Strata Schemes – Part 2

Owners Corporation and Executive Committee

The owners corporation is the body made up by all the owners in the strata scheme and is considered the governing body of the strata plan. An owners corporation is defined as follows;
The owners of the lots from time to time in a strata scheme constitute a body corporate under the name ‘The Owners – Strata Plan No. X’ (X being the registered number of the strata plan to which that strata scheme relates). ‘X’ represents the strata plan number, allocated by the Registrar General on lodgement of the strata plan with the Registrar Generals Office.

The owners corporation comes into existence on the day that the Registrar General registers the strata plan.
The owners corporation has an executive committee, which is a small representative group of owners or owners nominees elected by the owners corporation. Its basic function is to administer the day to day running of the strata scheme and make decisions on behalf of the owners corporation.

Financial Matters

The responsibility for the control, management and administration of a strata scheme’s common property rests with the owners corporation. The owners corporation is required to levy each owner in the strata scheme to raise sufficient funds to carry out its statutory duties.

The amount of levies to be raised is supported by a budget which must be tabled at each Annual General Meeting. The budget must take into account actual and expected expenditure and the existing financial situation of the owners corporation.

Owners are required to contribute to both the administrative fund and the sinking fund. The required contribution payable by each owner is based on the unit entitlements of their respective lot. Levies are usually paid every 3 months.

Every strata plan contains a list of the lots in the strata scheme and a corresponding allocation of a ‘unit entitlement’. The amount of the unit entitlement varies depending on a number of factors, i.e. the size of the lot. The unit entitlement is a whole number and the total of all the individual entitlements in the strata scheme is called the ‘aggregate unit entitlement’. The amount of levies payable by each owner is calculated on the basis of unit entitlements. Unit entitlements are also used to determine the following;

  • Share in the common property
  • Voting rights when the voting is conducted by means of a poll
  • Right to share in distributions of surplus monies in the owners corporation’s administrative or sinking fund
  • Right to share in compensation monies paid by any public authority resuming the whole or part of the common property, and
  • Obligation to contribute to repair and maintenance of common property under a joint exclusive use by-law.

An owners corporation has the same type of expenditure as a conventional householder. There are council rates, water and electricity charges for common areas, building and public liability insurance and repairs and maintenance of common areas. In a strata scheme, there is also additional expenditure such as workers compensation insurance, building valuations, the resolution of any disputes which may arise within the scheme and any other matters related to the running of the scheme.

The Administrative Fund

The Administrative fund is for day-to-day operational expenses. The amount in it must be enough for the owners corporation to pay its expenses:

  • For the cost of looking after common property and personal property of the owners corporation
  • For the payment of insurance premiums
  • For any other recurrent expenses other than amounts covered by the sinking fund or by a special levy.

The Sinking Fund

Sinking funds are intended to provide sufficient reserves for the long term maintenance and repair of the building as well as replacement of common property items.

Schemes are required to specifically plan ahead for the estimated sinking fund expenditure over the ensuing ten-year period. Levies are to be set accordingly to meet the ten-year sinking fund estimates. In other words, owners corporations will need to work out the likely expenditure on items of a capital nature over the next ten-year period.

Examples of items that the sinking fund should provide for are as follows:

  • For painting of common property
  • For obtaining personal property of the owners corporation (e.g. mowers or washing machines)
  • For renewing or replacing any fixtures on the common property and any personal property owned by the owners corporation
  • To replace, repair or make good the common property for any debts, other than amounts covered by the administrative fund

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