1. What are we talking about?
The extent that a strata company and or a Council of Owners (COO) have documented maintenance plans for their strata property varies considerably across WA. Given the normal tensions between the availability of funds and the extent of ongoing maintenance requirements, a reactive rather than proactive approach has traditionally been adopted for many WA strata properties.
As building and maintenance issues mount up and funds become more of an issue, there is often a requirement to undertake a longer term strategic approach to building management. A full building inspection by Houspect WA to identify building defects along with maintenance issues may be a better approach.
The WA Legislative changes introduced in 2018, and finally supported by Regulations in 2020, changed the minimum requirements for WA Strata properties with 10 or more Lots or with a Building value in excess of $5M. These strata properties are now required to prepare a 10-year maintenance plan and create a maintenance reserve.
Irrespective of the Legislative requirements, many strata companies are responsible for strata company common property assets which can range in value from hundreds of thousands of dollars to hundreds of millions of dollars. Entrusted with the responsibility of managing and maintaining these assets, strata companies need to develop and maintain a plan to ensure that these assets are maintained and or replaced as required.
3. The legislation
S 91. General Duty
(1) A strata company shall —
(b) control and manage the common property for the benefit of all the owners of lots; and
(c) keep in good and serviceable repair, properly maintain and, where necessary, renew and replace —
(i) the common property, including the fittings, fixtures and lifts used in connection with the common property; and
(ii) any personal property vested in the strata company,
and to do so whether damage or deterioration arises from fair wear and tear, inherent defect or any other cause;
(2) A strata company must, if it is a designated strata company, and may, in any other case —
(a) establish a fund (a reserve fund) for the purpose of accumulating funds to meet contingent expenses, other than those of a routine nature, and other major expenses of the strata company likely to arise in the future; and
(b) determine the amounts to be raised for payment into the reserve fund; and
(c) may raise amounts so determined by levying contributions on the owners in proportion to the unit entitlements of their respective lots.
(2A) A designated strata company must ensure —
(a) that there is a 10 year plan that sets out —
(i) the common property and the personal property of the strata company that is anticipated to require maintenance, repair, renewal or replacement (other than of a routine nature) in the period covered by the plan; and
(ii) the estimated costs for the maintenance, repairs, renewal or replacement; and
(iii) other information required to be included by the regulations; and
(b) that the 10 year plan is revised at least once in each 5 years and that, when revised, the plan is extended to cover the 10 years following the revision.
S100 (2A) (7)
designated strata company means —
(a) a strata company for a scheme with 10 or more lots; or
(b) a strata company included in this definition by the regulations.
r. 79 (1) For the purposes of section 100(7)(b), a designated strata company includes the following
(a) a strata company for a strata scheme that has a scheme building replacement cost of more than $5 000 000;
(b) a strata company for a survey-strata scheme if the replacement cost of the improvements on the common property is more than $5 000 000
4. Houspect observations on the Legislation and Regulations
- The 10 Year maintenance plans are sinking funds of every strata company asset.
- The maintenance plan only needs to list the items of common property, and personal property of the strata company, that the strata company anticipates will require maintenance, repair, renewal or replacement (other than of a routine nature) in the period covered by the plan (the covered items).
- While the maintenance plans are 10 year plans, they must be revised every 5 years.
- There are no qualifications or experience levels required for the person preparing the plans. The strata company can prepare the plan itself or outsource the plan production to one or several third parties. However, given the array of assets that potentially need to be incorporated into the plan it is highly likely that several specialised parties will need to contribute to the plan production.
- To determine if some assets will require maintenance, repair, renewal or replacement, it is likely that the person making this assessment will need to have specialist knowledge of the specific item and or hold appropriate Licences in WA to test and assess the item for maintenance, repair, renewal or replacement requirements. Often the most suitable party to make these assessments will be the Contractor that the strata company already has engaged to maintain these items (e.g. Lift Contractors, A/c Contractors, Security Contractors, Electrical and Plumbing Contractors) given their intimate knowledge of the items.
- In contrast there are some strata company assets where the cost to itemise, inspect and incorporate into a 10 year plan may outweigh the benefits such that the strata company could aggregate and apply an annualised expense rate over the 10 year period. An item that may fall into this category might be, for example, gym equipment.
5. Key Considerations for a Strata Company in Developing a 10 Year Maintenance Plan
- Where are the Lot Boundaries? Accessing individual Lots to inspect common property
- Inspecting the roof cover and roof plumbing – access issues?
- Inspecting the external walls, floors and ceilings – access issues
- Who should produce the 10 year maintenance plan?
- Forecasting expenses over 10 years
- Recommendation for funding – key impacts
- Disclosure issues
6. What – Producing the 10 year Maintenance Plan
7. What must the plan include
8. Who can create the 10 Year Maintenance Plan
9. Acknowledge the importance of engaging with Stakeholders on 10 Year Maintenance Plans
10. The benefits of a 10-year maintenance plan
- Assists in the execution of the legislative obligations which have existed for many years
- Assists in forward planning and funding future of maintenance, repair, renewal or replacement expenditure
- Focus is on the pragmatic vs the theoretical. Can be complimented by extended period Sinking Funds
- Improves transparency on the condition of the strata property and the availability of reserves for all stakeholders
11. Some Emerging Issues with 10 Year Plans
- What to inspect?
- Roof cover & plumbing – Access ( OHS Cherry Pickers, scissor lifts, drones etc.)
- Roof spaces – Access (Top floor units)
- Common property as viewed from within individual Lots – Access (every individual Lot – Tier 2)
- Array of items to inspect – cost considerations
- Should one party inspect or multiple?
- Leveraging existing contractors?
- Aggregation of data into 10 year plan
- Extending existing or new Service Agreements to support 10 Year Plans
- Communicating outcomes with stakeholders – managing the message
- Executing the plans
- Taking action remains key
- Do not underestimate the value of independent reviews of completed works
12. So What Does it Mean! – Conclusion
- The Summary
- Strata Companies must maintain common property – no change
- Designated Strata Companies must create a reserve – new
- Designated schemes must produce a 10 year plan, renewed every 5 years with costs – new
- Where applicable budget must take into account 10 year plan
- The Impact
- Greater disclosure and transparency amongst stakeholders
- Potentially increased costs to operate strata. Massive data collection.
- Large number of issues and questions to be answered
- More forward planning and reserve fund contributions
- Improved equity
- Only applies to Strata Schemes > 10 Lots and “Designated Schemes” – >$5M)
- Non designated Strata Schemes can elect to produce 10 year maintenance plans
- Many quality schemes are already undertaking forward plans and reserve funds
- The Strata Company can ignore the funding recommendations
- The Risks
- Managing communications and engaging stakeholders on 10 year plan conclusions
- Funding unfunded liabilities
- Start considering the emerging issues now
- Implementation timing – first plans due at the first AGM post 1 May 2021
13. The Advertisement
Houspect produces 10 year strata maintenance plans. Houspect has been inspecting buildings and producing maintenance plans for more than 40 years in WA. Maintenance plans are consistent with what we do. Houspect’s 60,000 plus construction, purchase and maintenance inspections in WA is a unique record.
Call Houspect to discuss your 10 year Strata Maintenance Plan requirements.