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"If you have money invested in a Strata Title Property, you'll want to make sure your investment is protected at all times through the proper care and regular maintenance of your building and facilities.  And, there's no better way to achieve this than through some sort of Preventative Maintenance Program with the help of the Capital Works Fund.  Prior to the latest round of legislative changes, many schemes were happy to ignore this vitally important part but now they can't.
Read on to find out why."

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STRATA PREVENTATIVE MAINTENANCE

• The Benefits
• Problems that can be avoided
• Who's responsible?
• Major Works
• Alternative ways to pay
• Capital Works Fund is Vital
• Capital Works Fund Plan
• Building Defects resulting from the Original Construction
• Ongoing Building Audits/Inspections
• Pest Control
• WH&S Audit or Safety Audit
• Public Liability Insurance requirement

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The Benefits

To identify, correct and maybe even avoid deterioration of your valuable asset (i.e. your strata property), a Preventative Maintenance Program (PMP) for what is known as 'Major Works' should be discussed with your Strata Manager (if you have one) and all the owners - and implemented as soon as possible.

Under current legislation, this is officially called the 10-year Capital Works Fund Plan - which is discussed in more detail further down this page.  Now, any slack or lethargic owners corporations which virtually ignored the setting aside of funds to cover these big ticket items MUST have a 10-year Capital Works Fund Plan IN PLACE AND AMENDED or ADJUSTED EVERY YEAR.  And it's about time too.

SOMETHING IMPORTANT TO NOTE - I'm not talking about fixing a leaking tap in the gardens or the mailbox latch that suddenly refuses to open or repairing the TV antenna on the roof because a pelican flew into it last week and broke it......I'm talking about the BIG Ticket Items that will come around on a cyclical or semi-cyclical basis.  These smaller items are covered in more detail in the Ongoing Maintenance and Repairs information page.

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Problems that can be avoided

A poorly maintained building can also create a lot of 'unpopular' problems in the future.  Hopefully, this will become less of an issue as time goes by (due to the legislative changes made in the Strata Schemes Management Act 2015), but things CAN be missed and emergencies DO crop up when least expected so a "buffer" should be built in for those contingencies.

Here are just a few of the consequences of NOT having enough funds to handle whatever comes up:

• when works are needed and sufficient funds haven't been allocated AND the present owners aren't in a position to contribute to a special levy, the works remain outstanding thereby possibly causing even bigger problems in the future - usually involving greater costs
• prospective purchasers may look elsewhere when they discover your scheme's Capital Works Fund has little or no money in it
• when you plan to sell your unit, there may be a number of maintenance issues the Owners Corporation has not attended to creating 'doubts' in the mind of the prospective purchaser
• a prospective purchaser may ask you to reduce your sale price to compensate for any special levy (for outstanding works) they may be asked to pay in the future
• it may be difficult to sell your unit as the overall appearance of the scheme may not be as attractive as other better-maintained schemes in the area

Who's responsible?

Ultimately, it's the responsibility of the Owners Corporation to look after all aspects of the Common Property of the Strata Scheme - which means it becomes every owner's responsibility as the Owners Corporation comprises each and every owner!  If you're having trouble working out what IS and what ISN'T Common Property then make sure you have a look at my Ongoing Maintenance & Repairs information page which covers the area of Who Pays for What.

As part of the Owners Corporation, it's up to you to ensure a Capital Works Fund Plan is firstly OK'd (through the Annual General Meeting 'agenda/motion' mechanism) and then actually put in place and actioned.  It's now the law...

And remember:  It's YOUR money you're protecting so make sure your valuable investment has a viable plan for the future!

Tip - Preventative maintenance is always much better (and usually a lot cheaper in the long run) than doing major repairs when something breaks - and something will always eventually break.  Also, repairs are generally much more expensive when they happen through neglect....just think about your car....if you don't service it regularly, what eventually happens?

