But a maintenance fund plan is about so much more than simply putting money away for a rainy day.
A maintenance plan is about taking the guess work out of how much you and your fellow owners will need over the coming years to keep your building in pristine condition.
Above all, it helps to ensure your Owners Corporation can continue to meet its legal obligation under Section 46 of the Owners Corporation Act (VIC) 2006, which states:
“An owners corporation must repair and maintain—
(a) the common property; and
(b) the chattels, fixtures, fittings and services related to the common property or its enjoyment.”
It’s about making a clear and transparent plan for all owners to follow, and locking in that investment from all owners over a fixed-term, usually 10 years.
A good maintenance plan will take into account all of your building’s capital items and set out how much your Owners Corporation will need to put away for the maintenance, repair and/or – in the worst case – replace those assets.
From your building’s roof and elevators to the paint on the walls, sooner or later your Owners Corporation will need to look at repairing these major assets.
A maintenance plan and in turn a maintenance fund is a great way to make sure your Owners Corporation has made every effort to ensure the money for those assets is there when it’s needed most.
Shane Foley, director of BIV Reports, told Strata Plan that one of the biggest reasons Owners Corporation’s fail to meet their obligations under Section 46 is a lack of available funds to promptly repair items of concern.
“Some strata lawyers out there say if it needs repair, [the Owners Corporation] has already breached that section,” Mr. Foley said.
“They’ve failed to act proactively to prevent that point from occurring.
“The main reason we see people not being able to fulfil that obligation is because they don’t have any money, they just say that we can’t afford it.
“There’s been a few court cases where precedence has been set that that excuse just doesn’t stack up. It has no weight as far as the legal arena is concerned.
“So the Owners Corporation has to be able to afford it and one of the mechanisms that have been put into the legislation is that prescribed Owners Corporations must prepare a maintenance fund plan.
“Section 36 also says that any Owners Corporation may get a maintenance fund plan. I guess it was put that way by the regulators to say it’s a good idea for everyone to consider it.”
A prescribed Owners Corporation is any Owners Corporation with more than 100 lots and/or an annual budget over $200,000.
Once a maintenance fund plan is drawn up, your Owners Corporation can decide to implement it by way of a motion at your next Annual General Meeting.
If your plan is resolved and put into action, a new account will be opened and additional levies will be struck in accordance with the plan’s schedule.
A good plan will also dictate in what years your Owners Corporation should need to expect to spend and on which assets the money will be needed.
Mr. Foley said a maintenance fund plan gives all owners a clear picture of what their highest costs may be in the coming years and how much needs to be saved in that time frame to ensure your Owners Corporation is prepared.
“We sometimes have an issue sometimes where people have an expectation that this is a mechanism for getting work done, but we’re constantly trying to educate the OC community that it’s a mechanism for saving money, so that you can engage people to get the work done,” Mr. Foley said.
“As we said before, the main reason Owners Corporations don’t comply with Section 46 is because there is no money in the bank.
“If the money is in the bank, it’s more a case of, ‘how much do we have in the bank? $50,000. How much will it cost to rebuild the fence? $25,000, so we can get it done.’
“We want three quotes, we’ll have an Extraordinary General Meeting (EGM) to discuss the quotes, decide who we want to go with, instruct them and off we go.
“It’s a mechanism to make sure you’re properly resourced to keep the building in working order.”
“At the point of selling a lot a solicitor or conveyancer may do a strata inspection and research the condition of the accounts, which is a primary concern for a prospective purchaser,” Mr. Foley said.
“They might find there’s a healthy amount in a maintenance fund and that is an asset an incoming purchaser would be entitled to part of.
“If they’re buying into an Owners Corporation, they’re buying into that asset pool and it’s going to reduce the potential impost of potential future requirements.”
If you are curious as to whether or not your Owners Corporation has already ratified a maintenance plan and opened a maintenance fund, send through an enquiry via the form below today.
If you’re a Strata Plan customer and would like to learn more about getting a maintenance fund plan commissioned with the aim of opening a maintenance fund, speak to your Strata Manager today.
Strata Plan can provide examples of what a maintenance fund plan looks like and what you and your fellow owners can expect.
Of course, these decisions are up to all owners and are usually reserved for Annual General Meetings, however signalling your intent to raise the issue with your fellow owners is a great way to get the ball rolling.
If you would like to contact us with any queries please complete the form below and we will respond to you within 2 business days.