Running a layered scheme

There are some differences in how a layered scheme operates, when compared with a basic body corporate scheme.

This page explains the differences in:

• forming a committee in a principal body corporate
• meetings
• financial management
• by-laws
• insurance
• records.

Forming a principal body corporate committee

The maximum number of voting committee members for a principal scheme with fewer than 7 lots is equal to the number of lots.

For principal schemes with 7 or more lots, the maximum number of voting committee members is 7—unless the body corporate decides by ordinary resolution on an amount greater than 7, but not more than 12.

The election process is determined by the regulation module recorded in the community management statement (CMS). Only the eligibility and nomination process is different to a basic scheme.

Read more about:

• the role of the committee
• committee structure.

Eligibility for the principal body corporate committee

The body corporate for a subsidiary scheme may nominate a representative of their scheme to be a voting member of the principal body corporate’s committee.

The subsidiary body corporate cannot nominate a representative as a voting member of the principal body corporate committee if the subsidiary owes a debt to the principal.

Subsidiary scheme representative

A body corporate of a subsidiary scheme is seen as equivalent to a lot owner in a basic scheme within the umbrella scheme’s body corporate. When the legislation refers to the owner of a lot, it will usually include the body corporate of a subsidiary scheme as well.

A subsidiary body corporate must appoint a person to represent them on the principal body corporate.

The subsidiary scheme’s representative must act according to the direction of their body corporate, and represent them in a way that is in the best interests of the subsidiary body corporate.

The subsidiary body corporate must give written notice of who they have appointed as their representative to the principal body corporate’s secretary. They can change their representative at any time.

Standard, Accommodation and Commercial modules

If the committee of a scheme registered under the Standard Module, Accommodation Module or the Commercial Module does not appoint a representative, the chairperson for the subsidiary body corporate committee will be the representative.

Small Schemes Module

For schemes under the Small Schemes Module, if the body corporate does not appoint a representative, the secretary of the subsidiary body corporate will be the representative.

Specified Two-lot Schemes Module

For schemes under the Specified Two-lot Schemes Module, a lot owner agreement would need to decide who would represent the subsidiary body corporate on the principal body corporate.

Appointing a proxy

A lot within a principal scheme can appoint a proxy to represent them at a body corporate meeting, unless the lot is a subsidiary scheme.

If a representative of a subsidiary scheme is unable to attend a body corporate meeting, the subsidiary scheme must choose another representative.

Meetings

The principal body corporate makes decisions at committee meetings and general meetings.

Notices

Notices of meetings, minutes of meetings and records of decisions must be sent to the owner of each lot. Where the lot is a subsidiary scheme, the notices should be sent to the scheme’s representative.

A subsidiary scheme representative’s contact address for service is the address for the subsidiary body corporate.

The principal body corporate is not required to send notices or minutes to each lot owner within a subsidiary scheme.

Committees make decisions at meetings or by voting outside of a committee meeting (VOC).

Votes cannot be made by proxy at a committee meeting of the principal body corporate.

General meetings

The principal body corporate must call and hold an annual general meeting and may call and hold extraordinary general meetings.

Who can submit motions and vote

The subsidiary scheme representative may submit motions from their body corporate to be included on the agenda of a principal body corporate general meeting.

The subsidiary scheme representative is also the person who will cast votes on behalf of their body corporate at a general meeting of the principal body corporate.

The representative must submit motions and cast votes according to the directions of their subsidiary body corporate. Votes cannot be exercised by proxy at a general meeting of the principal body corporate.

Financial management

Layered schemes registered under the Commercial Module do not have a spending limit.

Schemes registered under the Accommodation Module and Standard Module have spending limits for:

• spending by the principal body corporate committee
• spending above the major spending limit.

Anything beyond these limits can only be agreed to in a general meeting.

Spending by the principal body corporate committee

The relevant limit for committee spending in a layered scheme can be set by ordinary resolution at a general meeting of the principal body corporate.

If no amount is set, the relevant limit is calculated by multiplying the number of layered lots in the scheme by $200.

For example, a principal body corporate consists of 5 lots and common property. Four of the 5 lots are also community titles schemes with 20 lots each. These lots are referred to as layered lots. In this example there are 81 layered lots (1+20+20+20+20).

The relevant limit for committee spending for the principal body corporate will be 81 lots x $200 = $16,200.

Spending above the major spending limit

The limit for major spending is used to determine how many quotes are required when voting for a motion at either a committee meeting or a general meeting. If the spending is above the major spending limit at least 2 quotes are needed.

The relevant limit for major spending in a layered scheme can be set by ordinary resolution of the body corporate. There is no minimum or maximum spending limit that can be set.

If no amount is set, the relevant limit is the lesser of either:

• $1,100 multiplied by the number of layered lots in the scheme
• $10,000.

For example, the principal body corporate consists of 5 lots and common property. Four of the 5 lots are also community titles schemes and consist of 20 lots each. These lots are referred to as the layered lots. In this example there are 81 layered lots (1+20+20+20+20).

The calculation will be 81 lots x $1,100 = $89,100.

As this total amount is more than $10,000, the relevant limit for major spending for the principal body corporate in this layered scheme is $10,000.

Spending by the principal body corporate at general meeting

Some proposals require the spending to be approved at a general meeting. This includes spending above the committee spending limit and when there has been no or inadequate provision in the budgets for the expense.

When working out the value of the expense, the body corporate must allow for goods and services tax (GST) when it is spending.

By-laws

The by-laws form part of the CMS. A principal scheme and each subsidiary scheme has its own CMS. However, when the principal scheme has a by-law that contradicts a subsidiary scheme by-law, the principal scheme’s by-law will prevail.

A principal body corporate and a subsidiary body corporate can make, change or remove existing by-laws at any time, including exclusive use by-laws.

Like subsidiary bodies corporate, a principal body corporate is responsible for enforcing its by-laws.

The steps to take depend on who is enforcing the by-laws.

An owner or occupier can send an approved notice to their subsidiary body corporate committee to action, asking the subsidiary body corporate enforce the by-law.

The approved notice can be completed by an owner or occupier within a subsidiary scheme who believes that:

• another owner or occupier has breached the by-laws

and

• it is likely the breach will continue or be repeated.

The subsidiary body corporate can take direct action to enforce a principal scheme by-law against the principal body corporate—or against another subsidiary scheme or owner or occupier of a lot within the principal body corporate—in the same way as they would any lot owner within their own body corporate.

See how to deal with breaches of by-laws.

Insurance

The principal body corporate is required to insure the assets and common property of the principal scheme, but is not required to insure a building or part of a building that a subsidiary body corporate is required to have building insurance for.

Records

Owners in a subsidiary scheme would not normally be sent principal body corporate notices or minutes. However, they may be an ‘interested person’ who can apply to the principal body corporate to access or obtain a copy of a body corporate record.

The regulation module states which records are to be kept by a body corporate (and for how long).