Moving excess funds between strata scheme accounts

alfredo wrote:

Can a strata scheme transfer “excess” funds between the AD & CW accounts without any form of penalty i.e. raising special levy by the receiving account to pay back the source? On whose authority would this transfer be undertaken …

I believe the transfer of money from the Capital Works (CW) fund to the Administration (admin) fund can be approved by the strata committee, provided they have not been constrained from doing so by a vote of the owners corp at a general meeting.

The strata manager doesn’t have that authority unless it is specifically granted by the owners corp.  Strata law says the owners corp must “not later than 3 months after the transfer or use, determine the amount to be levied as a contribution to the fund from which the transfer or use was made to reimburse the amounts paid from the fund.”

Some strata managers interpret this to mean that you have to pay the money back by then, via a special levy if need be.  Others read the Act differently, saying all that’s required is that the owners corporation, advised by the strata committee, decides how much will be repaid and the period over which that must occur.

For instance, in the latter scenario, you might decide to pay the amount back over two years and reduce the normal levies into the admin fund by the same amount, meaning you have effectively transferred the money permanently. Either way, if large sums are involved, you might want to get advice form an experienced strata lawyer.

It’s one of the quirks of NSW strata law that schemes must have established a 10-year a capital works or maintenance plan, but are not required to fund that by accumulated levies, as some may prefer to use special levies or strata loans.

By the way, as explained in the notes on the Forum home page, it’s not helpful to new strata owners or readers of this website to use initials and acronyms, certainly not in the initial reference.

SP36965 addressed this issue.
It transferred $8309 from its sinking fund, as it was then, to its admin fund which had a deficit of over $8k. The OC did not meet the requirement to call a general meeting to recoup the amount. Instead, many months later, an owner put a motion on the agenda of the AGM to address the recouping.
The OC agreed to recoup the money but to do so at a rate of $800 per year until it was recouped. Recoup the amount at a rate of $7 per year, per lot, in a SP with 115 lots; what a joke. It was capital works money they were recouping. Hard to execute a 10 year plan while waiting for the money to come back.

The Tribunal said
“In order to meet the applicant’s point, motion 84 was put up in the 2012 Annual General Meeting and amended so that the respondent would comply with Section 71 of the Act. However, motion 84 was amended so that the amount of $8,309 would be recouped by a total levy on all lot owners in the sum of $800.00 per annum until the amount was recouped in full.

The applicant does not accept this way of proceeding and has taken the view that the proper course is for there to be an Extraordinary General Meeting in order to impose a special levy for the payment of $72.25 per unit entitlement in order to fund an immediate payment of the $8,309.00, or periodic payments for a period not exceeding one year to the same effect.”

The Member then went on to claim to have no jurisdiction to order a general meeting to make the OC recoup the money (in a sensible time frame). Case dismissed. SCS 12/40868 (unreported)

Another atrocious decision. The matter of the poor decision was taken up with Macquarie St given what was occurring was making a mockery of the Act.
If, as Mr Bannerman forecasts, there is going to be change to make recouping in a realistic time frame law then bravo to Macquarie St for their quick action – full sarcasms intended.

• This reply was modified 1 year, 11 months ago by .

The Hood wrote:

Interesting call given in another thread our agent claims come close of books any unspent money in the capital works fund becomes unspecified surplus, i.e. money does not accumulate to any purpose.

The difference would be between unspent and unallocated funds.  A smart strata manager would recommend either bringing forward some of the capital works (CW) or reducing the CW portion of the levies until such times as everything was back on track.

What owners really need to see is a list of future CW projects, how much they are likely to cost and where that money might come from – accumulated funds, special levies or strata loans.

The Hood wrote:

The legislation is a wish list and failure to comply means no consequence in too many cases.

Strata schemes are largely self-policing. If there’s a problem, you ask the other owners to tell the committee to fix it.  If the problem is big enough, or the other owners aren’t interested, you ask NCAT to fix it.  If the problem is intractable, NCAT can decide to put a statutory manager in, whether you want one or not.

But you have a point. Look at the number of rules in the Act that don’t have penalties attached and you can see how much wishful thinking it contains.

• This reply was modified 1 year, 11 months ago by .