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@’H’ said:
Thank you Peter C.Just a couple of asides to start with Peter:
- Our OC is very large.
Ours is quite large – just over 100 units.
- We do not count proxy votes or absentee votes when determining a standard quorum but even if we had, we would have never reached that milestone.
You should count proxy votes toward determining whether there is a standard quorum but not absentee votes. There was an ACAT decision confirming that proxy votes count for this purpose. See the OCN’s useful resource at:
https://web.ocnact.org.au/decisions-by-acat-test#TOC-Do-proxies-count-towards-a-quorum-
In Butt and UP 1725 ACAT decided that proxies do count towards the making of a quorum.
Section 3.9(1) of Schedule 3 of the UT(M)A provides that
(1) A motion may be considered at a general meeting of an owners corporation with 3 or more members only if there is present—
(a) a quorum (a standard quorum) made up by people entitled to vote (on the motion) in relation to not less than ½ the total number of units; or
(b) a quorum (a reduced quorum) made up under subsection (2).
The issue is to determine what “people entitled to vote (on the motion) in relation to not less than ½ the total number of units” means.
ACAT decided that the use of the words “in relation to” leads to the conclusion that the provision means not the people physically present but the number of entitlements to vote that are present. Therefore proxies (ie entitlements to vote) do count towards the quorum.
ACAT concluded this interpretation is reinforced because “Paragraph 3.31.(4) specifically provides in relation to absentee votes that such votes do not count “for the purposes of making up a quorum” If the same approach was intended to be taken in relation to proxies, similar legislative provision would have been made.”
I am told that too much carry over of funds from one year to the next has the potential to distort s119 certificates and that it can also cause problems with adjustments made at settlement between sellers and buyers.
I can’t think why there would be a problem or what ‘distortion’ could occur. The only thing relevant for the s.119 certificate is that an amount was levied for a period (regardless of what is in the budget or funds in the bank etc). Let’s say you pay levies quarterly and let’s say the levy for your unit for that quarter had been determined to be $300. If you have paid your levies and you sell the unit after the first month, the new owner will have to pay you $200 of the $300 at settlement. IE s.119 let’s the seller get their prepaid levies back pro-rata for the period after when the unit is sold.
How much money the OC has in the bank and when in the year budgeted expenses might occur are irrelevant. If you are looking to sell a unit in an OC that clearly has plenty of cash in reserve then you might get more for the unit (but you might not). Similarly, you would be foolish to pay a high price for a unit if the OC does not have much cash in the bank because you might reasonably worry that you could be up for a big levy hike later as a new owner in an OC without sufficient in reserve. However, none of that causes any problem for the s.119 certificate.
I am also elsewhere advised that the proposition that I posed is not permitted because contributions so determined must be paid within the same financial year. And further that contributions to the general funds must be based on an approved budget for that financial year.
I think the problem is that contributions have been determined by the last general meeting and so the EC can’t make them otherwise until decided by a new general meeting.
s.78 says just that the general funds contribution must be determined by the owners corporation. Nowhere that I can see does the UTMA say that the contribution has to be ‘based on’ the approved budget. Instead it is the other way around. The budget has to account for the fund contributions and estimates of other sources of income. Our OC quite often has total budgets that are not numerically identical with total levies and our managing agent says that is quite OK. It is explicit in our budget resolution that the contributions to be levied in a particular year for a particular fund (Admin fund, sinking fund or special purpose fund) are not necessarily the same as what is budgeted to be spent from that fund in that year.
If the OC has other sources of income (eg. interest on money in the bank) but the budget and actual spending were always exactly the same as levies then the surplus from the other income would gradually accumulate. At some point you would have to levy less to use up some of the surplus (while leaving enough for cash flow).
Many owners from other complexes and with different managing agents seem to deal with the problem ‘their own way’. And their way appears to also be a function of the accounting software being used. It seems high time for an amendment to the legislation?
Our managing agent is Independent and their software copes. I see no reason why any other accounting software would not cope with any amount of levy income that the AGM resolves to have.
Bottom line is that there is nothing I can see in the Act that prevents you from levying a slightly higher amount than the 2016/17 budget to cover a small deficit and build up reserves compared with 2015/16. It is just silly to not have a bit of cash in the bank to deal with the fact that the timing of levies coming in and expenses going out do not coincide perfectly. At the very least you need a bit of a float to cope with cash-flow even if nothing ever went even a tiny bit over budget.
Thanks again Peter C.
Your welcome. If you would like to talk more about ACT stuff feel free to send me a message (PM button at the top right of this post) and we could exchange phone numbers.