Question: Owners voted to approve spending for an item at an amount greater than the budget amount. Funds are available, but do we need to raise a special levy?
If owners vote to approve capital expenditure materially more than that allowed for in the sinking fund budget for that item and
- the aggregate of other expenditures in the budget won’t be equivalently underspent, and
- there are adequate funds available, albeit earmarked in the 15-year sinking fund forecast for maintenance;
is there a requirement for either:
- a special levy or
- amending the budget to reflect the increased approved expenditure? If so, do we need to increase the contribution amount of the budget accordingly?
Answer: A special levy would not necessarily be required, although it’s fine to have one if that’s how owners want to fund the project.
If you have the money in the bank, there is no reason why you can’t vote to spend it. Presumably, you have been saving it for just this kind of purpose.
No. A special levy would not necessarily be required, although it’s fine to have one if that’s how owners want to fund the project. Regarding the budget amendments, if you approve works via motions at an AGM then yes, you would amend the budget to include those works, but you don’t have to raise the contributions if you have the money available to cover the costs.
Owners must remember that it is not bad if your sinking fund goes down. The sinking fund is designed to fluctuate as you spend money on the building. You just need to find the balance between your spending today and your potential spending in the future, and considering and applying the different payment options for each project is a good way to do that.
This post appears in Strata News #712.
William Marquand Tower Body Corporate E: willmarquand@towerbodycorporate.com.au P: 07 5609 4924