Review of the Unit Titles Act 1972 - Discussion Document, May 2006
<< Previous | Contents | Next >>
5.5 Fairer Financial and Asset Management
The body corporate is responsible for the maintenance and management of common property in the unit development. The way in which the body corporate handles this responsibility affects all unit owners, their enjoyment of their property and the value of their asset. This differs from individual owners of fee simple property whose decisions about their property do not directly affect anyone else.
A unit title development is an asset that must be well managed and maintained as a whole to keep its value. It is clear that this is not always the case. A unit title development differs from individual properties held in fee simple title, as the financial and asset management decisions of one unit owner can directly affect all the other owners.
The proposals in this section cover:
- long-term maintenance plans and funds
- professional standards for body corporate managers.
(a) Long-term financial and maintenance planning
Issues
The Act covers the setting up of maintenance and capital funds by the body corporate. However, it does not cover a supporting financial planning and reporting system for the establishment, use and management of such funds.
Bodies corporate who have not planned ahead often respond to large or unexpected capital or maintenance expenses by raising large, one-off levies. This can put a lot of pressure on the unit owners at the time because they happen to be the owners when something expensive needs to be done. By planning and budgeting for future costs, unit owners would contribute more evenly over time, and over the life of the development.
There will be two compulsory funds and further optional funds. Money in these funds will be held in a trust account, which will be audited and reported on regularly. The accounts are: - a compulsory operating account
- a compulsory long-term maintenance fund
- an optional contingency fund
- an optional improvement fund.
|
Operating Account
The body corporate must have an operating account to pay for: - professional services such as secretarial, accounting and legal
- governance and technical reports that are required by law
- regular maintenance such as lawn-mowing, cleaning, lift service contracts and air-conditioning service contracts.
|
Long-term Maintenance Fund
The body corporate must have a long-term maintenance fund to pay for items in the long-term maintenance plan. |
Contingency Fund
The body corporate can choose to have a contingency fund to pay for items it has not budgeted for, such as unexpected maintenance or legal costs. |
Improvement Fund
The body corporate can choose to have an improvement fund to pay for work that upgrades the property. The work should improve the development rather than merely maintain it. Examples are shops and tourist buildings that need to be attractive and contemporary to draw in customers. |
Long-term Maintenance Plan
To support the setting up and management of the funds, a unit development must have a long-term maintenance plan. The purpose of the long-term maintenance plan will be to identify and plan for future maintenance needs, and to estimate how much it is likely to cost. The scope of the plan will depend on the size and complexity of the development. For example, very small and standalone developments will have simpler plans than a large 150-unit development. The plan will cover things like: - exterior painting
- repairs to the exterior of the building
- work on the structure of the building and the foundations
- maintenance or replacement of major infrastructure such as water, wastewater and stormwater pipes, collection and treatment devices, electricity and telecommunications cables, air-conditioning, fire detection and protection, lifts and stairs.
|
Effect of proposals
Bodies corporate will be able to manage both short- and long-term maintenance of their properties more responsibly, and for the long-term good of the development as a whole.
Owners' interests and the value of their investment will be protected.
The cost of long-term maintenance will be spread more evenly over time and owners will not face large, one-off levies.
| Do you agree with the proposals for funds and long-term management plans? Is there anything else we should consider? If you disagree, please explain why. |
| What are the advantages and disadvantages of the proposals for you? |
| Will the proposals have any financial implications for you? If so, please explain, giving as much information as you can. |
We have defined the words in bold in the glossary.
(b) Supporting body corporate managers
Issue
We have heard that there are varying levels of competency among body corporate managers.
| Encourage self-regulation of the body corporate management profession by professional institutes and bodies. |
Effect of proposal
Self-regulation by professional bodies will improve the performance and accountability of body corporate management so that it won't be necessary to introduce any form of occupational regulation. This will keep costs down for the profession and their clients.
| Do you agree with the proposal for body corporate managers? If you do, is there anything else we should consider? If you disagree, please explain why. |
| What are the advantages and disadvantages of the proposal for you? |
<< Previous | Contents | Next >>