Hi all
I was looking at the strata report for a unit I have owned for 4 years and was interested in how little the Administration and Sinking funds have in them. This prompted me to ask, when purchasing a unit, what do you look for in a strata report?
In the latest AGM minutes, the administration fund levy was $310,000 and the Sinking Fund levy was $31,000 (plus GST).
What is the difference between an Administration fund levy and the sinking fund levy? What does each pay for? The sinking fund levy seems very small for a 4 year old complex (3 buildings, each of about 50 or so units – 1-2 bedrooms). The proposed expenditure budget for the coming year is $304,000.
The apartment block has 170 units, 3 lifts and underground secure parking. My strata mgt fees for last year were $1,500 and each of the 170 units would pay about this (from memory, the BC fees are adjusted depending on the market value of each unit – some pay a little more, some a little less). There are 4 commercial units at the building (restaurant, hairdresser and another business). These commercial units are not referenced in the minutes so I am not sure if they are included in the residential BC funds.
When investigating a BC, how do you get information about the body corporate (whether they are a 'decent' BC), An internet search on my BC doesn't really reveal anything. How much emphasis do you put on the BC when considering whether to purchase a unit.
ChrisA1
Persistence is 'to keep on keeping on, no matter how hard the going may be'
So you haven't looked for 4 years?
I'm assuming you have your amounts around the wrong way. There is no way admin is $310K. The admin fund usually has enough in it to cover the admin costs. So if it is low there is no worry.
The sinking fund is to pay for maintenance etc. If there is a big cost coming up some strata choose to raise the levies for this beforehand to avoid having a special levy.
I find it strange that you think $310K is a small sinking fund. Or is it because of the proposed expenditure ($304K). Yes that will leave very little. Are they planning a special levy to top it up? You unit block would be expensive for maintenance (lifts etc)
When buying a unit the sinking fund is something to look at and if there are any expected/planned big spends.
Yes you pay depending on your apartment size.
I suggest you go to the AGM and keep informed. This is where decisions are made about YOUR property. I'd see how it works before assuming they are doing a poor job.
I don't worry about BC when buying. I just buy then get on the committee and get rid of them if they're no good. I've changed 2 so far. Others are good.
Yeah you only need to look at the sinking fund to make sure it has plenty of money. I fell into the trap of buying a strata unit with low sinking fund and then 6 months later they added and extra $200pq into the sinking fund. Its caught up now to the average strata sinking funds but the special levy isn't going anywhere
Tony Fleming | Triumphant Property Group
http://www.triumphantpropertygroup.com.au
Email MeNSW Buyer's Agent specialising in Western Sydney-Blue Mountains-Orange-Albury
Many thanks for your comments
I too was very surprised at the amount in the sinking fund vs administration fund but since the first AGM, the Administration fund has always been about 10 x the amount in the sinking fund. The amount in the administration fund is always just over the annual expenditure amount so my clumsy thinking is that the administration fund pays for the ongoing costs of maintaining the buildings and common property and the sinking fund is used purely for emergencies (ie in first year of the building's occupancy, admin fund was $200,000 (plus GST), proposed budget for the coming 12 months was $212,190 (GST incl), sinking fund of $20,000 (plus GST), second year the admin fund was $250,000 (plus GST), proposed budget was $259,620 (GST incl) and sinking fund was $25,000 (plus GST) etc etc).
If I was a prospective buyer, I wouldn't be so sure about the BC with a sinking fund so low…. I'm not sure how far $30,000 would go. Time to speak to the property manager about their approach here.
I am interested Catalyst that you do not worry about the BC when buying. Especially in a large complex, would it not take considerable time and effort to change a BC (while the building is continuing to fall into disrepair…)
ChrisA1
Persistence is 'to keep on keeping on, no matter how hard the going may be'
I don't buy in large complexes. Small complexes are easier to change things. You only need a few disgruntled people. Give them someone who is willing to solve their problem and they'll let you.
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