Wednesday, May 25, 2022

How many quotes are required by the owners corporation?

How many quotes are required by the owners corporation?

Ask any building manager, getting several quotes for Owners Corporation expenditure is a hard task, particularly when the item or job doesn’t have a large budgetary impact.

How many quotes are required by the Owners Corporation is a common question. The answer is not made easy after reviewing the Act.

What does the Act say?

An owners corporation, of a large strata scheme, must obtain at least 2 quotations in relation to proposed expenditure in respect of any one item if the proposed expenditure exceeds the prescribed amount (Strata Management Scheme Act 2015 Section 102)

Reading the Act alone when it comes to managing quotations and expenditures, would strike fear into any strata committee.  The key wording here is the ‘prescribed amount’; however, you need to search a little further to find out what the ‘prescribed amount’ actually means.

It is totally impractical for the Owners Corporation to seek several quotations for work or an item where the expenditure might only be a few thousand dollars. Therefore, the Strata Schemes Management Regulation 2016 Section 25 provides a prescribed amount, that being a proposed expenditure of $30,000.

Read related: Requirements of large strata schemes

How many quotes are required by the Owners Corporation?

Under the Act it means that at least two quotes are required by the Owners Corporation for amounts (on a single item) of $30,000 or more.

Is there a limit on spending by large schemes?

An Owners Corporation must not spend (on a single item) an amount greater than the amount specified in estimates provided at an annual general meeting. (Section 102)

Once again this is not practical in reality as quotations might need to be varied and it can restrict the strata committees’ ability to manage effectively.

The Act deals with these circumstances in two ways.

  1. A large strata scheme can spend up to 10 percent above the budgeted amount for any item
  2. The Owners Corporation may by special resolution passed at a general meeting remove the 10% limitation on any single item

The special resolution may look something like this;

That the Owners Corporation resolves in accordance with section 102(3) of the Act to remove the limitation on spending imposed by section 102(2) of the Act, provided that the total expenditure for the current financial year shall not exceed the total budgeted expenditure for both the Administrative and Capital Works Funds by more than 10%.

Removing the limitation allows your strata committee to govern effectively and not get bogged down when a single item of expenditure suffers a blowout.

What happens when emergency expenditure Is required?

The Act does not restrict expenditure for emergency purposes. This might include (but not limited to):

  • burst or blocked water or sewerage pipes,
  • serious damage caused by fire or storm or any other natural disaster,
  • unexpected electrical or security system failure,
  • glass breakages that affect the security of any building in the strata scheme or could result in damage to the inside of any such building

(Strata quotes requirements – The same rules apply for how many quotes are required by strata or strata committees)

Strataville Editorial
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