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Topic
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Part 5 Division 2 Section 79 of the Strata Management Act says that each AGM must prepare estimates of contributions to administrative and capital works funds.
At our recent AGM our large scheme rejected the budget proposed by the Strata Committee, largely because it included payment of interest for a strata loan for major works, and the owners voted down the idea of a strata loan. The owners asked the strata committee to come back to the owners quickly with a simple admin and capital works budget for ‘everyday’ items and reconsider other options for funding the major works at a later date.
One of the owners is concerned that we can only set budgets at AGMs, and thus willl have to wait for another year til the next budget is adopted.
Is this the case, or can the strata committee present an amended capital works budget at a just a General Meeting, along with a contract with builder, and set out a five year program of Special Levies to meet the works payment milestones (once they’ve been determined).
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Replies
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Your concerned owner is talking through the wrong orifice.
The obvious intention of the Act is that the OC should operate with a budget that is approved by the owners every year. The budget should be set at each AGM. Equally obvious is that the OC should seek to remedy a failure to set a budget at an AGM at the first available opportunity so that it can continue to operate with a budget that has been approved by the owners. That is what appears to be happening with the OC having directed the committee to develop a new budget proposal omitting the controversial item and then call a general meeting at which the revised budget can be approved ASAP. This all seems to be proper and appropriate.
I would have thought that there should have been a separate Motion resolving the issue of whether the OC was agreeable to the obtaining of a Strata Loan before the budget was set.
This should have been at least a two step process:
Step (1): Obtain approval for the levy increase – possibly by way of a Motion with Alternatives which gave owners a choice between (a) a Special Levy, (b) a Strata Loan, or (c) ‘beefed up’ ordinary levies with monies to be accrued over time. NB: This all depends upon how urgent the need is for the work.
To keep things easy and simple this approval should have been sought at an EGM prior to the AGM. The Committee and the SM should then have relied upon the outcome of the Motion with Alternatives to craft the legislated annual Budget Motions to be submitted for the upcoming AGM.
Step (2): The OC approves the AGM Budget which includes the approval obtained in Step (1).
It seems very unusual to build the Strata Loan into the annual budget without first obtaining OC approval for this action.
In answer to your original question: Can a Motion to raise a Special Levy be placed on the Agenda of an EGM? The answer is YES. This is due to the fact that the Special Levy is designed to cover emergency maintenance and spending situations.
In my opinion the Levies that you have described as being ongoing over a 5 year period would not be classified as a Special Levy. Instead, they would be classified as Capital Works Fund Levies (formerly known as Sinking Fund Levies).
See this article for a better explanation of the 3 different types of Levies:
https://jamesons.com.au/blog/special-levy-explained/
SH is correct when he says that the formulation of the annual budget is paramount and if not approved at the AGM then it would not be unreasonable for it to be approved ASAP by the OC at another general meeting (i.e. at an EGM).