- What is a Sinking Fund Plan?
- Why use Sinking Fund Plan Pty Ltd to complete your inspection and complete a report and budget?
- What are the obligations of the Owner's Corporation?
- Can the Owner's Corporation vary a Plan?
- What if the Owner's Corporation do nothing?
- What happens if the Owner's Corporation get it wrong?
- What are the benefits in a sinking fund plan?
- What are the common areas?
- What are the likely or possible defects in a strata building?
A Sinking Fund Plan is a professional report with a budget designed to identify defects within a building so that repairs can be completed in time and prevent later more expensive remedial works.
The Plan will also allow the Owners Corporation to budget in advance so that there are sufficient funds to cover the works. This will cover actual and expected expenditure. Currently more than 85% of Strata Management Sinking Funds are under-capitalised. There is estimated to be a $10 billion shortfall Australia wide and $3 billion in NSW.
Sinking Funds are held by Owners Corporations to finance major repairs and maintenance such as painting, roof
repairs, lift overhauls, fencing and replacement of carpets.
When an expert is engaged, then other not so obvious items may be found.
An experts report will also identify what works are required in sequence so that later works do not damage recent repairs. An example, is not to replace flat roof membranes just before installing scaffolding for painting as the scaffold will likely damage that membrane. This knowledge and expertise can save thousands in inadvertent and costly repairs as a result of inappropriate sequences.
The new provisions of the Strata Schemes Management Act 1996 came into effect in February 2005 (Section 75A). It requires the Owners Corporations of all new Strata Schemes from February 2005 onwards to begin planning for their Sinking Fund needs for the following 10 years. The provision stipulates that the Plan is to commence at the first AGM and be completed by the second AGM. The Plan is to be reviewed and adjusted by no later than the fifth AGM. This adjustment or review will allow for inflation and costs adjustments for trades at that time. It will also allow for a more current condition on latent defects.
The requirements for a Sinking Fund Plan are in 4 Phases
Strata Plan no. 50,000 and above (not including those already covered by Section 75A) will be required to commence 10 year sinking fund planning from July 1st, 2006.
Strata plan no. 30,000 - 49,999 to commence from July 1st, 2007.
Strata plan no. 10,000 - 29,999 to commence from July 1st, 2008.
Strata plan no. 1 - 9,999 to commence from July 1st, 2009.
The Plan will also allow the Owners Corporation to budget in advance so that there are sufficient funds to cover the works. This will cover actual and expected expenditure. Currently more than 85% of Strata Management Sinking Funds are under-capitalised. There is estimated to be a $10 billion shortfall Australia wide and $3 billion in NSW.
Sinking Funds are held by Owners Corporations to finance major repairs and maintenance such as painting, roof
repairs, lift overhauls, fencing and replacement of carpets.
When an expert is engaged, then other not so obvious items may be found.
An experts report will also identify what works are required in sequence so that later works do not damage recent repairs. An example, is not to replace flat roof membranes just before installing scaffolding for painting as the scaffold will likely damage that membrane. This knowledge and expertise can save thousands in inadvertent and costly repairs as a result of inappropriate sequences.
The new provisions of the Strata Schemes Management Act 1996 came into effect in February 2005 (Section 75A). It requires the Owners Corporations of all new Strata Schemes from February 2005 onwards to begin planning for their Sinking Fund needs for the following 10 years. The provision stipulates that the Plan is to commence at the first AGM and be completed by the second AGM. The Plan is to be reviewed and adjusted by no later than the fifth AGM. This adjustment or review will allow for inflation and costs adjustments for trades at that time. It will also allow for a more current condition on latent defects.
The requirements for a Sinking Fund Plan are in 4 Phases
Phase 1
Strata Plan no. 50,000 and above (not including those already covered by Section 75A) will be required to commence 10 year sinking fund planning from July 1st, 2006.
Phase 2
Strata plan no. 30,000 - 49,999 to commence from July 1st, 2007.
Phase 3
Strata plan no. 10,000 - 29,999 to commence from July 1st, 2008.
Phase 4
Strata plan no. 1 - 9,999 to commence from July 1st, 2009.
