What is a special resolution?

A lot of business of the body corporate is conducted by ordinary resolution which requires a simple majority of votes cast. A majority resolution requires ‘YES’ votes to be cast by more than 50% of all lot owners, even if not all lot owners have voted. However, a special resolution requires far more stringent requirements. The only resolution that is more difficult to pass is a resolution without dissent.


What is a special resolution used for? Examples of what a special resolution can do include restricting the use of proxies; leasing common property for less than 3 years; refusing to undertake an annual audit; and making improvements to common property. A big example is changing by-laws (except exclusive use by-laws). These are not exhaustive examples, of course.


A special resolution requires three things, all of which must be satisfied:


1. Of all votes cast, at least two-thirds must vote ‘YES’;


2. Of all votes cast, the number of ‘NO’ votes must not be more than 25% of all lots in the scheme; and


3. Of all votes cast, the total of the contribution schedule lot entitlements for the lots who vote ‘NO’ is not more than 25% of the total of contribution schedule lot entitlements.



There are two examples to demonstrate this. Say there are 60 lots all with equal contribution schedule lot entitlements and, by some miracle, every lot owner is engaged and votes. For a special resolution to pass, at least 40 people must vote ‘YES’. It also requires 15 or less people to vote ‘NO’. As all contribution schedule lot entitlements are equal, they reflect the votes. So long as there are 40 or more people who vote ‘YES’ and 15 or less people vote ‘NO’, the special resolution passes.


For another example, say there is a 5-level building with 8 lots. Units 1 to 6 each share a level and have 10 contribution schedule lot entitlements. Units 7 and 8, however, take up a whole level for themselves. Because they’re twice as big, they each have 20 contribution schedule lot entitlements. This means the total contribution schedule lot entitlements is 100. At the AGM, all 8 lot owners vote on a special resolution. Units 1 to 6 vote ‘YES’, and the owners of Units 7 and 8 vote ‘NO’.


As the votes are 6:2, the motion has more than two-thirds support, so the first condition is satisfied. The ‘NO’ votes were only 25%, not more than 25%, so the second condition is satisfied. However, the contribution schedule lot entitlements are not equal. Those who voted ‘YES’ total 60 out of 100. The ‘NO’ votes total 40 out of 100. As more than 25% of the total contribution schedule lot entitlements voted ‘NO’, the special resolution has failed.


The special resolution allows a motion to be passed with dissent, but there needs to be overwhelming support for it to pass.



This article is intended as general information only and should not be relied upon as legal advice. For specific legal advice please contact us here.

BRISBANE 

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