There are all sorts of sectional title buildings and they vary hugely.
As a result, there is pressure for them to be run in different ways – think a block of flats or townhouses versus a duet scheme or a golf course estate versus a marina complex or even an industrial park.
People buy sectional title properties for different reasons.
Some buy them as investments, others as a home while others could well be buying them as holiday homes.
Not all owners even live in the same place that they own property.
Imagine how difficult it would be to hold owners’ meetings, even by Zoom, if you had most of your owners living in Australia!
Where most of the owners live in the building or complex, they usually understand that there is a need to be ready to do regular maintenance and that they need to add something to the day-to-day levy to build up funds to do this work when it is required.
But in more upmarket buildings, wealthy owners may decide that when the time comes to repaint the building, they can afford to haul out large sums to pay their share of the cost.
In the past, where schemes were run on the basis that special levies were the way to go, quite a few owners found it very hard indeed to have this money ready when it was needed.
As a result, the current Sectional Title Schemes Management Act (STSMA) says that every body corporate must build up funds so that when major work has to be done there should be enough money in the kitty to do the work without having to have a special levy.
In my opinion, a very sensible way of doing things and Platinum Global has always set aside suitable reserve funds for specific items.
The STSMA talks about ring-fenced reserves.
This means that if you have saved R100 000 for re-waterproofing the roof, you cannot take this money to use for painting.
The money collected for each item being isolated from the funds collected for another purpose.
It is possible to move funds from one fund to another if it is approved by a general meeting but is not normally a good idea, though it can be done in a real emergency and requires a resolution of the body corporate.
While the ideal is that the entire building should be painted at one time, it is often more practical to paint only parts of the building.
For example, the north-facing side is likely to need repainting more often than the south side – your ring-fenced levies should take this into account.
Care should also be taken to adjust the target for inflation.
Waterproofing only takes place every three years or so and at the end of the period the cost of waterproofing could be as much as 30 percent more than the cost at the beginning. ‘
It is all a juggling act.
What can be done to reduce the amount that is needed to be collected in the long-term reserves?
Most new buildings take into account that the cost of running a high-maintenance building (painting, lots of flashings on the roof, wooden windows that deteriorate) is very high and by building a building that deliberately has near to no maintenance the cost of the levy can be brought down by at least half.
As an example, I had a new roof put on our offices in 1987.
This Harvey tile roof has had ZERO maintenance on it in 35 years.
Plastic gutters and down pipes require no painting.
Although quite expensive, slowly changing poor quality wooden windows to no-maintenance aluminium ones will reduce a continually high-maintenance item to a zero-cost one.
Painted exteriors can be changed over to cladded artificial marble finishes where maintenance is a thing of the past.
Rubberised waterproofing lasts far longer than conventional waterproofing and helps to protect tile roofs from cracking.
Owners and trustees need to look at how to reduce maintenance costs in their buildings to reduce the cost of the maintenance reserve.
- Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.