This article discusses afford capital works plan, explaining how strata schemes can balance legal maintenance obligations with owners’ financial capacity when 10-year plan costs cause hardship.
Question: What happens if half of the owners in a 13 unit block can’t afford to meet the suggested 10 year plan payments?
What happens if half of the owners in a 13 unit block can’t afford to pay for the repairs suggested in the first year of the 10 year plan. Our 10 year maintenance plan states $92,000 has to be raised.
Our levies have had a 95% rise in 12 months. We have several pensioners and low income earners in the block who struggle to pay the current fees, not to mention any further increases.
How do we keep the fees and reserve fund payments at a manageable amount for everyone? We feel that, with the current increases, we are on track to achieve a small surplus over the next few years.
Why do we need to cause such financial distress to these struggling lot owners?
Consideration should be given to the practicalities of achieving maintenance objectives without causing financial difficulty for owners.
Section 100(2A) applies in this instance whereby a designated strata company (that is, a strata scheme with 10 or more lots) is required to have a 10-year plan that sets out common property maintenance requirements as prescribed by Regulation 77.
A key aspect of Section 100(2A) is that the 10-year plan is revised at least once in each 5 years, and extended to cover the 10 years following each revision. It’s important to note however that there is no specific time frame on implementation of a 10-year plan once it has been composed (or obtained from a specialist plan provider) and adopted.
When using a 10-year plan for budgeting and future planning purposes, consideration should also be given to the practicalities of achieving those maintenance objectives without causing financial difficulty for owners. There doesn’t need to be a significant and immediate increase in levy contributions if longer term planning and implementation can be done to achieve the goals set out in the plan. Of course, if urgent or potentially dangerous, maintenance items are identified then those items should be addressed as a matter of priority.
This section of the amended Strata Titles Act 1985 was designed to eliminate past apathy by some strata companies by providing a framework to plan ongoing preventative maintenance and improvements. A balanced approach is needed to raise the necessary funds over time for the identified maintenance and common property improvements, coupled with consideration about the financial ability to actually do those things without causing undue financial hardship for owners.
In the circumstance described, if the levy increase was included in the meeting agenda, then that could have been amended at the meeting. Section 102(4) of the Strata Titles Act 1985 permits your strata company to vary its approved budget by ordinary resolution at a general meeting (or by ‘vote outside of a general meeting’, as per Regulation 89 of the Strata Titles General Regulations 2019).
This post appears in the February 2022 edition of The WA Strata Magazine.
Andrew Chambers Chambers Franklyn Strata Management E: andrew@chambersfranklyn.com.au P: 08 9200 4200