Firstly we have the building expertise and knowledge to identify building defects. The Company is backed with over 20 years in inspecting and reporting on the condition of buildings. This includes defects in new as well as older buildings up to 100 years old.
Older buildings have different characteristics that must be understood when undertaking repairs. Also heritage listed buildings require a specialist understanding. Councils may impose reasonable restrictions on remedial works so that the character of the building is retained. Further, with fire upgradings, it may be desirable to retain most of the original features and source an alterative solution. Also, with many buildings particularly those constructed prior to 1970, they can be affected by salt deterioration in coastal areas. The salt deterioration can be obvious not only in concrete spalling repairs but deterioration of brickwork and other building materials.
Where required, we have previously given evidence to the Courts and Department of Fair Trading as building experts. This expertise covers the majority of unit type construction and their defects. The Courts require specialist knowledge of building construction and the remedial works required. The Courts also require a specific methodology to be employed to substantiate claimed defects. Our staff are familiar with these requirements and have been successful in many of the matters that we have been involved with.
An accurate report on the condition of the building is essential before any budgeting can be undertaken. It is easy for an estimator to cost repainting, but that will not help if there are any defects within the building that must be addressed. Past history is not a guarantee that the future will be the same, particularly when budgeting for repairs.
Older buildings have different characteristics that must be understood when undertaking repairs. Also heritage listed buildings require a specialist understanding. Councils may impose reasonable restrictions on remedial works so that the character of the building is retained. Further, with fire upgradings, it may be desirable to retain most of the original features and source an alterative solution. Also, with many buildings particularly those constructed prior to 1970, they can be affected by salt deterioration in coastal areas. The salt deterioration can be obvious not only in concrete spalling repairs but deterioration of brickwork and other building materials.
Where required, we have previously given evidence to the Courts and Department of Fair Trading as building experts. This expertise covers the majority of unit type construction and their defects. The Courts require specialist knowledge of building construction and the remedial works required. The Courts also require a specific methodology to be employed to substantiate claimed defects. Our staff are familiar with these requirements and have been successful in many of the matters that we have been involved with.
An accurate report on the condition of the building is essential before any budgeting can be undertaken. It is easy for an estimator to cost repainting, but that will not help if there are any defects within the building that must be addressed. Past history is not a guarantee that the future will be the same, particularly when budgeting for repairs.
The duties of the Owners Corporation, including Committee members and building managers is to actively maintain the common property areas so that they are safe, structurally sound, properly maintained to an acceptable standard and retained in reasonable appearance. The Owners Corporation owe a duty of care to the lot owners as well as any visitors to the property. Section 62 (1) of the Strata Schemes Management Act 1996 states that "an Owners Corporation MUST properly maintain and keep in a state of good and serviceable repair the common property and any personal property vested in the Owners Corporation".
Section 62(1) of the Act states that the Owners Corporation can decide by special resolution to maintain in a state of serviceable repair particular items of common property that they consider appropriate. However this resolution cannot affect the safety of any building, structure or common property or detract from the appearance of any property in the strata scheme.
This means that a strata plan must be in place, but the committee may decide for example to defer some items such as repainting from the projected 3 years to 5 years.
This means that a strata plan must be in place, but the committee may decide for example to defer some items such as repainting from the projected 3 years to 5 years.
A Lot owner within the Strata Scheme would be able to apply to the Consumer, Trader and Tenancy Tribunal for an order instructing the owners corporation to meet it's obligations.
A recent court case (Seiwa Pty Ltd V Owners Strata Plan 35042) involved an owner's corporation being successfully sued by a lot owner for not maintaining what was common property. The lot owner claimed that the owners corporation failed in it's duty of care to maintain the common property and was in breach of the Strata Schemes Management Act 1996, section 62.
The lot owner successfully sued for damages of $150,000.00 for the loss of use of the unit, and depending whether the owners corporation complied with a mandatory injunction that the balcony be rectified within 3 months, another $250,000.00 in compensation to Seiwa in respect of a reduction in value of the unit should the works not be completed within that time.
