long-term maintenance plan Archives | Apartment Specialists

Tag: long-term maintenance plan

It a building is well maintained the usual increase of annual Body Corporate fees are 1-2% which covers inflation. Ensure you look at the Long Term Maintenance Plan to see what is coming up and if extra costs may occur during that period. A lawyer can assist you with this if need be.

SUMMARY:

Over time everything increases in price, for example buildings require cleaners for common areas, rubbish collectors and so on. In turn to cover these costs the Body Corporate need to increase their fees.

There are two major factors to watch out for to avoid more than the expected annual increase in fees.

Firstly, a building that is not well maintained may need extensive work to bring it back to where it should be, this will in turn effect the Body Corporate fees and they may rise significantly.

The second factor is to have a look at, is the Long Term Maintenance Plan for the building and seeing if funds are being allocated to save for any major changes that are required to be completed in the building, for example the need of new lifts. If the Long Term Maintenance plan is not being followed or funds aren’t being allocated to it, an unforeseen expensive cost may occur at the cost of apartment owners.

TRANSCRIPTION:

Good day, Andrew Murray here from the Apartment Specialists, talking about Body Corporate fees, how much do they go up each year? Now if the building is looked after properly it should go up with inflation, or remain pretty consistent, and inflation is generally about 1-2%. So not much. Now the reason for this is because, when you think about it, when I was small– okay 20 years ago, when I went to buy a can of Coke, when I was younger it was $1. Now it’s probably about $1.60. So over a long period of time, things go up.

You think about a Body Corporate, you’ve got cleaners, you’ve got rubbish collectors, over time their fees will slightly go up as wages go up, and things like that, which is perfectly normal. Now the big thing about a building, and the concern is – and this comes under when you’re going to purchase – is when a building is not looked after. And this is when Body Corporate fees can go up substantially.

So what do I mean by this? I mean let’s say, in two years time, the lift needs to be replaced. There’s a long term maintenance plan, and you can see in the long term maintenance plan it needs to be replaced. The cost that’s estimated is, say $200,000. Then when you look in the long term maintenance fund, or the contingency fund, and there’s, say $30,000, well you know that there’s going to be a shortfall, and money’s going to have to be raised.

Which will mean in that period you’re going to have an increase in Body Corporate fees to raise that money. So the key here is looking at the long term maintenance plan when you go to purchase, and the financials, specifically the long term maintenance fund, and the contingency fund, and see if they match up. I mean, how healthy, financially is it? And do they match the things that have got to, and I mean when that building needs to be painted in five years time.

Is the Body Corporate following that long term maintenance plan, and putting money aside each year for that time? Because if not, you Body Corporate fees could raise substantially and so that’s an unknown amount. And that means you’ve bought into the wrong building, or didn’t use your due diligence properly.

Make sure the Body Corporate that you’re going in to buy into is following the long term maintenance plan, and you can easily ask your lawyer to check this, or put this in as a condition when you purchase.

I hope that helps, Andrew Murray, Apartment Specialists, cheers.

If you have any questions, flick me an email at andrew@apartmentspecialists.co.nz or call +6421 424 892 and I’ll be happy to answer your queries.

Summary:

The plan consists of both desired changes or improvements that the powers would like and then a list of maintenance that has to be done and when, for example paint the roof, wash the building, repairs lift and on on. These are all time lined and at the AGM will be discussed if and when these changes are going to happen.

This eliminates the element of surprise costs for the building and informs the owners and new purchasers what is coming up in the future. You will also be aware of any expenditures that may be coming up that the Body Corporate won’t be able to fully covers so allows you to prepare for these extra future costs.

Making yourself aware of the long term maintenance plan as it is an important document to know about before purchasing and a lawyer can assist you with this if needed. Or alternatively Apartment Specialists can guide you through one too.

TRANSCRIPTION:

Good day, Andrew Murray here from Apartment Specialists, talking about long-term maintenance plans. What are they? Are they important?

When you buy an apartment, a long-term maintenance plan is something that basically all the owners agree to on how the building is going to be maintained in the future. A good way of looking at it is, if you own a house. So, you and your husband or you and your partner own a house. In ten years time you know that you have got to repaint the roof, or in 20 years times you’re going to have to repaint the whole house.