Even the location of a building can often cause certain areas to deteriorate quicker than usual.
Two simple examples of this are:

• concrete surfaces located near the ocean
• stained timber windows facing the western sun

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Major Works

The only way any major works can be done on the building is if there's enough money available to carry out those works and the Capital Works Fund's purpose is to provide sufficient money to enable major works, both anticipated and unexpected, to be completed.  However, if there aren't sufficient funds, the project will have to be either delayed (which is NOT a very good idea at all) or funded through the Owners Corporation obtaining a loan that's repayable over a number of year and the cost added to the quarterly levies. Refer to my section below on "Alternative Ways to Pay" if this in an area of interest to you.

When something requires attention, job specifications (along with a detailed 'scope of works') should first be prepared by the appropriate licensed professionals to ensure the problem is correctly diagnosed.  This way, the correct and the most economical method of repair can then be done.
Careful planning is necessary before commencing any project and expert advice is especially needed for major works, such as (but not limited to):

• roof replacement
• concrete spalling
• guttering replacement
• fire safety compliance & upgrades
• lift upgrades
• balcony repairs
• building facade repairs
• window replacement
• archbar replacement
• cracking to walls and subsidence
• uplifting of driveways and concrete areas
• waterproofing and rising damp problems
• termite (and other pest) eradication
• pool resurfacing
• carpet replacement in the stairwells
• common property painting and maintenance
• installation of window safety devices

Improving your Strata Scheme

For older buildings, consideration should also be given to updating your scheme to improve its appearance and value by:

• rendering the building's façade
• renovating the foyer area
• upgrading the landscaping
• replacing the balcony and stairwell railings with a safer, more modern design

Lannock Finance have produced a quick reference guide on the do's and don'ts regarding capital works called "Doing the right Capital Works" and is definitely worth having a look at.

Interestingly, Lannock decided to take this PDF off their site and replace it. Luckily I managed to salvage it (before it disappeared into 'internet oblivion') and load it to our server.  The info is still very relevant so it was a little disappointing they got rid of it.  They do have a new site with lots of good stuff but I couldn't find these datasheet-style PDFs anywhere.

TIP:  With maintenance and repair being such an important area in Strata make sure you also have a look at the section on Ongoing Maintenance and Repairs for additional information.

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Alternative ways to pay....

Many Strata Schemes, for a variety of reasons, may find themselves in the position where money is desperately needed to pay for essential repairs or renovations but the bank account is 'bare'.
Now, when this situation occurs there are a couple of options open to the Owners Corporation including:

• Don't do anything and wait till enough funds have been raised from future levies(not recommended)
• Raise a Special Levy so the works can be completed (not very popular)
• Raise the funds via a Strata Finance loan

While the idea of taking out a loan may seem abhorrent to many, it might just be the best (and sometimes ONLY) solution to ensure the work actually gets done before the problem gets any worse and more than likely resulting in a 'cost blowout'.  If left unchecked, and the problem involves WHS safety concerns, it could develop into something even worse - like litigation due to negligence - and no one wants that.  Yes, interest on the loan must be paid but at least the necessary works are done, the dreaded Special levy is avoided and everyone is safe from harm.

To get the full rundown on this 'ever increasingly popular' option, read my information page on Strata Finance Loans.

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Capital Works Fund is vital

The main way funds are raised to pay for a scheme's expenses is through the quarterly levy payment system with a portion of all levies received being directed towards the Capital Works Fund (CWF) - the purpose of which is to provide sufficient funds to meet the cost of major works like common property painting, carpet replacement in the stairwells, guttering replacement, roof repairs, fire safety compliance, unexpected emergencies, etc.  Without enough money in the capital works fund the complex will ultimately deteriorate negatively affecting the market value of every owner's property.

TIP: Have a read of my detailed section on the Capital Works Fund AND the CWF Plan on my Strata Levies Information page.

Before the latest round of legislation came into force on Nov 30th 2016, not all schemes allocated enough funds - and in some cases nothing at all - to this vital component to keep levies to a minimum.  However, they were just delaying the inevitable and, in many cases, the dreaded "Special Levy" had to be raised to pay for the item or items that eventually came up for replacement or repair.

