10-Year Maintenance Plan: wasted opportunity or meaningful exercise?

Many bodies corporate have a 10-Year Maintenance Plan but then simply use it as a tick box exercise. Even if the development of the plan is done with adequate participation and intention, the plan is often not properly implemented. That makes, what can be a very useful tool, an absolutely wasted opportunity.

The Sectional Title Schemes Management Act (STSMA) and Prescribed Management Rules (PMRs) came into effect in October 2016. The most important new legislative concept it introduced for the sectional title industry was the creation of an obligatory maintenance reserve fund. The PMRs furthermore stipulate that every sectional title scheme must develop and maintain an up-to-date long-term maintenance, repair and replacement plan. This legislative requirement changed the sectional title landscape dramatically. Trustees are now obliged to take a longer-term approach, instead of a very short-term focus. If utilised correctly, the maintenance reserve fund will eliminate the scourge of special levies.

The concepts in the STSMA and the PMRs are actually very simple. Funds are paid into a special additional fund (Maintenance Reserve Fund) every month. This fund is utilised to pay for the projects contained in the long-term maintenance, repair and replacement plan.

The plan starts with a proper assessment of the present state of the buildings. Requirements for the maintenance, repair and replacement plan are covered in PMR 22. The plan must cover all major capital items expected to require maintenance, repair and replacement in the next 10 years. It is necessary to determine the present state of the specific items to verify when the items will be requiring attention. Financial planning for the maintenance and repair requires an estimate of the reasonable cost of replacement and repair at the time appointed time. Apart from being logical, all these aspects are legal requirements for the plan.

The requirements for the plan as set out above are simple. It may therefore be tempting for trustees and managing agents to prepare the plan themselves. This is however not advisable. A suitably qualified person will add value by having the necessary experience and knowledge to make the appropriate assumptions and to know what to look for. The specific condition of each scheme’s unique physical setup at any given time cannot be directly compared with that of the scheme next door. Consequently, a general plan, or one copied from another scheme, is not the ideal way to comply with this legal obligation.

There are however certain general items that should be incorporated in any maintenance, repair and replacement plan. These are:

• roof and waterproofing maintenance,
• paint and redecoration of the buildings,
• security and entrance control systems,
• water reticulation infrastructure, electrical infrastructure,
• lift and escalator equipment,
• carports,
• driveways, and
• paving maintenance.

A quick check to ensure a long-term maintenance plan covers at least the above-mentioned items will help to verify the quality of a specific plan.

The STSMA provides for the minister to specify the minimum levels for the Reserve Fund. PMR 2 determines minimum levels depending on three situations:

1. Where the available maintenance reserve fund is less than 25% of the levels of the administrative fund of the previous year,
2. where the available maintenance reserve fund is more than 25% but less than 100% of the administrative fund of the previous year, and
3. where the available maintenance reserve fund is more than 100% of the administrative funds of the previous year.

Although it is important to ensure that the body corporate complies with the minimum requirements set by the minister, the reality is that it is far more important to verify that the maintenance reserve fund is sufficient to cover the maintenance, repair and replacement plan. If the maintenance reserve fund is sufficient to cover the maintenance, repair and replacement plan it will exceed the minimum levels set by the minister in most cases.

The PMRs require the scheme’s auditor to report annually on the maintenance reserve fund, specifically on any shortfall in the fund.

The maintenance, repair and replacement plan was a useful addition to the legislative framework for sectional title schemes. If used correctly, it will enhance the value of a scheme.