In our previous newsletter we discussed the 1st part of the requirement of the compulsory 10 year maintenance, repair and replacement plan.
The 2nd part of the plan requires the determination of what must be contributed to the reserve fund for the maintenance, repair or replacement for each and every capital item.
Legislators have even gone so far as to provide a formula to calculate this contribution:
Estimated Cost = Total cost for the specified maintenance item provided for.
Past Contribution = Funds that are already in the body corporate reserve fund for this item.
Expected Life = Number of years until the expense must be incurred.
Below is an example of how contributions would be calculated in respect of the repainting of a complex using the formula above. NB to note that the initial estimated cost should be reviewed annually to ensure it remains sufficient. In the example below we show the effect of changing the initial estimate in Year 3.
In the next newsletter we will be looking at the 3rd part of the plan, how it is presented and the approval by members.
Article courtesy of Marina Constas and Karen Bleijs Demystifying Sectional Title