You are obviously going to have to do the lawns. You are going to have to do the rubbish or you might want to do some altercations like improving the deck. You may want to put a pool in and put some heater. All these kind of things, owners come up with. On one side, a long-term maintenance plan is like a wish list.  It is what they want to improve in their building, and things that they need to do to maintain their building.

For example, once a year a building generally needs a building wash. Then in a couple of years, depending on the type of cladding, the owner may want to paint the building. In 20 years time the roof needs to be redone, or in 30 years time the lift needs to be reconditioned. All these things are put into a long-term maintenance plan. The reason for this is brought in in the 2010 Unit and Titles Act which was enacted in May. This act will make sure that the long-term maintenance plan is in place.

Owners do not get a surprise, “Oh, you need a new lift.” All of the sudden, you have to have a special levy. That means the body corporate fee. Part of it is putting aside, and would cost generally around about 10% of it is putting aside the  money towards what’s called a contingency fund. This is what used to be called a sinking fund, which is where all that money sits for the long-term maintenance plan.

I am just going to run through a pretty basic one. Just to give you an idea of what it is. As you can see it goes over what I was just mentioning before. The purpose of a long maintenance plan is to – that is what when you see LTMP, long-term maintenance plan – identify future maintenance requirements and estimate the costs involved; support the establishment and management of a long-term managements fund; provide a basis for the levying of owners of principal units; provide ongoing guidance for the body corporate to assist in making its annual maintenance decisions.

So the long-term maintenance plan will cover all of this, or cover the cost, or talk about what year things are going to be done – all that kind of thing. And this is something you want to look every time you want to purchase a building, or if you own a building, or you want to be updated this year, because it is very important.

Let’s go to page nine, what basically is the nitty-gitty of it, which is long-term maintenance plan for units in this complex.

Basically here you can see you have got different categories. Every building will have different categories. You’ve got your service lobby – so that’s our entrance level of this apartment complex. It’s got 115 apartments in it. The floor in 2016 will be retiled, or something like that. It’ll be painted, as well as the entrance walls. The rubbish room, they’re going to put tiles in the bottom – at the moment it’s just concrete – so that’s to improve it. They’re going to paint all the walls, they’re going to do tiles in 2022, 2016, refurbishment. What is the cost? The walls – you’ve got your cladding and building wash. So that means every year there’s an annual wash of the cladding, so that means somebody comes down– it’s quite a tall building, so you’re going to have people down on carabiners washing the whole place.

Then Level One and Two. The first couple of floors before it turns into aluminium composite cladding. It is actually concrete, so that needs to be painted and not cladded. Things like that. You know, the car park. It is pretty self-explanatory but it gives you an idea of what are the big ticket items. For example, the annual wash each year actually costs 18-grand. Obviously that goes into the budget. It is not really a long-term thing, but is included in that.

What is another big one? Your car park. Painting the whole car park is 9,000. Things like that.

As we go a bit further, it talks about the expenditure. When is this expenditure happening? And how much is going to be needed to be raised? So in each year, 2015, which is this year, you need $32,000 to meet everything that’s got to be done – 2016, 43. Ifyou are an owner, you are looking at a big year. You are going, “Okay,  19, 29, 25, 47. That’s quite big.” So you’re expecting maybe a high levy. Or basically what you are doing is repairing the body corporate fee to cover that whole period. That’s it in a nutshell.

It is really, really important, because you may have a period where, say 2017-2018, there are some big ticket items. You know in your budget, or in your contingency fund, or long-term maintenance fund, and there’s not enough money to cover it. So you know there is going to have to be a special levy there. So you can prepare for that.

This is a really important document that most owners or most purchasers – when they go to purchase – are just completely unaware of or don’t even look through. Or even lawyers don’t even look through. A really important podcast, this one. So make sure you are aware of the long-term maintenance plan of the apartment and the precinct.

Now, if you want to go through one with me individually, just flick me an email: andrew@apartmentspecialists.co.nz, or give me a call on 021424892. I can help you out.

Anyway, talk soon. Cheers!