How to create a 10-Year Maintenance, Repair and Replacement Plan
The reserve fund, admin fund and levies all play an important role in creating a successful and sustainable 10-year maintenance, repair and replacement plan for bodies corporate and homeowners’ associations.
The admin fund is used for day-to-day expenses such as repairs and maintenance, while the reserve fund is set aside for major expenses that are expected to occur in the future, such as roof replacements or paving projects. The levies are fees charged to each owner in order to fund these two accounts.
By having a healthy admin fund, a well-funded reserve fund, and appropriate levies, trustees can adequately plan for and carry out necessary maintenance and repairs over the long term. This ensures that the property remains in good condition and property values are preserved, leading to a successful maintenance plan.
To get a custom 10-year maintenance, repair and replacement template for your body corporate, click here.
To learn how to calculate a reserve fund for your body corporate read our guide “How to create a body corporate reserve fund”.
How to create and allocate your admin fund
A body corporate should create their admin fund by carefully estimating their annual expenses and establishing a budget that includes all necessary costs. This budget should take into account routine maintenance expenses such as landscaping, cleaning, and repairs, as well as administrative expenses such as insurance, legal fees, and accounting services.
To create the admin fund, the body corporate should assess how much money they need to raise from their members and set the levies accordingly. It is important to ensure that levies are set at a reasonable level to avoid overburdening members, while also making sure that there is enough money in the fund to cover all anticipated expenses.
Expenses that should be allocated to the admin fund include all routine and ongoing expenses that are necessary to keep the property in good condition and functioning properly. These may include cleaning and maintenance of common areas, payment of utilities such as water and electricity, and repair and replacement of common property assets such as lifts, security systems, and communal furniture.
In addition to regular expenses, the admin fund should also be used to cover unexpected or emergency expenses, such as storm damage, vandalism, or urgent repairs that cannot wait until the next budget cycle. By properly managing the admin fund and allocating expenses appropriately, a body corporate can ensure that their property is well-maintained and that they are able to respond to unexpected events when they arise.
How to calculate your levies
A body corporate can calculate their scheme’s overall levy contribution by adding up the levies for each lot and common property portion, plus any additional charges that are applicable. The overall levy contribution is the total amount of money required to fund the body corporate’s operating and maintenance expenses.
To calculate the levies for each lot, the body corporate should start by determining the lot entitlements for each unit. Lot entitlements are usually set out in the strata scheme’s by-laws and determine each owner’s share of the scheme’s overall property value. The levies for each lot are then calculated by multiplying the lot entitlement by the total amount of money required to fund the scheme’s expenses.
The levies for the common property portions are calculated in the same way, by using the appropriate entitlements for each area of common property. The total amount of money required to fund the common property expenses is then divided by the sum of all common property entitlements to arrive at the levy rate per unit of entitlement. This rate is then multiplied by the entitlements for each lot to arrive at the levy amount for each common property portion.
Once the levies for each lot and common property portion have been calculated, any additional charges that are applicable, such as late payment fees or interest on outstanding levies, should be added to the total. This will give the overall levy contribution for the scheme.
It is important to note that the calculation of levies should be done carefully and accurately, as errors can lead to underfunding or overfunding of the scheme’s expenses. By using lot and common property entitlements and ensuring that all relevant expenses are included in the levy calculation, a body corporate can ensure that their scheme’s overall levy contribution is fair and equitable for all owners.
