Common property work must be classified correctly because the distinction between maintenance and an improvement can affect the approval required. The committee spending limit is relevant, but it is not the only question.
This article explains how to classify the work, how improvement limits operate under the Standard Module, and what owners and committees can do when the correct process is unclear.
How do you tell whether common property work is maintenance or an improvement?
It can be difficult to draw a clear line between maintenance and an improvement. Consider the reason for the work, its scope, function and effect together.
The Body Corporate and Community Management Act 1997 (BCCM Act) says an improvement can include:
- putting up a new building
- making a structural change
- making a non-structural change, such as installing air conditioning.
A change can include adding, removing or swapping something. The BCCM Act does not define maintenance.
Examples include:
- Painting a deteriorated wall in a similar shade may be maintenance.
- Replacing a deteriorated wooden fence with a similar fence may be maintenance.
- Installing a new swimming pool may be an improvement.
- Replacing a wooden fence with coated metal may be an improvement.
These examples do not create automatic classifications. The materials, scope and purpose of the work may affect the outcome.
A change is not automatically an improvement because the original product or material is no longer available. For example, replacing foyer tiles with a similar modern tile may still be considered maintenance.
Preventative work can also form part of maintenance. The body corporate maintenance obligation includes work needed to prevent damage, such as taking steps to prevent termite damage to common property.
A project can contain both maintenance and improvement components. Where possible, separate those components in the scope of work, quotations and proposed motions. Adding something that did not previously exist may indicate an improvement, but it does not decide the issue on its own.
The body corporate should not divide a single project into smaller parts to bring it within an applicable spending or improvement limit. If associated improvements form one project, the total project cost may be relevant to the approval category.
Who approves maintenance work in a body corporate?
The body corporate must maintain common property in good condition and, where common property is structural, in a structurally sound condition. Under section 152 of the BCCM Act, it must also administer, manage and control common property and body corporate assets reasonably and for the benefit of lot owners.
The maintenance responsibility may depend on the scheme’s survey plan and regulation module. First, confirm the boundaries between the lot and common property and identify which regulation module applies. The community management statement records the regulation module for the scheme.
For a scheme under the Standard, Accommodation or Small Schemes Module, a committee spending limit can be set by ordinary resolution of the body corporate. If no amount has been set, the limit is calculated by multiplying the number of lots by $200.
This limit concerns how much the committee can spend. It does not decide whether work is maintenance or an improvement.
For example, if a maintenance project falls within the committee’s spending limit and there is enough money available in the budget, the committee may be able to approve the spending. If the proposal is over the committee’s limit, approval may be needed from a general meeting, unless an applicable exception applies.
The committee cannot divide one project into smaller parts to bring each part within its spending limit. Consider the cost and scope of the whole project.
The committee also needs to include GST when checking the spending limit. A quotation that appears to be within the limit before GST may exceed it once GST is included.
The number of quotations is a separate issue. The major spending limit determines how many quotes must be considered, not whether the body corporate or committee can spend more than that amount. If the proposal is above the relevant major spending limit, at least 2 quotes generally need to be obtained and included with the meeting notice, subject to the applicable exception.
You can read more about responsibilities and practical maintenance issues in our body corporate maintenance factsheet.
How are common property improvements approved?
For the rest of this section, the figures and approval categories refer to the Standard Module. Your scheme may be regulated by a different module, so check the community management statement before relying on these limits.
Under the Body Corporate and Community Management (Standard Module) Regulation 2020, a body corporate may make improvements to common property if they are within the basic improvements limit, approved by ordinary resolution within the ordinary resolution improvement range, approved by special resolution, or authorised by an adjudicator in the circumstances set out in the regulation.
The cost of the improvement helps determine the approval category. If several associated improvements form one project, consider the cost of the entire project. A committee or body corporate should not separate a single project into smaller items to obtain a lower approval threshold.
Basic improvements limit
The basic improvements limit is the number of lots multiplied by $300. A committee resolution may authorise an improvement within this limit, but the committee must also stay within the committee spending limit.
A committee-approved improvement must remain within both the basic improvements limit and the committee spending limit. The committee cannot approve it on its own if it exceeds either limit.
Increasing the committee spending limit does not allow the committee to approve an improvement beyond the basic improvements limit. The two limits operate separately.
