One of the biggest responsibilities of owners’ corporations is financial oversight and management for the strata community. It can lead to many conversations and decision-making processes over the best and most effective ways to do this.
A question we’re often asked by the owners’ corporations we work with is: “Do we need a maintenance fund?”
The short answer? Yes, you do!
While day-to-day expenses are covered through regular levies, longer-term maintenance and unexpected repairs can strain finances. Understanding the role of a maintenance fund can help owners’ corporations make informed decisions to protect their property and manage costs effectively.
What Is a Maintenance Fund?
A maintenance fund is a pool of money set aside by the owners’ corporation to cover future repairs, preventive maintenance, and the upkeep of common areas and property.
These funds are factored into annual budgets and intended for medium- to long-term projects and include upgrading or replacing common property as it reaches its ‘shelf’ life (such as lifts or security systems that need upgrading) or larger repairs (for example, roofing and building-wide external painting).
Contributions are collected through levies and managed as part of the building or community’s overall financial plan.
Why Maintenance Funds Matter
Maintenance funds are all about providing peace of mind and stability to the strata community. Knowing funds are set aside for major expenses allows residents to manage their finances without worrying about unexpected costs.
Maintenance funds help to:
- Reduce the need for special levies: Planning ahead helps avoid sudden, large contributions when major repairs or replacements are required.
- Spread costs fairly: Regular contributions allow owners to share expenses gradually rather than facing unexpected financial pressure.
- Support regular and timely repairs and maintenance: Whether it’s upgrades, repairs or replacements, the entire OC community benefits from the maintenance funds being available to cover these costs.
- Improve transparency and trust: A well-managed maintenance fund helps owners understand how funds are allocated and builds confidence in the owners’ corporation’s financial decision-making.
Director inspecting equipment
Factors Influencing the Need for a Maintenance Fund
While it’s recommended that owners’ corporations have a maintenance fund, the timing and amount of contributions can vary.
A few key factors to consider include:
- The building’s age and the likelihood of upcoming upgrades or repairs.
- The size of the strata and number of residents, as larger buildings with higher footfall or multi-lots will typically require more maintenance over time.
- The types of shared facilities and overall set-up of common areas that may need to tap into the funds. For example, strata’s with lifts, pools and gyms may require more ongoing maintenance.
- Any legislative, regulatory or compliance requirements that relate to your owners’ corporation.
Typical Uses of Maintenance Funds
Maintenance funds can be used to address a range of services, utilities and shared facilities throughout the strata.
Some examples that the AboveOCM team come across in our work include:
- Roof and balcony repairs and/or upgrades
- External building painting
- Driveway or car parking resurfacing
- Replacement of major building systems, such as security or plumbing
Funds may also be allocated for long-term capital works, such as structural upgrades or any improvements required to meet safety standards.
Consequences of Not Having a Maintenance Fund
A maintenance fund provides owners’ corporations and residents with the assurance that, when issues arise, they can be addressed efficiently and effectively.
Without a healthy maintenance fund, owner’s corporations may be faced with:
- Operational challenges when dealing with urgent repairs or maintenance, which can lead to special levies and backlash or disputes from owners and/or residents.
- Delays in essential repairs or upgrades putting the building and residents at risk.
- Further deterioration of common areas or building facilities when repairs go unaddressed for too long, leading to a heavier financial burden as repair costs escalate.
In the long term, this can also lead to issues with insurance coverage, health and safety compliance, and even property value.
Need Help Setting Up or Managing a Maintenance Fund?
Deciding to set up a maintenance fund is an important decision for owners’ corporations, as is managing that fund in the long term, but you don’t have to do it all alone.
At AboveOCM, our team is experienced in providing confidence and peace of mind as we guide owners’ corporations through this process.
By assessing property needs, supporting realistic budgets, and assisting with annual planning, AboveOCM helps Melbourne owners’ corporations make informed decisions about their financial future.
Contact us today.
