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I’ve got an AGM coming up.
The proposed Capital Works Fund (CWF) budget forecasts shows a balance at the end of the year of $190k. The CWF 10 year plan, drawn up in 2014) shows a balance of $670k (and increasing year on year)- due in the main to a lift upgrade costing ~$500k. As the Plan shows a balance increasing year on year the expenditure on the lifts can’t simply be an expenditure being brought forward from future years. Is there a requirement to actually keep (within reason) to the EOY balances as forecast in the Plan?
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To my knowledge there is no requirement as such. The budget projections are more of an advisory nature rather than mandatory.
However, if your scheme does not have enough money when the lift needs replacing then a Special Levy and/or a strata loan will be required.
The 10 year CW plan must be reviewed at least every 5 years so your scheme’s CW plan is due for a review. This hopefully will focus your committee’s attention to the deficit that your scheme is facing.
There is no legal requirement to either prepare a professionally assessed capital works fund (formerly the sinking fund) or to strictly finance the estimates that are prepared. That’s why so many buildings discover they have a shortfall in their finances when things start to go wrong.
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.
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