As a strata owner, expenses can creep up on you unexpectedly unless your Owners Corporation has a good 10-year capital works fund plan in place.

What makes a good plan?

A good 10-year capital works fund plan will comprehensively document how an Owners Corporation will repair and maintain common property for the next decade, as well as budget for the appropriate funds to cover these works.

Expenses typically budgeted in the plan are the painting of the building, refurbishing the driveway, landscaping upgrades, replacing fencing and carpets , plus other common property items like the roof and guttering, or the overhaul of the lift. It is good practice to revise the plan every five years to account for inflation and additional expenses for inclusion.

Benefits to Strata Owners

Due to the numerous advantages of having a 10-year capital works fund plan, 89% of strata owners view such a plan to be mandatory for all strata schemes, regardless of the lot numbers in the scheme, according to a University of Technology Sydney research study conducted by Hera Antoniades.

Strata owners said in the study that the plan allowed them to live in a well-maintained building, made units easier to sell later, and improved the budgeting process for expenses.

With an agreed plan in place, Owners Corporations can more effectively manage the capital expenses of the scheme. More importantly for individual strata owners, a plan lowers the risk of having insufficient funds available when expensive building repairs that may not have been foreseen without a plan need to be carried out.

Legislative guidance

The 10-year capital works fund plan started becoming an essential part of strata scheme administration starting in 2009, when the NSW Government made changes to the Strata Schemes Management Act 1996 regarding capital works funds.

The legislation now requires an Owners Corporation established after July 2009 to develop a 10-year plan for their capital works fund. Section 75A features the relevant clause.

Section 75A: Owners Corporation to prepare 10-year capital works fund plans

    • (1) This section applies to owners corporations established on or after the commencement of this section.

(2) An owners corporation to which this section applies is to prepare a plan of anticipated major expenditure to be met from the capital works fund over the 10-year period commencing on the first annual general meeting of the owners corporation.
(3) The initial plan is to be finalised by the end of the second annual general meeting of the owners corporation.
(4) The plan is to be reviewed and (if necessary) adjusted no later than at the fifth annual general meeting of the owner’s corporation.
(5) An owners corporation to which this section applies is to prepare a plan as referred to in subsection (2) for each 10-year period following the period referred to in that subsection and is to finalise and review the plan in accordance with the requirements of subsections (3) and (4) at the corresponding annual general meetings in the relevant 10-year period.
(6) An owners corporation may engage expert assistance in the preparation of a plan under this section.
(7) The regulations may extend the operation of this section to all owners corporations or to such classes of owners corporations established before the commencement of this section as are specified in the regulations.
(8) A regulation referred to in subsection (7) may make necessary modifications to the application of any provision of this section to an owner’s corporation established before the commencement of this section.

How much should a plan allot?

According to the NSW Fair Trading website, the amount required for the 10-year capital works fund plan will vary between schemes depending on their age and needs : “For instance, newer schemes may require relatively less money than the plans for older schemes with more repair work due. Each capital works fund plan should reflect the individual needs of its scheme.”

Because of its importance and need for in-depth consultation with strata owners, the 10-year capital works fund plan must be approved by strata owners at an annual general meeting.

Penalties for not preparing a plan

Strata owners concerned that their Owners Corporation is stalling on preparing a capital works fund plan, may refer the matter to the NSW Civil and Administrative Tribunal (NCAT). NCAT can issue an order instructing the Owners Corporation to meet its obligations.

We recognise that creating or reviewing a 10-year capital works fund plan may seem a little daunting for Owners Corporations, especially those responsible for older buildings who are required to assess the state of a range of fixtures and fittings, estimate their lifespans, and then predict their maintenance and/or replacement cost over the next 10 years.

Luckily there are businesses that specialise in preparing capital works funds for Owners Corporations.

For more information on capital works funds and 10-year strata scheme capital expense planning, please contact Shane Ball [email :], Licensed Strata Manager and Managing Director at PRECISION STRATA.