Strata Unit Sinking Funds are financial facilities used by owners' associations to cater for fu-ture operations and maintenance expenses of common properties like strata buildings. In a strata building set up, there are various expenses that need to be met for the common property to run smoothly. Such expenses typically involve maintenance and repair tasks such as painting of buildings, repair of roads and pavements within the property, plumbing and electrical system upgrades and many others. All these activities are associated with the common property, and this means that their cost cannot be imposed on any single owner unless they are individually liable.
A Strata Unit Sinking Fund is useful in cases where owners' associations wish to effectively cater to the cost of future works and upgrades within the property as well as any emergency expenses that may arise. When setting up a strata unit sinking fund, it's imperative that you set aside enough funds to cater for any and all repairs and renovations that may be required for your strata building in future. The sinking fund also needs to meet all legal and financial requirements imposed by your state or jurisdiction.
Main Objective of A Sinking Fund
The main objective of a sinking fund is to provide a financial facility that strata owners' asso-ciations can use to accumulate funds for future common property expenditure. When mon-ey is set aside in advance, the fund ensures that individual property owners don't have to foot the costs of large repair, maintenance or emergency bills when they arise. In most cas-es, property owners in a strata scheme will pay monthly, quarterly or annual strata levies that go towards a strata unit sinking fund as well as an administration fund. Here is a brief explanation of these two funds:
1. Strata Unit Sinking Fund - This is a fun used to cater for major maintenance and repair works that may be deemed necessary in future.
2. Strata Administration Fund - This is a fund used to cater for day to day maintenance and repair tasks such as landscaping, gardening, cleaning and paying contractors. The fund is budgeted for in advance.
Depending on where you live, a sinking fund can also be called a capital works fund or a maintenance plan fund. The fund ensures that your strata building operates smoothly and efficiently which is extremely important for both property inhabitants and investors. Also, a sinking fund ensures that all property owners in a strata building contribute equally towards future repairs and maintenance works within the common property.
What Do The Funds Cover?
Strata unit sinking funds cover a wide range of issues in regard to a strata building or scheme. To give you a clearer picture of what a sinking fund does, think of it as a 'rainy day' fund that you can use for unforeseen expenses or emergencies. The funds can be used to cater to common property expenses such as:
- Fence replacement
- Driveway renovation
- Overhaul of lifts
- Repainting buildings
- Any emergency maintenance or repair works that may arise.
For further information on strata unit sinking funds contact a professional body corporate manager like Stratacare Australia.
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