Sinking Fund Forecasts are regulated in Queensland by “The Body Corporate and Community Management Act 1997”. At the Annual General Meeting the owners are presented with the body corporate budgets of income and expenditure to approve based on the budget and to:
- Fix the contributions that are levied.
- Set the dates for payment of the levies.
DEVELOPING THE SINKING FUND FORECAST
The following is taken into consideration when preparing a Sinking Fund Forecast.
- List all the common property
These may include letterboxes, intercom, lighting, swimming pools, pool heaters and equipment, gardens, pergolas, driveways, waterproof membranes etc.
- Estimate when repairs will be needed
Estimate when repairs will be needed.
Decide on time frame for repair work.
Review guarantee or warranty information, where available, to establish a time line for items such as repainting, automatic doors, intercoms.
- Estimate costs
Investigate cost of replacing items and future repair costs.
- Consultation
It is important that whoever is preparing the Budget that they must consult with the On-site Manager, Committee member or Body Corporate as they will have important information as to the history of the building and knowledge about future planning.
- Sinking Fund Excess
Body Corporate Manager is to be aware if the Committee has any special requirements for a minimum balance in the sinking fund.
Review the Sinking Fund levy to establish if the levy is realistic for the type of property.
Body Corporate Manager is obligated to inform the committee of the excess funds projected in the Sinking Fund, whilst at the same time coming forward with recommended options such as:
– Obvious omissions.
– Reduce levies (Not recommended unless the Sinking Fund Forecast is unrealistic).
– Freeze the levy increase or total levy for a certain amount of years.
– Reduce the levies in proportion to an increase in the administration expenditure.
– Undertake whatever upgrades / renovation works required and have the Sinking Fund Forecast reviewed and strike new levies accordingly.
- Sinking Fund Shortfall
Body Corporate Manager is to be aware if the Sinking Fund is going to have a shortfall and what items are specifically attributing to the shortfall.
Body Corporate Manager is obligated to inform the committee of the shortfall in funds projected in the sinking fund, whilst at the same time coming forward with recommended options such as:
– Increase the levies to cover the shortfall.
– Introduce a special levy.
– Establish the main cost items and look at remedial options, for example painting: Establish if the building re-painting can be extended and whether as possible wash-down be utilized, Investigate the painting option where the building is painted but the payment schedule is extended over a 4/5 year period. These options could also apply to common area internal upgrades.
MAJOR LONG TERM ITEMS
The following items are deemed to have a life time overall life and are not included in the Sinking Fund.
– Lift maintenance contract. Note: Some contracts include for motor/ pulley upgrades.
– Overhead and underground electrical cables.
– Electrical distribution gear.
– Air-conditioning ductwork and platforms.
– Water/gas/fire piping.
– Roof tiles, sarking and insulation.
– Cement screeding to floors and plastering to walls.
– Garbage chute liners.
– Pool Structure (Excluding finishes).
Contact Seymour Consultants today for all your Sinking Fund Forecast needs.