Owners corporations are notoriously tight with money, and with good cause. Firstly, it is limited, secondly, it is not just one person’s money to spend as they wish, and thirdly, figuring out what or who is good value for money is time consuming and sometimes no-one wants to make the effort.
A perennial dilemma for most buildings is how much do we spend on essential versus non-essential renovations or upkeep? The NSW Strata Schemes Management Act (1996) requires that common property be maintained but there is wide scope for flexibility in deciding, for example, when to replace the carpet, when to re-paint the lift lobby walls and when to replace the gym equipment. Once the ‘when’ is agreed upon then the quality of the upkeep needs to be considered. For example, do you replace the aging 20 year old gym equipment with a new but down market brand or go for the more expensive, best you can find equipment?
When maintaining or and repairing common property the executive committee does not need to take decisions for approval to the owners corporation. It is allowed to make the decision itself, however with certain checks and balances (see section 1.3.2).
|A strata building’s chair (who was also being paid as a part-time back office manager) unilaterally decided to remove the shower fittings in both the male and female change facilities on the floor adjacent to the gym, pool and sauna. His logic was that the people showering were either external invitees or occupiers who were in overcrowded apartments. Although his logic was sound he had no authority to have the fixtures removed. Even if he had got the motion approved at an executive committee meeting the power would have been 'ultra vires'. To change common property in this way the motion would have needed to be passed by special resolution of the owners corporation at a general meeting.|
For example, if the lobby was just being repainted or recarpeted, then the executive committee could approve the spending. However, it the lobby area’s front desk was being preplaced or its mail boxed re-located then the approval of the owners corporation should be sought (Section 65A of the Strata Schemes Management Act 1996 requires certain common property changes to be authorised by the owners corporation, not the executive committee).
With any motion that is up for consideration by the owners corporation, you should provide as much succinct information before hand and at the meeting. Invite owners to come to lobby design meetings and presentations. Ask for ideas, but be careful not to make it a free-for-all. If you have 115 lots in your building you will have at least 115 opinions on how something should be designed. It is best to narrow the choices down to just 2 or 3 before going to owners for their opinions or approval.
By deciding on the quality and quantity of maintenance, compliance and appearance of the scheme the executive committee will determine the value of each owners' investment - in other words, the property's value in the market. It can help create a community that is enjoyed by residents and appealing to purchasers.
Money spent on common property improvements benefits all owners and occupiers both directly through living amenity and indirectly by improving rental yield and capital growth. The cost of common property improvements is spread throughout the owners and so if done well provides excellent ‘bang-for-the-buck’ investment.
It is obvious but worth reiterating that a property in a rundown, poorly run scheme will never attract as good a price as an obviously well maintained and beautifully presented property in a similar area.
|Relevant NSW Legislation: Strata Schemes Management Act (1996)|
Section 62: What are the duties of an owners corporation to maintain and repair property?
Section 65A: Owners corporation may make or authorise changes to common property