We recently received the following question about a 10 Year Capital Works Fund Plan. Peter Berney, Solutions in Engineering has provided the following response.
Question: We don’t want an ‘out of the box’ 10 Year Capital Works Fund Plan. How do we go about incorporating our ideas like adopting sustainable energy options, installing charging facilities for owner’s electric cars into the plan?
Our strata have recently had a 10 Year Capital Works Fund Plan prepared by a consultant. It includes most of the practical considerations our strata committee (and any future managing agent) will need to consider and fund during the forthcoming decade.
It is evident that the plan has been based on the consultant’s Capital Works template as there is very little about its projected repairs and maintenance that our particular to our building and grounds. Neither does it reflect any improvements to the property that most owners would consider desirable in the plan’s extended timeframe.
There is solid evidence that adopting alternative and sustainable technologies like solar panels and battery storage, combined with the latest and most energy efficient fittings significantly reduces operating overheads. New purchase plans also reduce initial capital expenditure, plus following a forever shortening payback (break-even) periods actually returns financial savings well within the 10-year scope of the plan. Initiatives that, in addition to the desirable medium-term savings on operating expenditure, also upgrade outdated and inefficient common property to current technology that adds value to each unit owner’s investment.
Before the Capital Works plan goes to our AGM what is the best way to have inclusions like adopting sustainable energy options, installing charging facilities for owner’s electric cars, replacing inefficient (and costly) lighting and air-conditioning in common areas, installing rainwater tanks and other desirable cost-saving environmental upgrades to ageing infrastructure so our plan can reflect reality rather than a formula.
Answer: The items mentioned e.g. sustainable energy options, installing charging facilities for owner’s electric cars etc should have been included in the 10 Year Capital Works Fund Plan.
Capital Works Funds were introduced via revisions to the Strata Schemes Mgmt. Act on the 30th November 2016 and specifically states that the owners can have any items of their consideration included in the Capital Works Fund. They replace the Sinking Fund Plan which required a Plan of anticipated major expenditure… over the 10-year period” This is pretty broad and could be thorough or very simple. The new requirements under the Strata Schemes Management Act 2015 s 80 still require a “Plan of anticipated major expenditure… over the 10-year period” but now must include:
- Details of the work
- Timing and anticipated costs
- Source of funding
- Anything else you want
- Owners Corporation must attempt to implement the plan
For the first time, the law is specific about what a Capital Works Fund Plan must contain, and; that it MUST be implemented. This weeds out the miser owners & lazy Capital Works Fund report operators. A precise list of expenses, with timing included e.g. replace water pumps – $4,218 in three years’ time, $4,766 in seven years, $5,385 in eleven years, etc. For each expense, list how the expense is calculated:
- Size or quantity of item
- Rate to maintain/replace
- Anticipated lifespan
- New non-recurrent expenditure, tailored to the property e.g. upgrade to a more impressive foyer, replace Linoleum with Calcutta pearl marble etc.
It should be tailored to the building in other ways:
- Type of construction
- Construction technique
- Recent sinking fund expenditure
- Existing issues/defects
Most of this information needs to come from the person who knows the most about the building e.g. the Treasurer or Building Manager and they should try to meet with the inspector onsite before the inspection commences to impart this knowledge and furnish the professional inspector with as much property information as possible. This will help ensure a more accurate report upon completion. That said, the items mentioned e.g. sustainable energy options, installing charging facilities for owner’s electric cars, replacing inefficient (and costly) lighting and air-conditioning in common areas, installing rainwater tanks and other desirable cost-saving environmental upgrades to ageing infrastructure should have been included in the Capital Works Fund Report.
If it’s not too long since the report has been received by the strata committee, then they may be able to request that the report is amended to include these items or worst case scenario the may be an administrative fee to amend the report. Remember you usually get what you pay for, so when looking to enlist the services of any contractor ensure that the strata committee take into consideration their experience, length of time in business, are a member of the industry body ‘Strata Community Association’ in your state/territory and most importantly not just accept the cheapest quote.
Happy to answer any further queries and to finish up in summary:-
- Capital Works Fund Plan must have details of proposed works/maintenance
- Relevant timing/anticipated costs of works/maintenance
- The source of funding for proposed works/maintenance
- Can include any works/maintenance item the Owners Corporation sees fit to add
- Include any matter prescribed by the Reg’s for this purpose
- The scheme must implement the CWFP as far as is practicable
- NSW: Q&A Capital Works Fund – What Do We Need To Do Now?
- NSW: Electric Vehicle Charging in Strata [Report]
This post on appears in Strata News #155
This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.
Are you interested in more information about 10 Year Capital Works Fund Plan or information particular to strata legislation in your state or territory? Visit Maintenance and Common Property OR NSW Strata Legislation pages.