Predicting Body Corporate Sinking Fund levies and Sinking Fund Forecasts

by Andrew Lind on 12 February, 10

Does the lawyer you are intending to engage to handle your conveyance have Body Corporate Law skills? Engage a law firm with Body Corporate law experience if you really want to be protected.

Key information, to determine what the go forward sinking fund body corporate levies may be, when you are considering purchasing a property in a community title development is:

  • The Sinking Fund Forecast
  • Minutes of Annual General Meetings and Extraordinary General Meetings of the Body Corporate for the last few years
  • Minutes of Body Committee meetings for at least the last year

In my opinion it is best to get hold of this information before you indicate what you are prepared to pay for the property. Why? If significant sinking fund body corporate levies are coming this is going to have a downward effect on market value.

Once you have these documents what do you need to look at?

  1. How up to date is the Sinking Fund Forecast?
  2. Have major expenditure items in the Sinking Fund Forecast actually be carried out when scheduled by the forecast?
  3. Has there been any additional recent major sink fund expenditure that was not forecast by the Sinking Fund Forecast?
  4. Do the minutes hint at any other major work required on the building that is not allowed for in the Sinking Fund forecast?
  5. Once these questions are answered you can start to make some estimates of what the sinking fund levies for the next few years may be.

This is an example of how practical our Property, Conveyancing and Body Corporate Lawyers are. We have lawyers with Body Corporate Law experience in both our Brisbane and Gold Coast offices.

More information: www.corneyandlind.com.au

{ 8 comments… read them below or add one }

Kelly February 12, 2010 at 9:22 pm

We have signed a contract of sale on a property and it has now gone unconditional – however a council search has found that the final plumbing and building inspection was never completed.

Whose legal responsibility is it to have this final inspection completed before settlement? Should this not be the current owners responsibility? Can this void our contract if a final inspection is not completed by settlement?

Thank you.

Andrew Lind February 15, 2010 at 10:26 am

In Queensland, the standard REIQ land purchase contracts contemplate that you will find this out during the “building inspection period” while the contract is still subject to a satisfactory building inspection. In practice however, if the contract only gives you a short time for your physical building inspection, the chances of having search results back from Council in this window of time are very slim. Additionally there is the problem of whether the search results form part of the building inspection report. (For future reference it is best to get our Brisbane and Gold Coast Conveyancing Lawyers to look at the contract before you sign it.)

Again in Queensland, under the standard REIQ Contract it is likely that you have no right to insist that the seller have the final building and plumbing inspections completed before settlement or to terminate the contract on this basis. There are limited exceptions to this (for example representations were made to you about this before you signed the contract or allowed the contract to go unconditional as to building and pest; and if there is an outstanding notice issued by Council that pre-dated the contract).

Really this is one that that careful legal advice needs to be taken on before you act. If we can assist please let me know.

Contact: Brisbane & Gold Coast Conveyancing Lawyers

More information: http://www.corneyandlind.com.au

Karen August 18, 2012 at 6:44 pm

4 unit block. $1000 BC PA. What percentage or figure should we maintain in the sink fund.

Kind regards
Karen Wallace

Andrew Lind October 3, 2012 at 4:19 pm

In Qld base line sinking fund levies are usually determined by a “sinking fund forecast” prepared by a quantity surveyor. This forecast anticipates the expenditure required over the next 10 years. Your Body Corporate Management company can assist you with this.

regards
Andrew Lind

Lara April 15, 2013 at 10:02 pm

I live in a block of 6 units. Five owners wanted to manage our own body corp. Do we need 6 signatures to make it happen or majority wins? Do we need a solicitor to inform the 6th owner? Than you.

Andrew Lind April 16, 2013 at 11:01 am

Hi Lara

Assuming the existing management agreement has expired the new appointment would most probably require a resolution (normally an ordinary resolution) to appoint a new manager. (See: Reg 114 Body Corporate and Community Management (Standard Module) Regulation 2008)

A General Meeting should consider it and if no new manger is to be appointed resolve accordingly.

Take care though. Without a professional manger there is a fair bit for the committee to do and be compliant with. Expectations should be clear about who is doing what and whether that work is to be paid for or not. It would unusual for a 6 Lot scheme not to have a professional manager to help with compliance and keep the paper work in order.

A Community Title Scheme that is not well managed may adversely affect the value of the units/lots.

Regards
Andrew

Helen November 13, 2013 at 3:03 pm

I live in a community Estate of 52 Units. I purchased my unit off the plan in its 2nd stage. The developer never completed BC common areas and left very little funds for the BC to cover for outstanding works. The project was riddled with problems and after 11 years is at its final juncture to turn things around. The on-going lack of proper maintenance and preventative measures has led to two engineer’s reports. The second report (which makes some serious recommendations regarding upgrading & rectification of 4 units with large timber decks with Grade 1 defects) is currently being undertaken. The problem is that the BC had not planned for these serious rectifications. Whilst some funds have been allocated to do immediate works payments are being dripped fed to the builder creating stop/start work on these rectifications. The owners are frustrated and seriously inconvenienced by these delays. The new Chairman and Caretaker manager have inherited this problem and are doing their best to navigate this project through its various stages. This is going to be a long process and it seems that there are forces trying to undermine the owners goodwill and the new direction the BC is taking. What more can we do ???

Andrew Lind November 15, 2013 at 5:10 pm

Hi Helen

I hear your pain.

I assume that the owners collectively have taken legal advice about any rights against the Developer for possible breach of Contract or Misleading and Deceptive Conduct (or other possible breaches of the law)?

regards
Andrew Lind

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