The Owners Corporation also had to pay all costs associated with the case.
The matter involved the rusting of structural steel posts which provided the framework enclosing a balcony that forms part of Seiwa's unit, and the waterproofing membrane that seals the floor of it's external patio. The membrane did not prevent water from the surface of the patio entering into the unit.
The structural steel posts formed part of the external wall of the Seiwa unit and substantially coincided with the external boundary of the lot marked of the plan. The lot boundary was the inner surface, and the steelwork was outside the lot and thus was common property. A similar order was made in respect of the waterproof membrane.
This is an example where having specialist advice can be invaluable when undertaking a sinking fund plan to ensure that "honest" mistakes, oversight or nor being aware of the magnitude of a problem are not made and that the risk of litigation is reduced.
The Owners Corporation in the above matter faced with a difficult task of completing substantial specialist works within 3 months of the order or pay $250,000 in compensation as well as the cost of works at a later date.
What was not recorded was the fact that similar problems existed within other units and ongoing substantial costs would be incurred to return to the building back to a safe condition.
The lot owner successfully sued for damages of $150,000.00 for the loss of use of the unit, and depending whether the owners corporation complied with a mandatory injunction that the balcony be rectified within 3 months, another $250,000.00 in compensation to Seiwa in respect of a reduction in value of the unit should the works not be completed within that time.
The Owners Corporation also had to pay all costs associated with the case.
The matter involved the rusting of structural steel posts which provided the framework enclosing a balcony that forms part of Seiwa's unit, and the waterproofing membrane that seals the floor of it's external patio. The membrane did not prevent water from the surface of the patio entering into the unit.
The structural steel posts formed part of the external wall of the Seiwa unit and substantially coincided with the external boundary of the lot marked of the plan. The lot boundary was the inner surface, and the steelwork was outside the lot and thus was common property. A similar order was made in respect of the waterproof membrane.
This is an example where having specialist advice can be invaluable when undertaking a sinking fund plan to ensure that "honest" mistakes, oversight or nor being aware of the magnitude of a problem are not made and that the risk of litigation is reduced.
The Owners Corporation in the above matter faced with a difficult task of completing substantial specialist works within 3 months of the order or pay $250,000 in compensation as well as the cost of works at a later date.
What was not recorded was the fact that similar problems existed within other units and ongoing substantial costs would be incurred to return to the building back to a safe condition.
An adequately maintained property is worth more at resale than a poorly maintained unit. People are aware of makeovers on buildings that have major issues that will cost a fortune to fix. So the kitchen may be great, but the levies will drain you. Where there is a professional Maintenance Plan in place, then future purchasers will feel confident in buying. Where people are happy to stay, then it is always reassuring that a professional has covered all the major issues.
That partly depends.
Plans registered before 1 July 1974 in theory include the lot as a centre line through a concrete floor and wall. A balcony may be within the responsibility of the lot owner.
Plans registered after that date, the boundaries of the cubic space forming are the boundaries of the lot. The internal walls are within the lot.
Plans registered before 1 July 1974 in theory include the lot as a centre line through a concrete floor and wall. A balcony may be within the responsibility of the lot owner.
Plans registered after that date, the boundaries of the cubic space forming are the boundaries of the lot. The internal walls are within the lot.
Concrete spalling is common in buildings prior to 1990 and requires professional treatment. If properly treated, then the repairs can be permanent.
Water seepage into a building
Cracking to concrete will result in water seepage to areas below.
Water penetration and likely damage.
Water seepage and staining issues
Dampness into a building, causes and remedial works
Deterioration of building materials usually as a result of salt deterioration in coastal areas.
Overall condition of a building and estimates to repair
This is an example of cheap sub-standard repairs where expert advice on roof issues has not been sourced.
Water seepage into a building
Cracking to concrete will result in water seepage to areas below.
Water penetration and likely damage.
Water seepage and staining issues
Dampness into a building, causes and remedial works
Deterioration of building materials usually as a result of salt deterioration in coastal areas.
Overall condition of a building and estimates to repair
This is an example of cheap sub-standard repairs where expert advice on roof issues has not been sourced.