Mandatory requirements for sinking fund
3 July 2009
Owners of most strata schemes in New
South Wales will have to prepare a 10-year sinking fund plan as part of
changes to the Strata Schemes Management Act 1996.
Fair Trading Minister Virginia Judge said
the amendments, which came into place this week, would encourage owners’
corporations to be prudent in building up resources for long term
“The NSW Government started with
legislative reforms in February 2005 when owners of all new strata schemes
were required to develop 10-year sinking fund plans,” she said.
“Almost all strata schemes are now
covered by the law. The only strata schemes not obligated to develop sinking
fund plans are two-lot strata schemes, where buildings are detached and the
owners vote unanimously not to establish a sinking fund.
“By developing a sinking fund plan,
owners get a clear picture of what sort of expenditure they may have to face
in coming years.”
Ms Judge said the laws were also designed
minimise situations where sudden, one off, levies
have to be imposed on lot owners in the event of unexpected costs.
“Owners can choose to pay with smaller
regular payments that are less onerous rather than a single large payment,”
“Owners’ corporations can prepare the
plan themselves or can have it prepared by independent experts.
“There are businesses that specialise in
the preparation of sinking fund estimations, but owners’ corporations are not
under any obligation to use external consultants.”
Ms Judge said owners’ corporations should
have a 10-year plan in place by their second annual general meeting.
“I urge all owners’ corporations and
strata managing agents to be fully aware of their obligations regarding the
development of sinking fund plans,” Ms Judge said.
“This is about making sure owners’
corporations are well prepared to meet future maintenance costs.”