Question: We have a Financial Summary Proposal document, not an official Capital Works Fund schedule. Instead of obtaining a Capital Works Fund schedule, can we choose to do our own maintenance?
All 5 owners of our Strata Plan are on the Owners Corporation. Our Strata Plan has a 2017 Financial Summary Proposal document, not an official Capital Works Fund schedule. This Financial Summary Proposal document was put together remotely, not via a visit on site, and is not in sync with reality. It proposes maintenance/replacement in the future of items that are already falling apart.
I have sent a proposal requesting the Owners Corporation pay an experienced builder to write a Capital Works Fund schedule. Our Strata Manager obtained a quote for $750. I am suspecting it will be voted no despite all owners agreeing that the existing document is out of date. The Owners Corporation simply doesn’t want to spend money.
I have repeatedly explained it is the legal requirement of the Owners Corporation to maintain and fix things and now 2 owners are taking it upon themselves to repair items which they expect the builder will put on the capital works fund list (eg. repair a retaining wall that was quoted at $15,000 by a qualified builder).
What do I do if my proposal to have a proper Capital Works Fund schedule drawn up is voted down? How do I stop owners doing major repairs themselves?
Answer: The Act requires all Owners Corporations to establish a capital works fund plan.
The Legal requirement
In October 2015, the NSW Government implemented the new and revised Strata Schemes Management Act 2015. This Act requires all Owners Corporations to establish a capital works fund plan. A capital works fund plan (CWFP) sets out all anticipated major expenditure. The legislation recommends the report be updated at least every 5 year (See s80(3) of the Act). So clearly there is a legal requirement to have a CWFP and this cannot be voted down.
Preparing a CWFP allows an Owners Corporation to predict and budget for the future maintenance of their property. This allows an Owners Corporation to ensure that they have enough money saved to cover the cost of major works, such as repainting the property or roof repairs, without having to raise a special levy or having to cut back or defer other maintenance work. Having these funds available in turn ensures that the Owners Corporation can properly maintain the building(s) and grounds, preserving the value of each unit and the property as a whole.
The Plan must include all anticipated, major expenses to be paid from the capital works fund over the following 10 years. Once the CWFP has been prepared, the Owners Corporation must refer to it when developing its budget and setting the capital works fund levy each year, under section 79(5) of the Act. The Owners Corporation must consider what work is needed to maintain the property, the CWFP provides a guide to this and the likely associated costs.
Who Should Prepare the CWFP?
While the basic principles of CWFP are quite simple, few individuals have the breadth or depth of experience to accurately assess the state-of-repair of the vast range of fixtures and fittings in most buildings, estimate their lifespan and then predict their maintenance and/or replacement cost over 10 years. Fewer still have the time to research all these issues. I would not do my own CWFP for my scheme purely because of the risk of litigation should I get something wrong. Plus, the owners corporation’s insurance will not cover or protect me from being sued by a disgruntled owner who believes I have not allowed for the correct funds to meet the outgoings for capital works.
Therefore, it makes good sense to only use correctly insured fully trained building industry professionals with decades of experience in property maintenance. That have access to a vast, continuously updated knowledge-bank of maintenance trends, costs and techniques designed to maximise the lifespan of your property.
I hope this answers all your queries but of great concern is owners undertaking the works themselves. Check with your strata insurer to find out what risk they are bringing on themselves and possible breaches of the owners corporations insurance policy.
This post appears in the July 2021 edition of The NSW Strata Magazine.
Peter Berney Solutions in Engineering E: peter@solutionsinengineering.com P: 1300 136 036