Ordinary resolution improvement range
An improvement above the basic improvements limit but not more than $2,000 multiplied by the number of lots falls within the ordinary resolution improvement range. It requires an ordinary resolution of the body corporate at a general meeting. Only 1 improvement within this range can be approved in a financial year.
Special resolution
A special resolution is required when the improvement is above the ordinary resolution improvement range or when the body corporate has already approved an improvement within that range during the financial year.
The Standard Module also allows an adjudicator to authorise an improvement where an order decides that it is reasonably necessary for the health, safety or security of people using the common property.
The approval framework is different for some other regulation modules. For example, under the Commercial Module, the committee cannot approve improvements to common property. They must be approved by ordinary resolution at a general meeting or by an adjudicator.
Why do spending limits and improvement limits both matter?
The spending limit and improvement limit answer different questions.
The committee spending limit asks whether the committee has authority to spend the proposed amount. The improvement limit asks which approval process applies to the improvement. A project may satisfy one limit but not the other.
For example, a committee might have an increased spending limit set by the body corporate. That may allow the committee to spend more on some maintenance work. It does not give the committee authority to approve an improvement above the Standard Module’s basic improvements limit.
The body corporate also needs enough money available in the budget for the proposed expense. If the budget does not contain enough money, the body corporate can consider amending the budget or raising a special levy.
The major spending limit is a separate consideration. It determines when quotations must be obtained and considered. It does not create a further approval category for improvements or replace the approval requirements for an improvement.
A proposal should be checked in this order:
- Is the work the body corporate’s responsibility?
- Is it maintenance, an improvement, or a project containing both?
- If it is an improvement, which improvement approval category applies?
- Does the committee have authority to spend the amount?
- Are enough funds available?
- Are the required quotations and meeting documents in place?
This approach helps prevent a committee from treating the spending limit as the only approval requirement.
What should a committee check before approving borderline work?
Borderline projects should be described carefully before a motion is prepared. A committee should consider:
- what is deteriorated, damaged or no longer functioning
- why the work is needed
- whether the proposed work restores an existing function or adds a new one
- whether the materials, appearance or function will change
- whether the work includes separate maintenance and improvement components
- whether the work is part of a larger project
- the total project cost, including GST
- whether the work affects the body corporate’s insurance or future maintenance obligations.
Obtain a written scope of work where possible. A report from a suitably qualified person may help explain whether the proposed work is necessary, what it will change and how the costs should be divided.
The motion should identify the work clearly. If maintenance and improvement components are combined in one broad motion, owners may not have enough information to understand what is being approved. Separating the components can also make it easier to apply the correct approval process.
Under section 152 of the BCCM Act, the body corporate must administer, manage and control common property and body corporate assets reasonably and for the benefit of lot owners.
The body corporate should also consider whether the work will affect insurance. For example, where an improvement to common property is made for the benefit of a lot and is likely to increase the reinstatement insurance premium, the owner of the lot must give the body corporate details of the nature and value of the improvement as soon as practicable after it is substantially completed.
Our commissioner’s office owner improvements information may also assist when considering work that benefits an individual lot.
Committees can reduce the risk of disagreement by recording:
- the reason for the proposed work
- the evidence relied on
- the classification adopted
- the approval category
- the applicable spending and improvement limits
- the quotations considered
- any conditions attached to the approval.
You can also read our guidance on acting reasonably in committee decision-making.
What can owners do if they disagree with the classification or approval?
An owner who disagrees with the classification of common property work can raise the issue with the committee or body corporate before the motion is decided. They can ask for the proposed work, cost breakdown, quotations and approval basis to be provided with the meeting papers.
An owner may also propose an alternative motion or ask that maintenance and improvement components be considered separately. This gives the body corporate an opportunity to reconsider the classification before work begins.
For an improvement, an owner who disagrees with the approval process can apply for dispute resolution.
The relevant regulation module, the project scope, the cost and the resolution passed will all be important when assessing the issue. Owners should keep copies of meeting notices, motions, minutes, reports, quotations and correspondence.
If the project has already started, raising the concern promptly is useful. The body corporate may need to consider whether the work can proceed, whether a further resolution is required and whether any part of the project should be separated.
Maintenance and improvement classifications depend on the details of each project, while approval also depends on the scheme’s regulation module and spending limits. If you need help working through the approval pathway, contact our team at reception@stratacare.com.au.
