Tagged: Cap Works Budget
13/08/2019 at 11:59 am #40515
I am an owner in a large strata scheme (more than 100 owners) in NSW.
We recently held our AGM where I questioned the size of the proposed Capital Works ‘Budget’: almost $1.1M was nominated with approx 20 separate items of expenditure identified.
In the past, our Strata Committee has been unable to organise the simplest items of maintenance (the usual annual Capital Works spend is about $150,000, at best), so I questioned how the Committee intended to achieve such an ambitious maintenance program over the remaining months of the budget year.
There was a mute response from the Committee before the Strata Manager jumped in and said: “It’s only a Budget and does not have to be spent; it just identifies items of future expenditure.”
Well that was news to me. I always thought Budgets were there to establish a Cap Works spending program for the upcoming year (or what remains of it if the AGM is held late in the year). When I looked at the NSW SSM Act 2015, I found Section 79 refers to ‘Estimates’ (Budgets?) that apply to anticipated spending “in the period until the next general meeting”.
Division 2 79 Estimates to be prepared of contributions to administrative and works
(6) An owners corporation of a large strata scheme must include in the estimates prepared at an annual general meeting:
(a) specific amounts in relation to each item or matter on which the owners corporation intends to spend money, or on which the owners corporation is aware money will be likely to be spent, in the period until the next annual general meeting, and
(b) a note as to any difference between the estimates and the 10-year plan for the works fund prepared under this Division and the reasons for the difference.
Can anyone else confirm this interpretation – or provide some other confirmation that a Budget applies only to an Owners Corp’s current financial year?
I also note sub para (b) which requires owners to be notified of “any difference between the estimates and the 10-year plan for the capital works fund”.
That has never happened at our AGMs despite Cap Works spending being consistently out of whack with our 10-year Cap Works Plan.
Thanks in advance.
13/08/2019 at 12:15 pm #40537
- This topic was modified 1 week, 5 days ago by Jimmy-T.
I’m not sure what the issue is here. Was the “budget” intended to raise the money required to complete the works? Were levies raised accordingly?
By the way, as you indicated yourself, the year referred to is the period until the next AGM, not the remainder of the calendar or financial year
And please don’t copy and paste material that shows up here with all sorts of coding, if you can avoid it.13/08/2019 at 5:50 pm #40558
Normally, the levies proposed for the capital works fund is not the spend budget, but a quantity if money to account for current (this year) and future expenditure.
Its unlikely your building will need 20’items replaced in a year. So this sounds to me that what you saw was a capital works plan. Every OC is required to create one, but there is no compulsion to implement it.
Most OCs adopt one of two ways to fund capital works.
1) Don’t raise much CWF levies each year, so the “bank” is fairly bare. When large expenses come up, raise special levies.
2) Raise levies each year, building up a bank so that when large expenses come up, the OC has money on hand.
Its up to all lot owners to decide which method they want to use.
As for what money is spent. Unless a motion is passed limiting the Strata committee in the amount they are authorised to spend without reference to the owners, the committee can spend any amount of money on the maintenance of the building.14/08/2019 at 7:09 am #40594
Thanks to you both.
To clarify: Our Owners Corp has always had 10-year Cap Works Plans professionally drafted. Those Plans established a schedule for annual Levies and an annual spend that maintained a healthy balance at all times. Our current Committee, however, continually ‘resets’ the Cap Works Plan by ordering maintenance work without any reference to the Plan. I understand the Plan needs to be flexible but our Committee in recent years has never explained to our AGM what maintenance work it intends to have carried out in the course of the upcoming year – or explain why other work scheduled in the 10-year plan has been deferred. We have a very healthy balance in the Cap Works Fund only because a lot of the work scheduled in the 10-year Plan has never taken place.
As noted in my original post, our current Committee produces ridiculous ‘Budgets’ for work that will never take place and then proposes wildly fluctuating Cap Works Levies to suit, again without reference to the 10-year Plan. The Committee then decides maintenance matters on an ad hoc basis at their meetings. No one has any faith that the Committee members know what they are doing but they form a voting block at the AGM and get reelected.
Surely, the intention of the SSM Act is for each AGM to agree the Cap Works that should be carried out IN THE FORTHCOMING YEAR (before the next AGM) and agree the BUDGET JUST FOR THOSE ITEMS? (As part of that process, the Committee has to confirm the proposed annual spend is within the capacity of the 10-year Plan and the proposed Levy is in line with that Plan.)
How can we get our Committee to produce a REALISTIC BUDGET FOR ANNUAL CAP WORKS at an AGM instead of the fantasy schedule we have been given (which no one believes will, or should, happen) and a Levy that is set arbitrarily?
Is it enough to quote Section 79 of the SSM Act?