Body corporate sinking& admin funds low

[Freddie Mac]

Hi. I went to view a townhouse and the BC disclosure shows that the Body corporate sinking & admin funds were very low (about $15k). There are no major planned works for the next few years. BC charges are also very low.

I get that this is a low maintenance block of THs. But what happens if major work is required. Who foots that bill? Insurance?

The question I am asking (from an IP perspective), is it it better to buy a TH with high BC costs to ensure maintenance. Or a low cost TH?

 

[Scott No Mates]

This can be symptomatic of the types of owners and whether they are active in the BC. I would be looking at the long term maintenance schedule ie next 5-10 year plan to see what expenditure is on the cards eg: gutter replacements, hws, plumbing, fire maintenance works, window screens for first floor etc.

If the block is predominantly owner - occupied, they might be contributing towards maintenance by diy eg gardens, cleaning etc but as they move out levies will rise accordingly.

 

[vaughan]

... But what happens if major work is required. Who foots that bill? Insurance?

Insurance covers events that are not certain to occur. If an event is certain to occur -- such as flooding in an area that is known to flood regularly, or earthquakes in an area of known seismic activity, or theft in an area of high crime -- then insurers will not cover it. They are not stupid.

Wear and tear and ageing are not insurable events, because they are certain to occur. The owners of the strata will need to foot the bill.

 

[Freddie Mac]

This can be symptomatic of the types of owners and whether they are active in the BC. I would be looking at the long term maintenance schedule ie next 5-10 year plan to see what expenditure is on the cards eg: gutter replacements, hws, plumbing, fire maintenance works, window screens for first floor etc.

If the block is predominantly owner - occupied, they might be contributing towards maintenance by diy eg gardens, cleaning etc but as they move out levies will rise accordingly.

I get this impression as some THs are painted different colours, landscaped gardens etc. While other THs there appear relatively neglected. I guess the BC is lax in regards to maintenance and prefer the individual owners to deal with this while giving them some room to express taste.

From an investment point of view I think this would suite me. Total BC costs are $1200 per year. Can't go wrong with that I suppose.

 

[mattysavager]

Hi. I went to view a townhouse and the BC disclosure shows that the Body corporate sinking & admin funds were very low (about $15k). There are no major planned works for the next few years. BC charges are also very low.

I get that this is a low maintenance block of THs. But what happens if major work is required. Who foots that bill? Insurance?

The question I am asking (from an IP perspective), is it it better to buy a TH with high BC costs to ensure maintenance. Or a low cost TH?

You need to find out what the plan of subdivision is. Just because it is a Community Titles Scheme doesn't mean that the Body Corporate is responsible for repairs to the townhouse. Depending on the registration of the scheme, the Body Corporate may only be responsible for a shared driveway, in which case the Sinking fund may be ample.

The Admin fund should theoretically be back to $0 at the end of each year, as this just pays for routine expenditure.

The block I own in is very well managed (because I manage it ) and has relatively low fund balances because there is little that needs to be done. If you are serious, you could request that the Owner provides a copy of the financial statements, which should show what the Admin Fund pays for, and also do some research into the plan of subdivision (either Building Format or Standard Format) which will inform the required balance of the Sinking Fund.

Cheers, Matt