This problem was seen as major by the industry as a whole and so the SSMA 2015 addressed this by making the CWF Plans compulsory for all strata schemes with the exception of some 2-lot schemes.  See Section 74 - Part 5: Exemption of the SSMA 2015 for the 2-lot scheme exemption.

The legislation also requires that the Owners Corporation MUST review the CWF Plan in FULL at least every 5 years and that the plan MUST be discussed (i.e. it must be on the agenda) EVERY year at the Annual General Meeting - some items may need to be adjusted or added or removed.  Scroll down for Schedule 1 - Point 6: Required items of Agenda for AGM of the SSMA 2015 which spells it out.  IMO, this is definitely a step in the right direction.

NOTE: Have a look at your levy notice and see what portion of the money you pay each quarter is being allocated to the Capital Works Fund.  Thankfully the incorporation of a CWF Plan now makes it a simple case of "Budgeting 101" - and as long as the estimates in the plan are accurate, most schemes should get into much less trouble down the track.  Sadly, for those schemes where the CWF was either tiny or non existent, the levies to be paid by those owners will have to increase.  I hope your scheme is NOT one of those.

Capital Works Fund Plan

Essentially, everything that can breakdown, wear out or deteriorate over time should be identified and included in the Capital Works Fund Plan (CWF Plan).

This CWF plan will contain:

• details of the proposed work to be carried out
• the timing and costings of the work proposed
• how the work will be funded
• any other relevant information

This is vitally important as the CWF Plan will play a big part in determining how much has to be allocated to the Capital Works Fund from each levy payment received.  You can read all about the requirements for the CWF Plan in Section 80: OC to prepare 10-year CWF Plan of the Strata Schemes Management Act 2015.

A Capital Works Fund Plan should be prepared by a suitably qualified professional, such as a quantity surveyor, so an accurate estimate can be made of future anticipated expenditure.  This assessment can then be used to prepare a detailed and workable Preventative Maintenance Program to suit your scheme.  It'll also advise you as to what capital works fund levies should be paid to ensure sufficient funds are available when work is needed.  The time frame (according to legislation) for these "plans" covers a 10-year period with a FULL review to be done every 5 years.

VERY IMPORTANT: Every Capital Works Fund Plan should also include an amount for "unexpected" events (i.e. an "emergencies" fund).

TIP: Have a read of my detailed section on the Capital Works Fund AND the CWF Plan on my Strata Levies Information page.

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Building Defects resulting from the Original Construction

This is an extremely complex area of strata law and it's suggested that, if the building defects are significant, you should seek the advice of specialists, such as building diagnostic consultants, engineers, strata lawyers and your Strata Managers before doing anything.

As it's an area that can create significant tension between the involved parties, expert assistance at all stages of the negotiations is critical to ensure fairness for all concerned - even allowing for the changes in legislation that came into effect 30th Nov 2016.  And, there's NO substitute for knowing THE best way to handle these delicate situations.

However, under the legislation changes that came into effect on 30th Nov 2016 (See SSMA 2015 - Part 11 Building Defects and SSMR 2016 - Part 8 Building Defects), rules have been tightened and new procedures put in place to mainly protect the consumer from developers who avoid and even shirk their responsibilities when it comes to correcting any building defects for multi-storey buildings within 2 years after building works are complete.

While there are still some limitiations in the legislation, such changes are a welcome addition for those consumers in buildings greater than 3-storeys high (i.e. multi-storey buildings).  Owners of properties in buildings up to 3-storeys are still covered by the Home Building Compensation Fund but prior to the latest legislation, those in 4-storeys or more were not covered and in many cases, massive legal bills became the norm in the chasing of those developers who didn't do what they were supposed to do.

Now, thanks to the latest legislation, the Owners Corporation have a set of guidelines and procedures (backed up by the legislation) to hold developers accountable for fixing any defects indentified within a 2-year window.  It's known as the Strata Building Bond & Inspections Scheme.

