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Our profligate EC has spent our Admin fund deep into arrears, and is borrowing against the sinking fund to pay ongoing expenses. (We assume, since the EC refuses to engage with any of the owners regarding their actions, and the SM refuses to confirm what fund is being used to pay expenses!)
We have to assume that we’re going to be hit with a special levy one day soon.
What are the rules regarding the introduction of a special levy (ie., must be proposed as an agenda item for an EGM or AGM? must be approved by simple majoriy? must be a special resolution requiring 75%?)
And, if introduced as a resolution, can the OC vote against it, and what would be the implications.
Thanks much
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Monies borrowed from the Sinking Fund must be repaid via a Special Levy, the structure of which must be resolved by simple majority at a General Meeting of Owners within 3 months of the date of the initial borrowing. So the Owners Corporation has no choice other than to pass the Special Levy!
Before the Agenda for the prescribed General Meeting is prepared, you would do well to ensure that the compulsory Motion about whether or not any spending restrictions are placed on the Executive Committee (E/C) is included, and that the Meeting invokes that by requiring appropriate restrictions on spending for any / all matters relative to the approved budget for each (e.g. <5% above), so that the E/C’s profligate spending habits are curbed.
At the very least your SM should be providing any member of the OC a copy of your balances (sinking and admin). If not on request, then at least at the AGM, you have an absolute right to know the state of the buildings’ finances.
Levies can be raised by approval 75% at a general meeting. If the OC vote against the special levy, then depending on the problem, the strata scheme would still need to address the issue anyway, so would probably be only able to do so by applying for a loan. This may result in increased levies over a period of time, rather than a once off special levy.
To reiterate, a Special Levy is determined in precisely the same way as any other Levy; by a simple majority vote by Owners present in person and by proxy at a General Meeting.
“mattb” is correct by advising that as an alternative to a Special Levy, the Owners Corporation (O/C) could raise funds equal to those required to reimburse the Sinking Fund by raising a loan. That mechanism does indeed provide the O/C with an ability to make the necessary reimbursement in total, and to stagger the repayments over time with interest.
However depending upon the circumstances, the NSW Strata Schemes Management Act (the Act) provides some similar benefits as it only prescribes the time frame for the O/C resolving a repayment structure, and is silent about the repayment term.
In my opinion, the priorities for “basjan27” are to ensure that a General Meeting is convened to resolve the means by which the reimbursement to the Sinking Fund will be made (e.g. a Special Levy), to resolve the structure of that (e.g. the $ & the term), and to resolve to place some restrictions on the E/C’s ability to approve spending in the absence of a prior endorsement by the O/C.
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