10-Year Maintenance Plans for Sectional Title Schemes: What you need to know to secure your investmentLiezel Weber
Buying any property comes with the responsibility to maintain the property to protect and sustain your investment.
In Community Schemes, the general decay of the buildings (even a single building or unit) and Common Property, if not maintained over time, not only erodes the asset value of those units within the Community Scheme but also the properties surrounding it.
Community Schemes routinely undergo vital maintenance-related projects, ranging from paint projects to waterproofing projects, to the repair or replacement of common property facilities and/or equipment.
Legislators used the above reasons as justification to making it compulsory for Trustees to prepare a sound maintenance repair and replacement plan (“MRRP”) that is reviewed annually and adjusted regularly to meet the Body Corporate’s needs and financial capabilities. A Community Scheme is compelled by law to have a MRRP in place for major capital maintenance items and projects. Prescribed Management Rule 22 of the Sectional Title Schemes Management Act Regulations essentially requires Bodies Corporate to formulate a written 10-year plan which includes:
- the major capital items expected to require maintenance, repair and replacement within the next 10 years;
- the current condition of all those items;
- the time when those items will need to be maintained, repaired or replaced;
- the estimated cost of each of those items;
- the expected life for each of those items once they have been maintained, repaired or replaced; and
- any other relevant information.
Many Community Schemes often found themselves without sufficient funds to perform these projects, forcing them to either delay the project – leading to further corrosion of the building – or to raise a special levy to finance the project. The latter puts individual unit owners in a position where they will have to make an additional payment over and above their normal monthly levies, which can be substantial, depending on the cost and urgency of the maintenance related project.
Why your Community Scheme needs a MRRP
The main purpose of the MRRP is to force Bodies Corporate to plan better for maintenance expenditure of a capital nature. Not only does this allow a Community Scheme to anticipate major expenditures in the future, but it also allows for considered financial planning. In so doing maintain asset value and not create prejudice to those unit owners that cannot pay their special levy upfront.
Advantages of a MRRP
- It allows for better financial planning of Body Corporate resources. Unit owners also are in a better position to plan their monthly expenses such as levies and not overburdened by the need to raise capital upfront.
- Levies can be kept stable with only marginal year-on-year increases as opposed to substantial increases – or the need to raise a special levy – when major maintenance repairs must be done.
- Better transparency of Body Corporate affairs.
- Unit owners can hold the Trustees accountable as they are responsible to prepare the MRRP.
- Trustees are better prepared for short, medium- and long-term maintenance requirements.
In the absence of enough capital in the reserve fund and not wanting to burden their unit owners with an unaffordable and immediately payable special levy, when immediate maintenance related projects are required, the Scheme has the option of project funding.
STS offers bespoke project funding packages that aim to provide Community Schemes and their unit owners with the flexibility to choose their funding period and ensure that it can commence with the maintenance related project when required, without having to collect special levies upfront.
We, in partnership with BC Funding Solutions, specialise in facilitating project funding to Community Schemes, offering various lending solutions to clients that require funding for maintenance and/or capital projects, but whose unit owners cannot immediately raise the necessary upfront cash. This gives Community Scheme’s peace of mind whilst they save towards a 10-year maintenance plan