08/05/2019 at 2:26 pm #37442
Where a strata plan has low funds and the committee want to move ahead with some expensive maintenance item (tree removal) that would normally require a special levy, can a small group of the lot owners (possibly the committee) advance funds to the SP to get the work done and then recover the funds with the special levy/adjustment. Take it as give that the special levy and costs are approved.
08/05/2019 at 2:41 pm #37445
- This topic was modified 2 weeks, 4 days ago by Jimmy-T.
I have been involved in such activities but only when it was very clear who had agreed to what and with a paper trail to minimise the risk of misunderstandings.
In our case, it was not because of limited funds. It was because it was sometimes quicker and easier in the midst of an approved project, with multiple steps, materials that will only be delivered after being paid for and with services to book which need the materials to be on site, to just pay some of the invoices personally so the next step can proceed without delay.
Sometimes it is easier and less stressful to just get on with things by paying personally up-front and sorting out reimbursements later.
08/05/2019 at 2:45 pm #37447
- This reply was modified 2 weeks, 4 days ago by Sir Humphrey.
I would say ‘no” … this would be very unwise.
A Special Levy can only be approved at a general meeting. If the committee was to fund this personally and then expect to be repaid via a Special Levy then that would be creating an expectation that the OC would approve this by way of an Ordinary Resolution.
What happens if the OC doesn’t approve it? Then the committee members will be personally out of pocket.
It is very important to put a lot of thought into creating a relevant budget. Unfortunately I see situations where many committees just rubber stamp previous budgets without consideration of what projects need to be undertaken over the coming year. Then there is a shortfall.
The Sinking Fund forms part of the value of a Lot. Having a very low Sinking Fund budget may seem to be ‘helping’ keep costs low, but it actually does a disservice to lot owners, particularly in older buildings with inevitable maintenance issues.
08/05/2019 at 3:01 pm #37450
- This reply was modified 2 weeks, 4 days ago by Lady Penelope.
It shouldn’t be too hard to organise a general meeting – especially with the very flexible quorum regulations currently in place – to get agreement on this plan … or even an official strata loan08/05/2019 at 3:05 pm #37453
I agree agree with LP in the case of low funds. What if the OC does not approve the funding later and you are out of pocket?
The OC really should bite the bullet and have an adequate sinking fund plan, including a levy each year to fund the plan, and the plan should have a substantial contingency component. Plan for both the known expenses and the likelihood of some unknown expenses. Build up a comfortable buffer and it will be no big deal if some expense is required earlier than anticipated in the plan or something else turns out to be more expensive than anticipated.
Unless your tree presents an immediate, urgent, serious threat that demands immediate action, I would suggest that you just call the meeting with proper notice and get the levy approved and get on with the tree after perhaps only a month or so of delay. Putting hazard cones around or roping off the area would underline the importance of getting the approval.10/05/2019 at 8:42 am #37507
Thank you for these responses – I appreciate your thoughts – can you let me know which you think is better
1. A lot owner(s) advances the $ to the SP and the SP pays the contractor – is this “levies in advance” (?) and the SP pays the contractor – what does the SP issue to the lot owner to receive the funds – levy notice?
2. the lot owner(s) just pays the contractor and gets reimbursed (gst implications).
Thank you.10/05/2019 at 8:54 am #37511
Paying levies in advance may be the cleanest way to do this. The owners could pay the levies in advance and receive a statement from the treasurer/strata manager acknowledging this. Subsequently, each levies notice would contain the amount of the levies and a statement of the positive outstanding balance. However, you’d have to work out how long it would take to recoup the money by this method.
That said, a much better plan might be to get a short-term strata loan that could be paid off by a special levy at the next AGM. That, however, would require agreement at a general meeting.
And on that note, if you make this a private loan, make sure you don’t fall foul of Section 100 of the Act, which requires agreement at a General Meeting.10/05/2019 at 8:59 am #37513
I agree with JT.
If you really want to go down this route, I would go with option 1 since the OC is low on funds.
I have done option 2 but only in an OC that had plenty of funds and it was purely about getting a contractor or goods on-site as quickly and simply as possible and I could be confident of getting the money reimbursed promptly, backed up by a paper trail showing the expense was approved.
With option 1, the owner(s) could pay money against their levy accounts. They would then be in advance of their levy payments. The OC should issue them with an account statement showing the payment received and that their account is in credit. The OC would have cash and could spend it on tree surgery or anything else the committee approves consistent with the budget or urgently necessary work.
When the next levy is due, those whose account balances are in credit would either not need to pay anything or would not need to pay as much, thereby, in effect, getting their money back.10/05/2019 at 4:36 pm #37526
There is nothing preventing owners from paying levies in advance, and if an expense then arises the OC using the funds available to meet that expense. Where an owner pays in advance, the strata records will show that – for example if you pay a year in advance your levy notice should show:
– levies payable for that quarter
– amount paid by the owner to date
– amount if any payable by the due date – where paid in advance it will show nil
You may not need to strike a special levy, it depends on the circumstances. The thing is, if the expense has been incurred then you can’t reverse it – note that you can’t enter into a contract unless you have the funds to pay for it at that time.
More generally – if a strata scheme has funds that are so low that they cannot proceed with a maintenance item such as tree removal (which is not that expensive) then I suggest it is not setting the budget appropriately, and the levies are too low. What are you going to do if something really serious arises? Basically I am repeating what Sir Humphrey has said – you need to plan for both known and unknown expenses – we have done this for a long time now, and it has seen us through some major issues including replacement of the hot water system and major work on the sewer pipes.