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Following the process

By Frank Higginson02 Feb 2011

The beginning of 2011 has been a shocking one for many Queenslanders. The astonishing circumstances of the incredible rain, cyclone Yasi and subsequent flooding have, and will continue to, cause enormous suffering to many.

Resolving the detailed legal issues arising from the floods will be a lengthy process, and one we will not contemplate in this e-newsletter.

The more immediate questions we have been asked relate to responsibilities around flood insurance for bodies corporate. Our conversations with affected body corporate managers lead us to believe that it is a very rare body corporate that has flood insurance.

This then leaves flood affected bodies corporate with the need to take control of their own rectification works (as opposed to leave them with their insurer).

The Body Corporate and Community Management Act provides a number of safeguards for bodies corporate with respect to spending and contractors. A simple summary is that any spending of a substantial nature requires two quotes and general meeting approval for the spending. It may sometimes require a special levy where the spending has not been budgeted for - which is almost certainly going to be the case with flood damage.

The law sets these safeguards in place for obvious reasons, and the usual timing for this sort of spending would be at least two months in the making, from getting quotes to physically calling and holding the general meeting.

So what happens if the circumstances are extremely urgent?

We were recently engaged to provide advice to a body corporate that needed to attend to urgent rectification works. The immediate spending was likely to be in the vicinity of $3 million. This was obviously not budgeted for.

The reality for this body corporate was that it needed to engage contractors to start the works urgently and commit to spending money that it did not necessarily have. It could not tell what the costs were going to be with any detail until further investigations had taken place.

There was no time to obtain two quotes, or even properly scope and tender the proposed work.

The normal statutory processes are designed to ensure probity and accountability in the creation of significant financial or contractual liabilities for a body corporate. However, following the required statutory processes in this matter simply would not have worked. It would leave hundreds of people displaced from their homes for an inordinate amount of time and possibly have resulted in even more damage to the property.

We were approached by the committee to provide advice on how it could find a balance between the protection of lot owners and the urgency of the situation.

We assisted the committee to urgently obtain an order from the commissioner’s office authorising the spending of $1 million dollars from the body corporate’s current accounts together with an order allowing the general meeting to be called on seven days notice to strike a special levy to continue the remaining works. This order was obtained within 48 hours.

There were a range of orders sought, but working in consultation with the body corporate manager, the proposed contractor and the judicial authorities produced an outcome that allowed immediate works to begin outside the normal statutory limits.

The body corporate consisted of over 200 lots and the general meeting has now been held. The motions were passed without dissent, which in the context of the situation is an incredible result.

In these circumstances where any urgent works can be legally sanctioned on 48 hours notice, it is well and truly worth making sure that any extraordinary spending is judicially endorsed.

Following due process is important. However, with the right advice and team behind them, a committee can respond to an emergency situation with some flexibility and the knowledge that its decisions are made in accordance with proper authority.

This is a landmark decision in the context of the body corporate law in Queensland and shows that with the right advice, seemingly insurmountable legal hurdles can be overcome.