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Hello All,
Quick question, for reasons I can only speculate about, our strata manager paid for damage to common property partly from the admin fund and partly from the capital fund.
They eventually lodged an insurance claim after insisting, and it was approved.
Now the total amount received was credited back into the admin fund and not both, leaving the capital fund in the same financial position it was 12 months ago.
I want the allocation of the received money to go back in the same amounts as they were borrowed, but the strata manager is making claims that this goes against regulation.
Does this sound right?
Personally, I want to grow the capital fund as ours has always been extremely weak, so would like to put any money back into it that was borrowed.
What should I do?
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I want the allocation of the received money to go back in the same amounts as they were borrowed, but the strata manager is making claims that this goes against regulation.
This (below) is the relevant section of that Act. It’s a very loose piece of legislation so I would be interested to hear your SM explain how a decision to refund the money in the amounts it was drawn goes against the regs.
76 Use of administrative fund or capital works fund for purposes of other fund(1) This section applies if the owners corporation of a strata scheme comprising more than 2 lots—
(a) transfers money from the administrative fund or capital works fund to the other fund, or
(b) pays money from the administrative fund or capital works fund for expenditure that should have been paid from the other fund.
(2) The owners corporation must, within 3 months of the transfer or payment, determine, by resolution at a general meeting—
(a) whether the money, or part of the money, should be reimbursed to the fund from which it was transferred or paid, and
(b) if the owners corporation determines that part or all of the money should be reimbursed—the amount to be—
(i) transferred from the administrative fund or capital works fund to the fund from which the transfer or payment was made, or
(ii) levied as a contribution to the fund from which the transfer or payment was made.
(3) Section 81(3) and (5) apply to a contribution determined under subsection (2)(b)(ii).
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
As Jimmy points out, it isn’t hard (after recent amendments to the Act) to use money from both accounts, to carry out a job, and not reimburse the amounts exactly, but to swap some money from one account to the other. But if not reimbursed exactly, the Owners need to approve this within 3 months at a general meeting. A building might ignore the 3 month deadline if they believe the owners would approve this anyway, at the next AGM say – especially if the amount in question is small relative to the overall financial position of the building.
Also, the use of both accounts might be valid. Repairs are generally paid for from the Administrative fund. But improvements are generally paid for from the Capital Works fund. So, for example, if a window is damaged and replaced, and it was an old window without safety glass, the new window must have safety glass, which can be considered as an improvement, so (partially) a CW expense. Or if the building’s front door is replaced with a better one, then some of the cost could, or perhaps should be a CW expense, the proportion depending on the replacement/improvement factor.
And no-one seems to be too worried about using the “right” fund – the main issue is with investors, who have different tax claims whether there a Admin/CW source – they care! But generally only if the amounts are significant when spread among lot owners.
In your case, it may be a better solution to propose a motion a the next AGM (or an amendment to the motion setting the amounts of levies), to increase the CW levy, and perhaps reduce the Admin levy correspondingly.
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