Question: We took over from a failing committee and have been working to bring the body corporate back on track. Looking at our sinking fund forecast, we are behind in both funds and maintenance. Where do we start?
We took over the committee responsibilities for our small strata in a ‘coup’ two years ago after several years of neglect by our predecessors. Since then, we have been getting the body corporate back to a safe and compliant physical state, plus getting the finances into good order. We’ve started looking at the 10 year Sinking Fund Forecast. We are approximately halfway through and although our sinking fund is now in a very good state, the numbers suggest that the extra funds that should have been set aside per the recommendations of the report have either been diverted away or were never saved in the first place.
First instincts are get a new Quantity Survey with some early financial stacking in the first two or three years to allow us to catch up financially, whilst prioritising the maintenance accordingly. With our efforts over the past two years, we’ve arrested the general decay, but I was alarmed at the assertion in a recent webinar that the paint may no longer be providing protection. We are now concerned about the potential consequences of delaying repainting for too long.
The previous committee seem to have lost records of when the last painting was done, although it does look in fairly new condition. I’ve also reached out to the company who possibly painted the building last time to fill in some of the blanks.
The last Quantity Survey was a simplistic ‘fill in a template and we’ll crunch it through our app’ process done by an interstate firm, so – coming from a technical engineering background – I’m not over-confident in the recommendations.
What are all my options to continue to get the body corporate back on track? Are we likely to find ourselves in violation of Queensland or Federal laws around these issues?
Answer: Neglect of common property will find the committee and the BC liable for damages to owners whether that be loss of rent, loss of asset value or safety issues etc.
It is fantastic to see that you have formed a proactive and diligent new committee who are determined to see the state of the corporate body improve from a level of neglect. This is the first step in terms of becoming a compliant body corporate. Under the BCCM Act & Regs for QLD, neglect of common property will find the committee and the BC liable for damages to owners whether that be loss of rent, loss of asset value or safety issues etc.
The BCCM requires a body corporate to operate a sinking fund and the BC must allow for raising a reasonable amount of capital for spending in this financial year and at least the next 9 years of expenditure. As such it is an expectation that the body corporate has reasonably forecast the next ten years of major maintenance and capital replacement. As the industry standard for Sinking Fund Forecasts is a layout of 15 years’ worth of expenses, to ensure the above provision is satisfied, a Body Corporate will need to reassess their forecast or 10 year budget, every 5 years. It is crucial that the body corporate always be able to view the anticipated expenses of the next 9 years for budgeting and levy purposes.
The building inspector completing this report should be able to determine the state and age of the paint of the exterior and appropriately forecast the year it should fall due. Similarly, they can look for signs that would indicate possible waterproofing failure, such as concrete spalling and suggest you engage a remedial specialist.
A sinking fund forecast should be a comprehensive document but simple enough for a layman to read if they were to pick it up. Rather than a templated sheet to fill in, the forecast should be tailored to the nature of the BC and the materials, construction type, age and appearance of the scheme.
This post appears in the July 2022 edition of The QLD Strata Magazine.
Dakota Panetta
Solutions in Engineering
E: dakotap@solutionsinengineering.com
P: 1300 136 036
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