Now that all new and/or large apartment buildings have to have a sinking fund, the great unanswered (and largely unasked) question is, what happens to all the money while you’re waiting for the building to fall apart?
For instance, the big mega-complexes sprouting up everywhere could easily be salting away a quarter of a million bucks every year. Where it goes and how it’s used is up to the owners corporation or, in the first instance, the Executive Committee.
A good strata manager will find the account that pays the best interest while still having a reasonable amount of accessibility in the funds. However, a less excellent operator will use an account that makes their lives easier – with direct billing and electronic transfers – even if it doesn’t earn as much interest.
So what are the restrictions on what you can and can’t do with your building’s money? The answer is – not a lot. Theoretically, if you can garner enough support from your fellow owners, you could emulate World War II veteran Alan Inglis, stuff the lot in a plastic bag, take it down to Randwick and place it on a hot tip.
Less adventurous owners may decide that, since the money isn’t supposed to be used for a while, it might be better placed in a series of long and medium term funds that earned better rates of interest than basic bank accounts (if not the TAB). There are lots of reliable schemes that give higher returns for those periods when you don’t need the money anyway.
If you are interested in how your hard-earned and sadly missed folding stuff can better pay its way, you might want to check out the Owners Corporation Network, a non-profit organisation of apartment-owners and EC members set up to improve the running of strata buildings. They recently held a seminar on the topic and should have material on their website www.ocnaustralia.com. It does not, I’m assured, have racing tips.