If you need to or want to know more about the Strata Building Bond Scheme (that came into effect 1st Jan 2018) then check out the NSW Fair Trading section on "Strata Building Bond & Inspections Scheme".

You'll get a full rundown of the guidelines and procedures for the handling of building defects for multi-storey buildings under the legislation.

Even with the improved guidelines and procedures things might still not go to plan, so below are a couple of excellent information resources that can assist greatly in giving you a direction if defects ever become an issue - just follow the green links.  But remember - consult your Strata Manager first (or NSW Fair Trading on 13 32 20 if you don't have a Strata Manager) before going down any of the other paths.  Their experience and expertise might just save you a lot of frustration, time and unnecessary expense.

A 'must read' is the information page called Resolving Building Disputes from the FT (NSW Fair Trading).  And, if you need to lodge a complaint, go to the Make a Complaint page and select the area you want.  Very helpful.

And for even more FT stuff - there's a wonderful section on a service offered by FT when neither 'warring' party can come to an agreement.  It's called the Home Building Dispute Resolution Service which steps you through how it all works if you are forced to head down this path.  Great stuff!

Still some confusion...

However, there still tends to be some confusion regarding exactly where Home Building Compensaton Fund (HBCF) fits into the whole defects area.  Many people are under the misconception that owners can make a claim against the builder (to have any defects fixed and paid for) under the HBCF.  This is not totally correct!

While the Home Building Compensation Fund does cover building defects it's only activated before completing the home or fixing the defects, if a builder:

• dies
• disappears (and cannot be found)
• becomes insolvent - in others words, bankrupt and unable to pay

If none of these conditions apply, then the person(s) or entity wanting to have the defects rectified will need to go through other official channels such as the NSW State Insurance Regulatory Authority and the NSW Civil & Administrative Tribunal (NCAT) to resolve the issue.

TIP - The information sources mentioned in this Building Defects resulting from the Original Construction section will help you with this if the builder is still around, is still in business and you need some defects rectified.  However, your Strata Manager (if you have one) can also prove to be quite invaluable in such circumstances to help steer you through the maze.

For an even more detailed report on Home Building Compensation Fund and all that it entails make sure you have a look at my Home Building Compensation Fund page.

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Ongoing Building Audits/Inspections

A Building Audit (or Inspection) is separate to the Capital Works Fund Plan and should be prepared by a suitably qualified professional on a regular basis.

Of course, once the "chance to make a claim on the developer for defects" window has closed, the Owners Corporation should then continue to do regular Building Audits to keep the building in tip top shape. That's the theory but, in reality, not all Owners Corporations do what they're supposed to do - and they're taking a big risk by NOT doing regular inspections.  The Building Audit provides a report on the present condition of the building and advises on any necessary repairs or defects needing attention and these findings (in the report) can be used to provide information to the Capital Works Fund Plan as well as assist in making any insurance claims under the NSW Home Building Act 1989 and the NSW Home Building Regulation 2014.

The sorts of things a building audit can pick up include:

• structural defects & problems
• rising damp
• concrete cancer
• exposed asbestos
• roofing & guttering problems
• plumbing & electrical problems
• illegal building works
• existence of and damage from termites and borers

Should you spend the money?  Building Audit reports do NOT come cheap but it's much better to find out earlier (and get anything fixed that needs fixing) rather than finding out later on when, due to neglect, the problem that was only small before has become much bigger and more involved to fix now.  Repairs due to neglect are always much more costly.  These sorts of things can come back to haunt you.

And don't forget - there's ALWAYS the litigious risk side that will raise its head if an accident occurs due to negligence and something that should've been fixed, wasn't.

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Pest Control

Pest control, while seemingly a small thing, can actually become a major problem if left unchecked.  Many schemes make the mistake of not doing an annual pest inspection (due to the cost) and then, a few years down the track, find the entire complex riddled with termites or some other 'difficult to remove' vermin.  When this occurs, the pest problem has usually progressed from being a simple preventative maintenance issue to a major works issue due to the amount of eradication, repair and rectification work that must be done.

