By the Paddocks Club team

Below are examples of two questions on the Paddocks Club discussion forum, to show you what is available to our Community members!

Are items in the administrative and reserve fund budgets ‘ring-fenced’?

Member’s question:

Hi Graham,

To what extent are items in the budget ‘ring-fenced’, ie can one rob Peter to pay Paul with reference to items in the budget?

If items in the budget are not ‘ring-fenced’, is there or should there be a limit to the amount that can be re-allocated from item ‘A’ to item ‘B’?

Kindly advise.

Many thanks!

Graham’s answer:

Dear member,

In terms of Prescribed Management Rules (PMR) 9(c) the trustees are obliged to “apply the body corporate’s funds in accordance with budgets approved by members in general meeting”. This applies both to the administrative and reserve funds.

This restriction should be read in conjunction with PMR 24(5)(b) which gives the trustees limited rights to use some of the body corporate funds reserved for repairs, maintenance and replacement in subsequent years for urgent maintenance, repair or replacement  expenses which cannot wait but must be dealt with immediately/in the current year. Subject to this provision, body corporate money must be spent as per the line items in the administrative and reserve fund budgets.

If this becomes impractical, then yes, I think the trustees can and should take the issue back to a general meeting and get a direction from members to spend the money in a different way than originally approved under the relevant budget.


Can trustees increase the levies by more than 10% per annum?

Member’s question:

Good afternoon Graham,

The Financial Year End (FYE) is February.

  • An increase of 10% was raised in March 2018
  • An increase of 5% was raised in October 2018
  • An increase of 5% to be raised March 2019

Another increase is needed – can the trustees determine another increase in the same FYE or can they only raise 10% within one FYE?


Graham’s answer:

Dear member,

The only power trustees have to increase contributions is limited to a 10% increase at FYE in terms of PMR 21(3)(b), and this requires that they decide that this is necessary to take account of the BC’s increased liabilities.

The provision does not allow the trustees to implement any number of increases, but just one at FYE, and the purpose is to avoid an excessive cash shortfall as a result of the delay in implementing new levies based on the budget approved by owners at the AGM.

So assuming a 29 Feb FYE and a background of increased expenses each time, it looks as if the second increase was unauthorised, but the other two were in order.

Article reference: Paddocks Press: Volume 13, Issue 12.

Professor Graham Paddock and Ané de Klerk are available to answer questions on the Paddocks Club discussion forum for Community members. Get all your questions answered by joining Paddocks Club.

This article is published under the Creative Commons Attribution license.

Back to Paddocks Press – December 2018 Edition.