in extra money to meet its obligations, maybe the committee should hold an owner’s forum to explain why. Is it possible to reconsider the amounts by taking out some optional costs and making them individual items for owners to vote on? For example, if you wanted to do a major pool refurbishment and had added the costs to the budget, maybe this item should be listed separately with a special levy to approve it.
Whatever the circumstances, everyone must be realistic about finding a path forward. Bear in mind that it will cost the scheme to call an EGM to consider a new budget, and there will be delays in issuing levies until a new budget is agreed upon. This can cause a lot of stress, so owners must work together on practical solutions.
William Marquand
Tower Body Corporate
E: willmarquand@towerbodycorporate.com.au
P: 07 5609 4924
This post appears in Strata News #723.
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Read next:
- QLD: Q&A Unpaid Strata Levies and Overdue Fees at Settlement
- QLD: Q&A Levy Increases – As Lot Owners, Can We Refuse?
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