TERMITES - now these little guys are the REAL danger.  Yes, other pests can be annoying but termites can do severe damage to the entire property if they get a foothold.  So, if nothing else, please make sure you have REGULAR TERMITE INSPECTIONS done.

Not having regular pest inspections done is just another simple example of false economy exercised by a well-meaning but misguided Strata Committee wanting to save a few dollars each year - but with it (possibly) costing everyone a whole lot more in the long run.

To avoid this sort of thing happening at your scheme (especially if the scheme is on the 'older' side):

• keep up the regular pest inspections - especially for termites
• always use a licensed, qualified pest technician
• listen to the advice given by these specialists - especially if you are advised that the building is conducive/prone to termite infestation
• make sure you take any recommended necessary preventative actions

My information page on Common Property Pest Inspections goes into detail on the compliance requirements with links to sample notices, templates, 'what if...' scenarios and more - so check it out.

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WH&S Audit or Safety Audit

The provisions of the Work Health & Safety Act 2011 and the Work Health & Safety Regulation 2017 require that the Owners Corporation provide and maintain the common property to

• ensure it's safe and without risk to the health of contractors and others who may use it
• agree to undertake ongoing risk management assessment to identify and eliminate any such risks

One way to undertake such risk management is to have an independent expert inspect the common property (on a regular basis) and report to the Owners Corporation any identified risks.  This is commonly known as a Safety Audit or a Work Health & Safety Audit and should highlight anything unsafe or potentially hazardous.  Once notified, the Owners Corporation MUST address the risk(s) and repair the common property as required. Failure to do so can result in severe penalties.  Don't say I didn't warn you.

SPECIAL NOTE  - Commercial, Retail and Industrial properties require more regular inspections than residential properties.

Some more information

Safework NSW have a huge section on Work Health and Safety (WHS) which offers helpful summaries, lots and lots of information pages and various links to some very relevant areas.  Start by clicking on "Get Started Here" to see just how deep the rabbit hole goes...and once in there, make sure you peruse the menu items down the right hand side.

Another section in Safework NSW is the one on Legal Obligations for Strata Title and Body Corporate which discusses the WHS requirements for strata.  So, if you need to know about Work Health & Safety and all it entails (plus details of the latest amendments, this is a fantastic place to start.

TIP - If you DO go onto the Safework NSW homepage, don't forget to have a good look in the navigational menu across the top. There's lots of sub-menus under the main menu tabs.  You have to click on each menu item to get a sub-list of topics but it's all in there - you just have to hunt through the different sections to find what it is you're after.   If you know what you're looking for, then try the SEARCH facility.  However, it's still quite easy to be a tad overwhelmed at the sheer volume of info here.

Public Liability Insurance requirement

A regular and ongoing assessment of risk is also necessary to provide evidence to the public liability insurers of the proper management of the common property in the event of a claim.  The minimum cover is currently $20,000,000.
See NSW SSMR 2016: Regulation 40 - Insurance amount.

Should you spend the money on a Safety Audit?

Again, it's far better to get anything fixed that needs fixing as soon as possible rather than stalling or not doing it at all and then having to deal with the (possible) severe consequences, courtesy of a letter from a litigation lawyer, if an 'accident' should happen.  Only then do you discover that your scheme violated one or more Work Health & Safety requirements thereby leaving the Owners Corporation liable for any litigation claims (and fines) that may surface.  Besides having to deal with the lawyers, you'll also have Workcover breathing down your neck gunning for a prosecution.
Is it really worth the risk to delay things or, heaven forbid, not fix them at all?  Absolutely no way in the world.  You could be putting someone at risk of injury or worse, as well as breaking the law.

If you're on a Strata Committee and totally lost and don't know what to do - then talk to your Strata Manager who can point you in the right direction.  Now, if there's NO strata manager to fall back on (for your self-managed scheme) then all I can suggest is to try a bit of 'googling'.

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Strata Title Terms and Jargon

If you need to know the meaning of one or more of the common terms mentioned above then have a look at the Strata Terms and Jargon Information page.

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