Committee Membership under the new Standard Module transcript

After extensive stakeholder and community consultation, which included our input, and recommendations made by the panel on the Queensland University of Technology property law review, the body corporate and community management regulations were remade on 29 September 2020. They will come into effect on 1 March 2021.

This video is specifically about changes relating to committee membership. We will go through the changes made to the Standard Module regulation only. If your scheme is registered under one of the other regulation modules you should check that regulation module for any differences, although note that the changes are very similar if your scheme is registered under the Accommodation Module.

Transitional provisions in the new Standard Module allow for some arrangements under the expiring Standard Module to continue to help minimise disruption to bodies corporate in implementing the new module.

Topics

The topics covered in this video include co-owners and representatives, deeming committee membership, electronic voting, calling from the floor, chapter 3 part 5 engagements, receiving benefits and removing committee members.

Note that under the transitional provisions provided in Chapter 10 of the new Standard Module, the expiring Standard Module continues to apply for procedural steps and the conduct of a committee meeting and general meeting called but not held before commencement of the new Standard Module.

Co-owners

The regulations concerning co-owners and family members on the committee has been the subject of many enquiries. The most common question being – why are both husband and wife on the committee if the legislation prevents co-owners who own only one lot from being on the committee at the same time?

Under the expiring Standard Module, co-owners can both end up on the committee depending on how they are nominated. This occurs through what is termed a “loophole” by some, where one co-owner is on the committee based on ownership of the lot, while the other co-owner was on the committee at the same time under their eligibility as a family member.

For example under the expiring standard module, a co-owner could nominate the other co-owner who is their spouse under their eligibility as a family member, while the co-owner who gave the nomination could still be nominated by another lot owner in the scheme under the basis of their ownership of the lot. This situation could also occur where ownership of the lot is in one name only but the owner and their spouse both end up on the committee.

Here is an example of how this loophole can currently occur.

In this example, Bill and Rachel are co-owners of 1 lot. Bill nominates Rachel under her eligibility as a family member. Bill is then nominated by Joan, another lot owner in the scheme, under his eligibility as owner of a lot. This loophole allows them both to be elected to the committee.  This could also occur if Bill and Rachel were married and only one of them owned the lot.

The intention of the legislation was to prevent co-owners or an owner and their family member from being on the committee together, when they only own 1 lot.  The perception of control is the main concern raised when owners and their spouse, or their family member are on the committee together.

The new Standard Module seeks to close that loophole, it makes it clear that the only situations co-owners or their family members or a person acting under authority of power of attorney given by the owner can be elected to the committee, is if they own more than one lot or if they are required to bring the number of committee members up to the minimum of 3.

When inviting nominations, it may be a good idea to remind people that there are restrictions on co-owners, family members and a power of attorney of an owner being on the committee at the same time.

Using Bill and Rachel from our previous example, under the new Standard Module, Bill and Rachel could both nominate for the committee on the basis of ownership if they own 2 lots.  They could then both be elected to the committee.

Otherwise if they own only 1 lot, they could only both be on the committee if they were elected to bring the number of committee members to the minimum number of 3.

Deeming committee membership

The expiring Standard Module allows committee membership to be deemed in certain circumstances, rather than determined by election. This happens when there are only two lots in the scheme, or there are more than two lots, but fewer than three lot owners.

The new Standard Module also allows committee membership to be deemed where there are three or more lots, and only three owners. The relevant owners decide between themselves which executive positions each will hold. If the owners cannot decide then the positions are held jointly.

Deeming committee membership for schemes with only three owners may reduce costs for relevant schemes as a committee election does not need to be held.

When a committee is deemed under the new Standard Module it is called a minor committee. This applies to:

• A scheme of 2 lots and the 2 lots are in identical ownership
• A scheme of 2 lots and the 2 lots are in different ownership
• A scheme of 3 or more lots and all the lots are in identical ownership
• A scheme of 3 or more lots and there are only 2 different owners for all the lots
• A scheme of 3 or more lots and there are only 3 different owners for all the lots

Electronic voting

Under the expiring Standard Module, there is no specific provision to vote electronically for a committee ballot. The new Standard Module allows electronic votes and systems of electronic voting to be used for both open ballot and secret ballot committee elections, if authorised first by ordinary resolution of the body corporate.

Lot owners can waive requirements for receiving hard copy secret ballot materials where electronic voting is in place, to further assist in reducing the costs to the body corporate.

