Strata Title
19. Sinking Funds
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 22 Sep 2015
- There are two trust funds in a strata scheme:
- the administrative fund; and
- the sinking fund
- The levies that you pay are divided between these two funds based on the budgeting structure of your strata scheme.
- The money is then used to carry out any required maintenance or administrative tasks.
- The monies in the administrative fund are used for:
- everyday regular expenses such as cleaning, gardening and utility bills;
- minor repairs to common property such as replacing lightbulbs or a damaged fencepost;
- expenses associated with running the owners’ corporation and executive committee;
- fees for strata management if a manager is used; and
- accounting fees such as audits, tax returns and bank charges.
- The monies in the sinking fund are used for:
- long term planning issues as under the law strata schemes must maintain at least a 10 year plan;
- long term maintenance issue such as painting the façade of the building or replacing carpets in common areas;
- capital expenses such as installing a new pool;
- replacing or renewing common property fixtures such as a parking garage;
- major repairs such as replacement of a roof; and
- unexpected emergencies such as storm damage.
- Funds may be transferred from one fund to another by the owners’ corporation to cover unexpected costs but they must issue a “special levy” to recover the shortfall in the fund within three months of the transfer.
- A special levy may also be raised if there are not enough funds in either account to pay for an essential expense. An expense is essential if it creates a danger to residents or members of the public such as repairs to broken stairs or fire safety compliance
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