When it comes to sinking funds, we have heard it all. From “why do I need a sinking fund, my building isn’t sinking” and I guess you can imagine the rest!
If we weren’t in the Strata industry, chances are we would have thought similar things. In this article we will share all you need to know about sinking funds and your Body Corporate.
Just like a car, things in your home will need to be regularly maintained to avoid them breaking down and resulting in costly bills. Obviously, you don’t need to change the oil and top up the coolant in your home, so what does the money in your sinking fund go towards?
The money in a sinking fund can be spent on several different things such as:
- Painting the building, recarpeting, updating common area furniture etc.
- Major structural repairs to common property
- Maintenance repairs
- Common Property Fences
- Lift maintenance
- And more!
Now that we know what you need to maintain your scheme, let’s look at how the funds in the sinking fund are raised.
The sinking fund is raised through three main avenues:
- Owners’ contributions to the sinking fund
- Interest received from the fund’s investments
- Money from insurance pay outs (for major capital items which have been destroyed or damaged)
The sinking fund levy (owners’ contribution) is often kept and administered by a community management company such as SSKB, on behalf of the Body Corporate.
The Sinking Fund Budget:
Every financial year, Body Corporate Committees must prepare a Sinking Fund budget. This is to ensure the sinking fund has sufficient finances to provide necessary and reasonable spending for the upcoming financial year. This is also necessary to ensure an amount is reserved to cover likely future spending for at least 9 years after the current financial year. Building up funds reduces the likelihood of having to ask lot owners to make a large, one-off payment to sinking fund levies via a special levy, although it does not totally remove the possibility of this occurring.
Since 1995, SSKB has been the industry leader in strata management. Servicing clients through Queensland, New South Wales and Victoria, we have a broad portfolio of schemes under management and pride ourselves on having the most experienced and skilled management team in the industry.
As a lot owner, you will have access to our expert Client Solutions Team who are on hand to deal with general enquiries. This team works on a “one call resolution” policy, aiming to resolve any issues on your first call to us. The team have a 94% rate of answering questions on the spot. By having our Client Solutions Team assisting lot owners, It allows our Community Managers and Assistants to be on hand to better deal with the requirements of the committee.
If you are not a client of SSKB and would like to see how easy it is to make the switch, click here to contact us for an obligation free consultation.