Changes on way for apartment reserve funds

WA apartment owners are preparing for rigorous new standards to ensure reserve funds, which are used to pay for the maintenance of apartment buildings, are administered more fairly and carry sufficient balances to meet building maintenance costs.

The reserve fund contributions were included in wide-ranging reforms to the Strata Titles Amendment Act which support the growing number of Western Australians who own, work or live in a strata property.

The changes will require strata schemes larger than 10 lots or smaller than 10 lots but with a value of more than $5 million, to have a 10-year maintenance plan and a compulsory reserve fund.

The 10-year plan will provide a comprehensive list of the major items and systems in the building, their expected life span, and the cost of replacement.  

The proposed Strata Titles Act (General) Regulations 2019 do not stipulate who can draft maintenance plans but Colliers International, the strata manager for a number of Perth apartment buildings, recommends they should be drawn up by industry experts, such as quantity surveyors, registered builders or a building or facility management company.

The plan would then be used to budget for an annual levy contribution to ensure there was enough money in the reserve fund when items need to be replaced.

Colliers International Director Business Services Ali Qamar said the changes would address the long-standing problem experienced in many residential strata properties where insufficient money was set aside to fund building maintenance.

“In the past, reserve fund contributions were largely determined by the council of owners at each scheme and many councils of owners—the elected owners who make decisions on the running of the building—had limited knowledge about the costs involved to maintain an apartment building so when a major replacement or maintenance item came along, owners faced the financial stress of paying a special levy to raise funds,” Mr Qamar said.

Although the new reserve fund requirement is likely to result in an increase in reserve levies at most apartment buildings, it will also deliver well maintained buildings where councils have a clear lifecycle plan for their buildings and enough money to pay for maintenance, repairs and replacements.

Mr Qamar said it would also be a fairer system, as future owners would not be left with all the cost of replacing equipment used by previous owners.

“Each year the reserve levy will collect an amount towards the replacement of those items so scheme contributions will come from people selling or buying into the building,” he said.

“Along with the budgeting benefit of a stable reserve fund levy, consumers will also be able to make an informed decision about the financial well-being of a building before buying an apartment.”

Reforms to the Strata Titles Amendment Act have been overseen by Landgate, WA’s land information authority, on behalf of the Minister for Lands Rita Saffioti. 

The proposed Strata Titles Act (General) Regulations 2019 are expected to be finalised and delivered to Parliament this month.

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Ali Qamar

Director

Perth

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