What is a maintenance fund?
An owner’s corporation’s maintenance fund is effectively a deposit which exists to allow an owners corporation to pay for repairs and maintenance of a building, in accordance with the property’s maintenance plan.
The maintenance plan is a 10-year plan which is administered by the owners corporation, and covers a number of maintenance requirements. This includes major capital items for repair and replacement over the 10-year period, the present condition of the items, when items or components will require repair or replacement, the estimated cost of this repair or replacement, and the expected life of those repaired or replaced components. This plan must detail anticipated repair and replacement costs and timing for all ‘major capital items’ over the next 10 years. To be implemented, it must be approved by an ordinary resolution at a general meeting.
Maintenance which the owners corporation must undertake includes corrective maintenance (regular things such as keeping gutters clean), predictable maintenance of major capital items (such as replacing the lift), and emergency corrective maintenance (things which must be repaired immediately for health, safety and security reasons – such as replacing the roof if it is blown away in a storm).
Maintenance funds are compulsory for prescribed owners corporations over a certain threshold. The threshold for these ‘prescribed’ owners corporations is having 100 lots of more, or alternatively, raising $200,000 or more in annual levies. For properties which do not satisfy these requirements, the raising of a maintenance fund is optional.
The maintenance fund is raised through three main avenues:
The maintenance fund levy (owner’s contribution), is kept in the owners corporation management fund account, and is often administered by a Community Management company such as SSKB, on the behalf of the owners corporation.
The owners corporation committee must approve the initial maintenance plan at the Annual General Meeting. The maintenance plan can be reviewed through the financial reports, which shows where money is being spent. This is to ensure the maintenance fund has sufficient finances to provide necessary and reasonable spending for the upcoming financial year, or the items listed above.
This is also necessary to ensure an amount is reserved to cover likely spending for at least 10 years after the current financial year, for different types of maintenance.
Payments out of the maintenance fund can only be made where it aligns with what is included with the maintenance plan. The only exception for this is where payments are approved by special resolution, or for extraordinary payments for urgent matters. This would only occur to effect repairs in compliance with a court order, or for emergency repairs where health and safety is at risk.
Owners corporations may request SSKB to recommend an independent contractor to prepare a maintenance plan for their property.
If your property is looking for advice on what a maintenance fund is, and how best to manage it, talk to SSKB. We can provide you with expert advice and tailor it to the details of your individual property to ensure you get the best outcome.