In July 2009 all NSW Strata Schemes were required by law to have a 10-year capital works fund plan in place.
We receive many enquiries about 10-year capital work fund plans.
There are a combination of legislative provisions which are relevant. Section 75A of the Strata Schemes Management Act 1996 (“the Act”) explains the requirement to, and how to create a 10-year capital work fund plan. Section 75(4) of the Act provides:
When estimating the Capital Works Fund forecast, an Owners’ Corporation is required to prepare a plan to take into account anticipated major expenditure identified for the 10-year period to which the plan relates.
The interpretation of this section is pivotal in the determination of whether or not an owners’ corporation should have funds or raise funds in accordance with their plan.
A Capital Works Fund Plan is set up by the Owners Corporation typically to cover the costs of future capital expenses which include for example painting, common area carpets, roofing and guttering, lift overhaul etc. The Owners Corporation can prepare the plan or engage an outside expert, such as us, to have one prepared.
The report will list numerous items which require long term maintenance or full replacement. We then decide on a cyclical time frame for repair, maintenance or replacement of these items and produce a table with the annual contributions required.
There are a combination of legislative provisions which are relevant. Sections 74, 79 and 80 of the Strata Schemes Management Act 2015 explains the requirement to prepare a 10-year capital works fund plan.
Whilst there are no penalties in the legislation for Owners’ Corporations who do not have a 10-year plan, it is widely considered a signature of a well-managed complex that is meeting its financial obligations. The impact here materialises with a well maintained building, sound building finances and buyers/bidders confident to engage in the sales process
Two Lot schemes that are physically detached buildings and no buildings are situated outside the Lots of the
Scheme may be exempt from the requirements for a sinking fund plan if decided by a unanimous vote.