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Capital works fund 15year plan
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11/05/2018 - 7:20 pm
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we just had our AGM yesterday. Our strata manager did a 15 year capital works fund plan 4 years ago and we review the plan every year. This year we need to put in $110k(we have 121 units) to bring the capital works fund balance to $238k according to the schedule. I proposed we only put in $10k this year. The strata manager said if we don’t put in the amount according to the schedule, then we are not compliant with the section 184 of the strata management act. The strata manager said our property valuation may be affected when the potential buyers of the units in this building know we are not compliant with the s184.

I don’t trust this strata agent, but everyone else follows him. 

Is what he said correct? Do we have to stick with the schedule he did for us?

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11/05/2018 - 9:36 pm
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There seems to be considerable confusion here.  Section 184 refers to the certificate that the strata scheme or manager must supply to prospective buyers.  It does indeed refer to the capital expenditure estimates (among many other things) and whether or not they are funded.
But here’s my problem with this.  The Act requires that you have a capital expenditure estimate for 10 years, not 15 (see section 74, below) , and that while you MAY review it every year, you are only required to review it every five years. Also Section 81 (also below) requires the strata scheme to fund the estimates. 
You don’t say how many units you have in the block but $284k sounds a lot.  It’s probably too late to do anything this year but BEFORE your next AGM you could lobby other owners to demand a revision of the plan to 10 years and to leave funds in there to cover that.  You would have to do this long before the AGM to give the SM the chance to revise his figures.  This is something you could and should raise with the committee in the interim.
FYI, even if you could get an EGM called and have the 15-year plan pegged back,  you would not be able to retrieve the excess funds as that would require a unanimous vote and you probably aren’t going to get that.
74   Capital works fund

(1) Establishment of fundAn owners corporation must establish a capital works fund.

(2) Amounts payable to fundAn owners corporation must pay the following amounts into the capital works fund:

(a)  the contributions levied on, and paid by, owners for payment into the fund,

(b)  any amounts paid to the owners corporation by way of discharge of insurance claims, unless paid into the administrative fund,

(c)  any amounts paid to the owners corporation under Part 11,

(d)  any amount received by the owners corporation that is not required or permitted to be paid into the administrative fund,

(e)  the proceeds of any investment of the fund.

(3)  An owners corporation may also pay the following amounts into the capital works fund:

(a)  any income of the owners corporation,

(b)  any amount that may be, but is not required to be, paid into the fund under this Act.

(4) Amounts payable from fundAn owners corporation may pay money from its capital works fund only for the following purposes:

(a)  payments of the kind for which estimates have been made under section 79 (2),

(b)  payments made in accordance with this Division on a distribution of a surplus in the fund,

(c)  payments of amounts for the purposes of Part 11,

(d)  the transfer of money to the administrative fund or to pay expenditure that should have been paid from the administrative fund.

(5) ExemptionAn owners corporation for a strata scheme comprising 2 lots need not establish a capital works fund if:

(a)  the owners corporation so determines by unanimous resolution, and

(b)  the buildings comprised in one of those lots are physically detached from the buildings comprised in the other lot, and

(c)  no building or part of a building in the strata scheme is situated outside those lots.

81   Owners corporation to set contributions to administrative and capital works funds

(1)  The owners corporation must determine the amounts to be levied as a contribution to the administrative fund and the capital works fund to raise the amounts estimated as needing to be credited to those funds.

(2)  That determination must be made at the same meeting at which those estimated amounts are determined.

(3)  The owners corporation must levy on each person liable for it such a contribution.

(4)  If the owners corporation is subsequently faced with other expenses it cannot at once meet from either fund, it must levy on each owner of a lot in the strata scheme a contribution to the administrative fund or capital works fund, determined at a general meeting of the owners corporation, in order to meet the expenses.

(5)  A contribution is, if an owners corporation so determines, payable by the regular periodic instalments specified in the determination setting the amount of the contribution.

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11/05/2018 - 9:57 pm
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Thanks Jimmy!

we have 121 lots in the building, 3 lifts, no gym no pool. The SM made 15 year projections for us. The numbers are very scary, $110k pa for next 2 years, then gradually increase to $180k in 15 years’s time.

i’ll plan early for this. Many thanks

Sir Humphrey

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14/05/2018 - 8:23 pm
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Does the plan have any documentation to justify the cost projections? It should have a schedule showing the years in which certain expenses are expected to happen and some reason for the magnitude of that expense. So, for example, some bit of equipment might need a round of routine maintenance every 5 years and the cost of that is probably known from the most recent time it was done. Reasonable assumptions about inflation can be made. 

A decade or so ago we had no end of trouble because a managing agent said at an AGM and it was put in the minutes that we might need $100,000 in each of the next 5 years. It didn’t happen. It was nonsense but the consequence is that we still have people anxious about our sinking fund even though our 2015-25 plan is very well documented (even if this ex-treasurer says so himself). Our biggest non-routine expense is $30K likely once every few decades and we don’t have many of the expenses that other owners corporations do have. 

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20/05/2018 - 9:01 pm
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clockwise said
 This year we need to put in $110k(we have 121 units) to bring the capital works fund balance to $238k according to the schedule. I proposed we only put in $10k this year. 


That is less than a thousand dollars per lot – seems pretty normal (if not on the low side) given you must be a reasonably sized property with 121 units and three lifts! 

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