Sinking Fund Can Leave Strata Owners’ Feeling All At Sea
1/02/2005Most owners of strata title apartments are becoming accustomed to the change that saw their building’s Body Corporate renamed the Owners’ Corporation. But they are not so accustomed to the continuing legal responsibility of the newly named entity to establish and manage a sinking fund. This sticking point is a problem area that needs careful attention.
Mr Richard Tooker, the director of one of the states’ largest management groups, New South Wales Strata Management, says the problem arises because there is no hard rule which says how much money should be set aside. Money is needed on a regular basis to handle not only regularly occurring maintenance, but to also cover unplanned repairs that can suddenly appear and require urgent attention.
Sinking funds can be a contentious issue in strata plans, Mr Tooker says, because too few plans are setting aside a sufficient amount to handle a property’s ongoing and future maintenance needs.
“Meeting the costs of sudden, major repairs can become a major problem if an Owners’ Corporation has not maintained adequate levies. It is important that these levies are based on sensible estimates of maintenance and replacement costs, and that the funds, which are set-aside for this purpose, are regular and well planned. The last thing people want in their lives is a financial surprise. But this problem can be prepared for in advance.
“Here at New South Wales Strata Management such planning is one of the things we quite regularly put under review.
“We’ve found it to be the stickiest issue for owner-occupiers or owners who have their property leased. So we take a more proactive stance that assists the Owners’ Corporation in preparing for a wide range of eventualities. Experience is the key. We’ve been managing many types of buildings, in many districts, and this gives much needed insight.”
Mr Tooker says that Owners’ can be quite understandably fearful that special levies can come their way, leaving them with costs to pay. Elderly residents and those who may be new purchasers can be especially vulnerable to calls for additional monies to cover unforseen events.
“What is needed is the expert assessment of the building’s current and future maintenance needs. This can see the establishment of a viable sinking fund that would provide for future inevitabilities.”
Mr Tooker noted that the establishment and maintenance of an appropriate sinking fund is but one of many roles played by a competent strata manager.
Others roles include the maintenance of books and records, an oversight of overall financial management, access to reasonably priced and fully licensed tradesmen, and an assurance that the buildings’ insurance package is suitable, is regularly reviewed and correctly valued.
New South Wales Strata Management is based at Parramatta but serves Owners’ Corporations situated throughout the Sydney basin. It can be contacted on 9890 1841.
New South Wales Strata Management (formerly Gilmour Strata Management) commenced business in early 1991, as a member of the highly respected J A Gilmour & Sons group of companies. Licensed solely and specialising only in strata management services, the company has steadily grown to become one of the largest such organisations in New South Wales.