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We recently had a ~$50k special levy for major works to our 12 unit building. The money has gone to the Administrative Fund as per legislation.
However, our strata manager is making progress payments from the Sinking Fund. Hence the Administrative Fund is very healthy, but the Sinking Fund will be almost half a million in deficit if this continues. What is the correct way to make progress payments? I would have assumed directly from the Administrative Account where the money is held. But our strata manager states that “As these are major remedial works they must come from the sinking fund.”
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Am not sure which State you are in …..
The Admin Fund generally supports the day to day running of the property and day to day maintenance of common property, whereas the Sinking Fund supports major works and renovations.
The Special Levy would have been raised because your scheme did not have enough money in the Sinking Fund to cover the cost of the renovation it. Once raised it should have been put in the Sinking Fund rather than the Admin Fund.
In NSW in special circumstances money from the Admin Fund can be used to help support the Sinking Fund but the money should be paid back within 3 months. However, this transfer of money from the Admin Fund to the Sinking Fund is forbidden in QLD.
Generally the Admin Fund should not contain more than 10% over the expected annual running costs of the Admin Fund. The Sinking Fund is the correct fund for accumulating excess money ready for use for future capital expenses.
Strata finance and loans can also be considered if Special Levies are too burdensome.
See here for NSW: https://www.strataplus.com.au/resource/sinking_administration_fund/
I generally agree with PS. However, I (as Treasurer) keep more like 30% of the Admin fund budget rather than 10% as a buffer against anything unexpected from the Admin fund. That is not necessarily a capital expense eg. could be a legal expense for some matter that has to be attended to urgently. Our sinking fund does also have a healthy contingency component.
In the ACT there is nothing to say we can’t carry a comfortable surplus.
Meanwhile, here in the ACT, the appropriate resolution would do the following: 1) raise the levy, 2) allocate it to the sinking fund, and 3) amend the sinking fund plan so that the extra money corresponded to a plan to spend that amount on the stated purpose.
In the circumstances, I would say that it was obvious that this amount of money was levied for this purpose. So long as that amount was spent on that purpose, it doesn’t matter where it was put. If it was put in the Admin fund rather than the sinking fund, don’t worry about that and just spend the amount from the Admin fund for the reason the levy was raised.