All too often when undertaking site inspections, we leave the site with the impression that the Owners Corporation is not adequately maintaining their investment which is, more often than not, due to a funding issue. This will likely affect the sale value of the lots and increase the risk of large special levies when the works can no longer be ignored.
Why is this?
The main reason is simply, in many instances, having the owners invest their money into an account they don’t control, and when it’s not mandatory for the owners to invest their funds over time, it can be like getting blood out of a stone. The result being that property maintenance decisions are made reactively rather than proactively.
New legislation only requires 51 lots or more to approve a maintenance plan, which is a positive step forward for the industry, however many properties less than 51 lots still require funding for major works such as passenger lifts, roof replacement, external painting and other plant and equipment.
Encourage Owners to take action
We advise all Owners Corporations to take action, be aware of their buildings and specific needs, and develop a maintenance plan or ensure some form of funding is in place regardless of the number of lots of their building/s. We encourage the following:
Explain the benefits to the Owners
- Owners to have a maintenance inspection undertaken.
- To identify the known and potentially unknown cost cycles (the earlier the better).
- The committee to have a “Maintenance Plan Review Meeting.”
- The committee should ask questions and understand the plan.
- Don’t set and forget and be proactive.
- Review the plan and budget at least every 3-5 years.
- Long term needs of building assessed and funded.
- Potential problems may be identified when plan is being prepared or reviewed.
- Allows works to be undertaken when needed and as funds are available.
- Promotes a view of a well-maintained building and prudent Owners Corporation.
- A fairer system of funding for all stakeholders.
- Special levy is typically not required.
- Financial certainty for all owners.
- Add value to their investment.
- Promotes saleable units and liveable Owners Corporations.
In late 2019 Mabi was engaged to work with an Owners Corporation committee to inspect the property for defects and establish a long-term maintenance plan. What we discovered was a perfect example of the importance of proactive maintenance and establishing a fund as early on as possible, regardless of the size or number of lots.
The development in question consisted of 35 lots, as such did not require a maintenance plan under the previous legislation, nor does it require one under the newly adopted legislation as of 1st
The development was 45 years old and had common property infrastructure such as a passenger lift, four separate metal roofs, timber balustrades to balconies and common walkways and a known issue with subsidence to the under-croft car park.
Upon completion of the defect survey the following was determined:
- The passenger lift required immediate overhaul and was unsafe
- Structural engineer advice determined the brick ties had corroded and parts of the brick façade required re-building
- Concrete spalling to the cantilevered concrete balconies was significant
- Three of the four roofs require replacement within 5 years
- A number of timber balustrades had completely rotted, and the steel supports were corroded
- One balustrade had recently fallen out of the building leaving a tenant with a balcony with no fall protection
- Timber windows were also rotted and had not been painted
- Geotechnical engineer had determined a serious subsidence issue within the under croft.
Without allowing for all other required maintenance (such as internal hallway painting and carpet replacement, essential safety measures, mechanical, CCTV and other normal maintenance costs cycles), the total for the urgent works exceeded $1.4 million required within the next 5 years. The average cost per unit for the next 5 years exceeded $10,000.
This is a perfect example of why an Owners Corporation must consider the specifics of their building/s and not just the number of lots. The Owners Corporation had zero funds set aside for maintenance and no formal or informal plan. The owners were reluctant to have the works carried out as they had no money, and no decisions were ever made until it was too late.
Whilst this case study is a ‘horror story’ it does illustrate that nothing lasts forever, and a more pragmatic approach must be taken when maintaining common property and how it is funded.
Not all Owners Corporations will require substantial repairs as per this example, however many lot owners will be dealt a blow when they realised the sums of money they are required to individually contribute often coupled with the fact that they are effectively recouping funds that should have been contributed from day one and potentially from past owners.
The earlier a maintenance plan budget is set up, the easier the process and the fairer the financial requirements are for all stake holders over the long term.
Example of concrete spalling to concrete ceiling with no action taken by Owners Corporation for 15 plus years
Example of timber fascia that has rotted past the point of repair