The body corporate must operate a system for receiving electronic votes that

• rejects votes cast by a person who is ineligible to vote or who has already voted in the election and
• only allows the secretary to receive the votes and
• for secret ballots, does not disclose the identity of a voter

The secretary prepares an electronic form of the ballot paper after the nominations close if needed, and an instruction sheet must be sent with the notice of annual general meeting on how to vote electronically. To cast a vote the person must follow the instructions provided.

The electronic voting system may allow for votes to be cast by computer, smartphone or tablet.

Allowing electronic voting for secret ballots will also assist with reducing costs to the body corporate. It should help owners who live interstate or overseas in voting as they will not need to post hard copies of secret ballot papers unless they choose to.

In the expiring Standard Module, a committee must have the required number of voting members. In the new Standard Module, the term required number has been removed, instead the term is maximum number.

Maximum number

Maximum number means - that if there are 7 or more lots, the maximum number of committee voting members is 7, and, if there are fewer than 7 lots, the maximum number of voting committee members equals the number of lots in the scheme. The committee must still consist of at least 3 voting members.

Also, the new Standard Module allows the body corporate for a principal scheme in a layered scheme to vote to increase the maximum number of committee members to not more than 12 by passing a motion by ordinary resolution. This is not relevant if your scheme is not a layered scheme.

Calling from the floor

Under the expiring Standard Module, if the number of nominations for executive members and ordinary members is less than the required number of voting members for the committee, the chair must invite a number of nominations for ordinary member positions sufficient to bring the number to not more than the required number. The wording of this section often causes confusion and is the subject of many enquiries to the Commissioner’s office. It is not clear if the chair has to invite nominations if less than 7 committee members are elected.

The new Standard Module clears this up. Instead a committee must consist of at least 3 voting committee members and no more than the maximum number of voting members.

And, when there are fewer than the maximum number of voting committee members, nominated or elected, the chairperson must invite nominations from the floor of the meeting to attempt to bring the number of voting members of the committee to the maximum number.

This change to the module will ensure owners will have an opportunity to nominate from the floor at the meeting if they have missed submitting their nomination before the end of the scheme’s financial year and may also assist in creating more diverse committees.

Secret ballot for Part 5 engagement

A body corporate manager can be engaged to carry out the functions of a committee and its executive members where, in specific circumstances, the committee for the body corporate does not have sufficient numbers – this is commonly known as a ‘Part 5 engagement’.

Under the expiring Standard Module, a secret ballot is required for a motion about this type of engagement.

Given that efforts to appoint sufficient committee members must have already failed prior to consideration of a Part 5 engagement, the requirement for a secret ballot may place additional cost and procedural burdens on schemes.

The new Standard Module allows a body corporate to decide by ordinary resolution that a Part 5 engagement can be decided by an open ballot, rather than secret ballot. Having an open ballot may then reduce general meeting costs for relevant schemes.

The motion to engage a body corporate manager under these provisions remains a special resolution.

Disclosure of benefits

The new Standard Module restricts committee members from receiving direct or indirect benefits from caretaking service contractors and service contractors unless the body corporate has authorised the receipt of the benefit by ordinary resolution.

This does not apply if the benefit is for the supply of or payment for

• a letting agent business service conducted by the contractor, or
• a service the body corporate has engaged the contractor to provide or
• a service the owner of a lot has engaged the contractor to provide at market price.

This means that a committee member can engage the caretaker as their letting agent and receive benefits that would normally be available under that type of relationship. For example the caretaker may clean the unit after a tenant vacates and charge the owner at market price for the service.

Removing committee members

Under the expiring Standard Module, there are two means by which a committee member can be removed from office: by ordinary resolution; or by way of issuing a notice for breach of the code of conduct followed by subsequent removal by ordinary resolution. However, the relevant provisions do not make it clear that these are two distinct means of removing a committee member from office.

To reduce confusion around the options for removing a committee member from office, the new Standard Module sets out that removal under the code of conduct breach process, by way of issuing a notice for the breach of the code of conduct followed by removal by ordinary resolution, is a distinct process that causes a committee member’s position to become vacant. Separate to removal from office by ordinary resolution of the body corporate where no notice for breach of the code of conduct is issued.

You can find more information about the new regulations by visiting the shortened URL www.qld.gov.au/bodycorp-regchanges

If you have more questions you can contact our office by telephone or send us an online enquiry via our website.

Also keep an eye out for more resources, including articles, videos and further webinars.