Do We Need a Maintenance Fund for Our Owners Corporation?

Do We Need a Maintenance Fund for Our Owners Corporation?

Prescribed Owners Corporation

Consumer Affairs Victoria defines Prescribed Owners’ Corporation as owners’ corporations having more than 100 lots (including storage lots, car parking lots, and accessory or ancillary lots), or collect more than $200,000 in annual fees in a financial year.

The $200,000 limit does not include special levies raised under section 24 of the Owners Corporations Act 2006.

Thus, CAV stipulates duties of a Prescribed Owners’ Corporation relating to the set-up of a maintenance plan/fund as follows:

  • prepare and maintain a 10-year maintenance plan for major capital items that are its responsibility
  • establish a maintenance fund to implement the maintenance plan
  • report on the implementation of the maintenance plan at every general meeting

In addition, buildings with multiple owners corporations which comprised of more than 100 lots may also be considered prescribed owners corporation and carries the same duties as to maintenance fund according to CAV.

Owners Corporation Comprised of 100 Lots or Less

An owners’ corporation having 100 or less than 100 lots can set-up maintenance plan and maintenance fund but are not required to formally adopt it (unlike from the requirements of a prescribed owners’ corporation). This approach gives the owners’ corporation the flexibility how to manage the spending of the maintenance funds or the option to move it to administrative fund.

The benefit of having a maintenance fund on this set-up is that i.e. if in 5 – year time the roof needs replacement at a cost of $80,000 you’ll have enough/excess/some funds set aside – rather than the owners been hit with a special levy out of the blue.

The building or the Owners Corporation has the option of setting up a maintenance fund (for owners to contribute to, in addition to contributing the annual admin fund/budget).

If the Owners’ Corporation chooses to set-up a maintenance fund (i.e. vs owners being hit with special levies when large repairs/maintenance is needed), then below are some options:

  1. Engage a Quantity Surveyor to prepare a maintenance report (at estimated cost of ~$800-$2,000; it’s a pretty precise way to budget how much owners should contribute for items and when things will need replacement/repainting/fixing etc.)
  2. Consult with the new manager on what a reasonable amount is for the Owners Corporation to contribute to the maintenance fund.
  3. Committee/Owners at the AGM compute an amount that’s acceptable for everyone to set aside and contribute into the maintenance fund.

The maintenance fund sits in a separate account to the admin fund – and can sit in an interest- bearing account (though it is currently a low interest rate environment).

 

For further information about living and owning in an owners corporation visit the Consumer Affairs Victoria website, or if you are ready to have a conversation about changing strata management companies – speak to Strata Management Consultants on 1300 917 848 or via office@strataconsultants.com.au

The contents of this article or website are only intended to provide a general overview of the topics discussed. The author of this article makes no representations as to the accuracy or completeness of any information and the information is not intended to constitute investment, legal or professional advice. You should seek professional advice before acting or relying on any of the content. This article does not contain references to any specific company, organisation or individual, unless expressly specified.
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