Sinking Fund Plans
WHY DO YOU NEED A SINKING FUND PLAN?There are compelling reasons why property owners should have a maintenance sinking fund plan for their building. A sinking fund plan can be used to ensure that sufficient building maintenance funds are available to avoid unnecessary delays in carrying out urgent building maintenance and repairs. A lack of advance planning for major works may result in owners being charged unexpected special levies.
There is a liability risk for buildings without a maintenance plan or sinking fund. Poorly maintained properties can pose a health and safety risk which can increase the insurance liability on the building which in turn can result in lowering the property value impacting on the future sale price.
A Sinking Fund is set up by the Owners Corporation to cover the cost of future maintenance expenses, which can include painting of the property, replacement of common property, compliance upgrades, etc.
WHAT IS INCLUDED IN A SINKING FUND PLAN?
A Sinking Fund Plan lists all major capital items that will require maintenance, repair or replacement over the next 10 years and up to 30 years, including the current estimated repair costs which allows for inflation on the cost of future works.
An Archicomm report includes the following:
- A Ten-Year Maintenance Plan Budget compliant to Part 3 – Division 3 Owners Corporations Act 2006
- A current condition report listing items including a forecast of their life expectancy
- A budget table listing recommended annual contributions from owners towards anticipated expenses over the next 10 years and/or up to 30 years
- A first year individual lot liability breakdown for the accrual of levies as per the registered Plan of Subdivision.
Archicomm also recommends that a re-inspection of the building be carried out every five years to assess actual expenditure versus the predicted maintenance plan, together with a follow up building condition assessment of the entire property.
