Author: Stonewood Property Management
7 May 2020
WHY YOUR BODY CORPORATE NEEDS A 10-YEAR MAINTENANCE PLAN
Why do sectional title schemes need a 10-year maintenance plan and what is its purpose? In this blog, we look at answering these questions along with listing some of the major advantages.
A legal requirement
In the past, many community schemes have found themselves in financial distress due to poor planning by trustees, or due to push back from owners not wanting to increase levies. The lack of efficient planning had the result of placing undue financial stress on individual owners as well as the body corporate when major maintenance repairs became necessary.
Law makers used these compelling reasons as justification in making it compulsory for trustees to prepare a maintenance plan annually and so, on 7 October 2016, it became compulsory for schemes to have a 10-year maintenance repair and replacement plan (MRRP) for maintenance items of a major capital nature.
The purpose of an MRRP
The main purpose of the MRRP is to force bodies corporate to plan better for maintenance expenditure of a major capital nature. Not only does this allow a scheme to anticipate major expenditure in the future, it also allows for considered financial planning.
At this point, it is important to distinguish maintenance of a major capital nature from normal day-to-day maintenance. Examples of the former (maintenance of a capital nature) are lifts, roofing, interior and exterior painting, heating and cooling systems, and waterproofing while day-to-day maintenance includes items such as garden services, replacing light bulbs, repairing leaking taps, replacing locks and repairing vehicle assess gates.
Advantages of a maintenance plan
- Essentially, it allows for better financial planning of body corporate resources. In turn, owners are then also in a better position to plan their monthly expenses such as levies.
- The body corporate can use it to focus on long-term planning of maintenance while realistically considering the financial impact.
- Levies can be kept stable with only marginal year-on-year increases as opposed to substantial increases – or the need to raise a special levy – when major maintenance repairs must be done.
- Better transparency of body corporate affairs.
- Owners can hold the trustees accountable as they are responsible to prepare the maintenance plan.
- Trustees are better prepared for short, medium- and long-term maintenance requirements.
No maintenance plan?
Not having an MRRP means that the trustees are failing in their responsibilities which can lead to their dismissal or negatively affect their chances of being re-elected. Furthermore, a maintenance plan will quickly lose its value if it is not updated regularly. Without keeping the plan updated, it can’t be used to accurately plan for future maintenance of a major capital nature.
If a body corporate has access to a suitably qualified person who can draft a proper plan at no cost, that is great but without access to a proficient person, the body corporate is better off contracting an experienced service provider at a reasonable cost to put together a comprehensive plan.
Although the requirements of the MRRP is straightforward, trustees may want to consider using a third party to assist them in the preparation phase of the plan to ensure the basis of the plan is correct from the outset.
By regularly reviewing and updating the MRRP, the trustees will ease the pressure and responsibility they have to ensure the scheme is well managed.
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