Tough Times Right Time to Protect Strata Property 30/03/2009 Underfunding maintenance to a strata apartment building can be tempting when times are tough. But a failure to properly look after such a major investment can prove costly, not only in the short term but the much longer term too.
Today, more prospective buyers are eyeing strata title apartments than at any previous time. The good value such properties represent means that they are worth the look. But a failure in maintenance can see their value plummet.
Mr Richard Tooker, director of one of the states’ larger strata management companies, New South Wales Strata Management, has seen this happen all too often, and says the devaluation of what was once a notable and highly valuable asset is something painful to see.
“In our business we often come across very good but older structures that are now suffering from what can only be called long term neglect. To avoid this happening owners need to support their Owners’ Corporation and listen carefully to advice from their strata manager who works in an advisory role and help protect the interests of all.”
Mr Tooker says that most people are already well aware of the need for a sinking fund to provide funds to cover the long term cost of maintaining the buildings common property.
“This fund accumulates money to cover capital needs. These may be roof repairs, replacement of down pipes, repaving of driveways or parking areas and other major repairs or refurbishments. These come under Section 75A of the Strata Schemes Management Act.”
However he says there another fund that is headlined much less often. This is the Administration Fund.
“Its purpose is to fund the day-to-day expenses of the scheme. Quite understandably the buildings’ Owners’ Corporation - the entity responsible for the entire operation of the scheme - have expenses of a more ‘local’ nature than funds that have been set aside for the future.”
He notes that when the time comes to pay the buildings’ insurance premiums, to fund the wages for the gardener, for repairs to the buildings’ lawn mower, or cover other such mundane expenses, the money has to come from somewhere. And the two administration fund is the source.
This collective funding, he says, is a particular strength of the system, a primary attribute of strata living. This cost sharing sees expenses spread amongst all the owners.
“Pitching-in by all sees the costs of both funds, sinking and administration, become distributed amongst many, reaching each owner as a relatively small proportion of the overall total. This way no individual has to carry a disproportionate load.”
He warns that a failure to adequately support such a system can result in a buildings value failing to grow over time, adding that it often falls to the Strata Management Company to wave a warning flag.
“We recognise that an Owners’ Corporation is often called upon to handle many and sometimes highly complex details. Getting them right all of time can be difficult in the extreme. With the Strata Act, compliance issues frequently require knowledgeable interpretation. And this is where our professional oversight role comes into play.”
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.
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