In 2015 SSKB surveyed Resident Unit Manages to ask them what their top five challenges were.
The answer came back – working with body corporate/owners corporation committees to approve budgets for building improvements.
We asked Chris Nezmah, general manager of Star BMS for practical tips and suggestions to present a compelling business case to committees and we share them below.
Buildings in strata schemes are no different to cars, in that their value will constantly depreciate, and will at some stage require money to be spent overhauling them.
While Resident Unit Managers often have the managing rights over a scheme, a RUM’s strata scheme management knowledge can greatly vary. But one critical element of the job is the need for RUMs to work with committees to budget for improvements.
This need to budget for improvements often falls flat when the lines between people’s roles in a scheme become blurred. Body Corporate Committees are responsible for raising the administration fund (dealing with minor repairs/rates) and the sinking fund (capital repairs and non-recurrent items). Committees often divest the task of determining how to use the sinking fund to the RUM. But when the time comes to recommend how the fund should be used, RUM’s often struggle to get their recommendations across properly. Some RUM’s are unsure whether this task is their responsibility.
A RUM’s job requires an interest in keeping the common property looking good. To achieve this, RUM’s must be able to demonstrate to a committee exactly why money should be spent on improvements. Common property should firstly be assessed. Ask yourself – what sort of condition should this common property be in? Is the carpet in the lobby worn? Is the pool gate rusted? Is the paint on the building faded? If you conclude simple maintenance won’t suffice, you might need to consider refurbishment and if this is the case, how to pay for it.
Your assessment of improvements should be put in order of importance. This order depends on the requirements of your scheme. A hotel needs its public areas such as the lobby and the entrance to be in good condition for people to want to stay there. A retirement village looking to entice new owners needs to ensure safety equipment was up to date and looking good.
Once you have prioritized what needs to be done, you need to get estimates. If the pool tiles are cracked, talk to different pool companies and get different quotes on a refurbishment. It might be a more effective use of funds to look at replacing all the tiles, rather than each individual tile as is necessary. Armed with your best quote, an organized RUM could obtain a copy of the sinking fund forecast and determine if the fund covered the cost of the refurbishment, or whether there would need to be an extra charge to cover it.
Communicating to committees is vital, as the RUM is the one reporting on what needs to be done. The RUM doesn’t control the money or the approval of its use, so you need to be able to effectively present the required information to the committee so they can make the appropriate decision on allocating funds. If major expenditure is required, the presentation needs to be simple to understand from the initial phase, and to make it obvious it will require some time and effort.
To make an effective presentation to a committee to gain approval for use of funds, a bit of effort goes a long way. Just talking and saying “we need to replace the pool tiles” won’t cut it – committees need to be convinced! Take photos of the pool tiles and combine it with your quotes from the pool company, and an analysis of the sinking fund forecast in a brief presentation. Visually presenting this information can make a world of difference to committee members, although it should be noted this can be done without writing a 300-page memorandum!
Committee members might easily be perturbed by the amounts of money which might be required. Spending half a million on refurbishing a building could be more money than they have ever spent, so it is important to provide an analysis of the sinking fund and forecast and whether or not the improvements are covered by it. Updating a building is like keeping a car in good condition, but on a macro level – that requires you to make your own fund forecast, estimating the cost of tyres and perhaps a new clutch.
If you need advice on how to make recommendations to committees, or on how to best budget for improvements in your scheme, contact your SSKB Community Manager. We can advise and guide you through the process to gain the best outcome for your strata scheme.