Strict rules on capital works plans could sink strata schemes & inspectors
Michael Teys
By Michael Teys
15 November 2016

Sinking fund forecasts [Reserve Fund Studies] have been something of a joke to date.

there’s been no sanction for ignoring them

It’s something you’ve had to have, and you’re required to think about them when setting levies but there’s been no sanction for ignoring them. So when the admin fund budget goes up, in the never-ending quest to keep levies the same as last year, the balancing amount has been the sinking fund levy. It comes down a bit, and hey presto the figures work.

Well that’s about to change. The tiger now has teeth.

Capital works plans [Reserve Fund Studies], as they will be known, must be implemented, so far as practicable.

new owners suing the owners corporation

This brings us to our friends in the USA where similar provisions have led to new owners suing the owners corporation for not implementing the plan when funds have not been saved progressively for replacements and renewal.

The proviso, ‘so far as practicable’, will be used in defence but it won’t cut it when the reason is to keep the levies the same as last year when the price of just about everything else in the world is going up.

The first to be bitten might just be strata inspectors who fail to notice that difference between the amount in the capital works fund and the recommended closing balance in the study.

What does this mean?
Potential buyers of a condo re-sale had better examine the Status Certificate and the attached audited financial statements. If the information enclosed is accurate, then buyer beware.

(Most of the time, unfavourable information is stated but it is hidden or difficult to read. A lot of times it could be argued that it is deliberately difficult to understand.)

If the Status Certificate contains false or misleading information, a new buyer may have grounds for a lawsuit.

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