It has been almost five years since the Sectional Title Schemes Management Act (STSMA) came into effect, and most schemes now seem to be complying with one of the biggest changes it introduced, which was the requirement for every Sectional Title scheme to have a Reserve Fund – and to keep building up this fund in accordance with a contribution formula also contained in the Act.
However, it seems there is still a widespread lack of understanding about how the Reserve Fund may be spent. “Many trustees still seem to be under the impression that this fund is ‘rainy day money’ that is only to be used for major unexpected expenses, or that is it a sort of savings account to accumulate funds for major improvements to the common property.
But actually, according to Prescribed Management Rule 22, every scheme is also supposed to have a professionally-prepared, 10-year maintenance, repair and replacement plan (MRRP) that goes hand-in-hand with the Reserve Fund and contains the details of how it will be spent to keep the common property maintained and in a state of good repair.* “In addition, the trustees are supposed to report back to owners every year on the work that has been done and money that has been spent on items listed in this MRRP - and also present an updated version of the plan to be approved at the AGM.
Before compiling the MRRP, he says, the trustees need to make the distinction between day-to-day “running repairs” and bigger maintenance projects that nevertheless need to be undertaken regularly. “The former might include the replacement of lightbulbs, cleaning of gutters, fixing of leaking taps, removal of refuse and weeds from the gardens, and repairs to security gates, fences and access systems as well as electrical and plumbing repairs, and these should be provided for in the scheme’s ordinary annual budget.
The latter, however, are tasks that should be part of the 10-year MRRP and might include waterproofing and exterior painting; repairs to boundary walls, carports and stairs; the servicing of lifts and firefighting equipment and the replacement of certain equipment such as lawnmowers and pool cleaners. This type of planned maintenance is essential to keep up the overall appearance of the complex, enhance the lifestyle of the residents and ensure property asset value growth.