Under The Unit Titles Act 2010 you must have a fund, unless you opt out at a general meeting.

So the first decision you need to make is “fund or no fund”.

If “no”, you will need to pass a resolution at an AGM or EGM confirming that you intend to opt out (note: a special resolution is required) and a statement confirming your decision should be included in the plan.

Budgeting with no fund

Operating without a fund is likely to make budgeting a lot easier.   All you need to do is prepare a total maintenance budget and include this in your plan.   Funding is straight forward too. We recommend that you simply provide for a surplus or “reserve” and pay for everything out of that.

Budgeting with a fund

If you are going to have a fund, the Act requires that it is not to be used to pay for those items that come at least once a year.

For example, you might have a contractor carry out routine inspections of your ventilation system and this should be dealt with in the regular operating budget.

However, the same contractor might suggest that some of the fans will need replacing during the period of the plan.   To deal with this, a separate budget item could be included for replacing the fans and this item identified as being paid for out of the fund.

Things to watch out for

There are some rules that come with a fund.

1. You can’t use the fund for anything not included in the plan.


2. As already explained, you cannot use the fund to pay for items of maintenance that routinely come up at least once a year.


3. You can’t spend more than 10% over budget on any one item without getting approval from a general meeting.

Accurate planning is essential

So if you are going to have a fund, accurate planning and budgeting is essential, along with a clear distinction - in the plan - as to what is going to be paid for out of the fund and what isn’t.

We propose two lists and two totals

The first thing to remember is that everything must be in the plan and not just those items to be paid for out of the fund.

We believe that the best way around this is to list all of the maintenance items and identifying them as either being paid for out of the fund or not.

We recommend two lists with totals.   One is a total of the repairs and maintenance in the operating budget and the other is the total of the items to be dealt with by the fund.

Remember that these provisions are only for when you have a fund.   If you don't have a fund you can have one list, one total and everything is funded from the operating levies.

Summary

Like quite a few things in the Act, working through the issue of whether or not to have fund can be quite daunting.   Call us if you would like to discuss this.

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