This article discusses strata capital works funding, explaining whether current owners must contribute to future roof replacement and how capital works planning obligations apply.
Question: Do current strata owners have a legal or other obligation to fund future roof replacement, even though they likely won’t be around when it’s needed?
I am a strata owner and secretary of a small three lot strata plan for over 50s on Sydney’s northern beaches. Our buildings are 21 yr old two-story townhouses with an expected life of 40 – 60 years. All three resident owners are over 70.
The roofs are in excellent condition and are well maintained. Our capital works fund does not include an annual contribution towards the roof replacement cost in 20 to 40 years. We will have died or moved on to care facilities by then, so what obligation, legal or otherwise, do current owners have to fund the roof replacement? We’ve received estimates of $130k and acknowledge that, upon sale, any amounts in our capital works fund account are included in the settlement price.
Answer: Plan, plan and plan more then look to the future.
In NSW, the obligation is to plan for future capex which means a capital works fund plan. The legislation says that owners must annually consider the capital works plan and how best to fund it.
NSW owners, you are fortunate. This is exactly the way funding legislation should be. Plan, plan, and plan more, then look to the future. Be very precise about it. Work on it as much as you can, and then, each year, consider your best way of funding the plan. It’s your choice.
In this situation, it’s the owners corporation’s choice of whether you make regular contributions to a capital works fund, whether you decide to do it by a special levy at the time these works happen, whether you choose to borrow at the time they happen or, and very importantly, the fourth consideration, which is a mix of those three. It’s a matter of what is appropriate in your situation.
What you’re doing sounds completely right. You’re considering what your future needs are. You’re looking at the type of owners in the type of situation you are in. You’re considering how you should best fund that. Every owner corporation is different in this respect. Congratulations!
This post appears in the March 2025 edition of The NSW Strata Magazine.
Paul Morton Lannock Strata Finance E: paul@lannock.com.au