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Last Christmas, the body corporate bought gifts for the strata manager and the caretaker. Recently, our chair held a farewell party for the caretaker. Food and drinks were supplied for approximately 45 guests for three hours.
The members decided to reimburse the chair at a subsequent committee meeting.
- Q1. Can the body corporate (BC) spend approx $600 on gifts?
- Q2. Can the BC spend approx $3,000 on a party?
Without disclosing the cost of the party, can the committee vote to reimburse the amount spent on the party after the event and without advertising the motion to owners?
Answer: While social cohesion in a community titles scheme is a laudable goal, spending money on Christmas parties, and by extension, other parties, is not a valid use of lot owners contributions.
‘Nothing is easier than spending public money. It does not appear to belong to anybody. The temptation is overwhelming to bestow it on somebody.’ Calvin Coolidge, 30th President of the United States of America.
Bodies corporate are creatures of statute and have only the powers granted to them by those statutes. Under the Body Corporate and Community Management Act 1997, there is no general power of taxation, or for that matter, general power to spend. The legislative schema is to establish bodies corporate to fulfil stated purposes, empower them to fulfil those purposes, grant them authority to raise necessary funds through budgeting and contributions (levies), and then to spend those (lot owners) funds by following stated processes.
When answering the question ‘can the body corporate lawfully spend money on X?’, a good place to start is to see if ‘X’ is, or relates to, a stated function or power of the body corporate. For example, there is no doubt that a body corporate can raise and spend money on common property maintenance. The issue, of course, is when, after having looked for ‘X’ everywhere in the legislation, you cannot find it. There may be something similar, but you are not sure. Take the issue of a body corporate that objects to a proposed new development next door that will block views and erode occupier’s amenities. The body corporate can make an objection, and bring a ‘submitters appeal’ against the development approval, but cannot do the same thing indirectly, by donating to a GoFundMe campaign to fund another submitter bringing an appeal (contrast Quay Terraces [2016] QBCCMCmr 91 with Paradise Palms Country Club – The Keys [2022] QBCCMCmr 130). Why? In the former case, there is a statutory head of power for the body corporate to bring proceedings, and therefore, it must be able to spend money for the purpose of those proceedings. In the latter case, there is no statutory head of power to make donations to the cost of proceedings under someone else’s control.
If you cannot find ‘X’ or something similar, then odds are, body corporate funds cannot be spent on it, no matter how it may seem beneficial to the body corporate or lot owners and occupiers. In this vein, while social cohesion in a community titles scheme is a laudable goal, spending money on Christmas parties, and by extension other parties, is not a valid use of lot owners contributions; see Kensington Gardens Retirement Village [2005] QBCCMCmr 269 (20 May 2005). As for the matter of gifts, where the statutory function or power is missing, it does not matter whether there is some collective interest of lot owners in making such a gift. The gift or donation will be unlawful. For example, if a community titles scheme is used for beachside holiday letting, with the bonus of a patrolled beach in front of the complex, lot owner’s contributions cannot be donated (i.e. gifted) to that surf living saving club; see Edgecliffe Apartments [2021] QBCCMCmr 30 (20 January 2021). Disclosure of the spending decisions, in this case, simply follows the normal rules; minutes of general or committee meetings (or votes outside committee) must be distributed to lot owners. As with any body corporate decision, a decision to spend on gifts or a party can be overturned by a subsequent body corporate decision of the same or ‘higher’ type, and an Adjudicator can, on an application made within the 3 month time limit, overturn unlawful decisions.
This article by Queensland Partner Michael Kleinschmidt first appeared in StrataNews Newsletter #723 from LookUpStrata Pty Ltd.
© Bugden Allen Group Legal Pty Ltd. This is general information only and not legal advice. You should not rely on this information without seeking legal advice tailored to your specific circumstances.
