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Approval of a Ten Year Maintenance Plan for Sectional Title

As you may know by now, the Sectional Titles Schemes Management Act, 8 of 2011 (the Act) requires all Sectional Title Schemes to have a separate reserve fund and the money in that fund must be used to finance a ten year maintenance plan, repair and replacement plan (“maintenance plan”).

What does a Maintenance Plan Contain?

The Maintenance Plan contains a list of all the major capital items of common property for that particular scheme. Of course there will be differences in the details of each scheme’s plan, so the Body Corporate cannot use a generic plan. The list must describe the present condition of each item, estimate when it will need attention and what that cost will be, and when the item will need attention again.

When is the Maintenance Plan revised?

Prescribed management rule (“PMR”) 22 under the Act, which provides for the maintenance plan, states that the plan becomes effective once it has been approved by the Body Corporate at a General Meeting. If one looks at the item added. So the question raised is, how often must the plan be revised and approved and when?

Taking the above into account, it seems logical that the plan should be approved every time it is updated. It should be updated every time a maintenance item is completed or it could be updated every time a capital item is added to the plan, for example when an improvement is made to the Common Property.

The Maintenance Plan and Budgets are Interdependent.

The list of obligatory items for the annual general meeting (“AGM”) agenda does not include approval of the plan, but prescribed management rule 26, which deals with financial record keeping, does. Additionally, the Trustees must prepare a report specifically on the implementation of the maintenance plan and present it at the AGM Meeting.

The budgets are approved at the AGM Meeting and the owners need to understand what maintenance has been completed and what is still required so that they can make an informed decision regarding approval of the reserve fund budget, as well as the maintenance items included in the administrative fund budget. They will have this information from the presentation of the updated plan, the Trustees report on the implementation of the plan as well as the budgets and analysis of the amounts in the annual financial statements.

The approval of the maintenance plan and both the reserve and administrative fund budgets at the AGM go hand in hand, so the logical time to approve and update maintenance plan is at the AGM Meeting.

Article Courtesy of Paddocks

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