NAT: Q&A Provisions in the maintenance plan / sinking fund

This article is about making provisions for lift replacement and other maintenance requirements in the sinking fund / maintenance plan.

Table of Contents:

• QUESTION: Is there an average dollar value per lot that should be put aside for the Capital Fund?
• QUESTION: We are going through a lift replacement costing $200,000 which hadn’t been provided for. How do we start saving for the next lift replacement in 25 years time? Can you check my calculations?

Question: Is there an average dollar value per lot that should be put aside for the Capital Fund?

Answer: Each building has such varied maintenance requirements, however….

There is no one dollar amount per lot that can be a hard and fast rule for a Capital Works Fund Plan (CWFP) as each building has such varied maintenance requirements.

We always try to ensure there is a sufficient minimum balance throughout the life of a CWFP to ensure that the scheme maintains a healthy financial position amongst future expenses. For a very basic scheme of say 4-6 lots, simple design, we would usually hope to see $2000 – $2500 per lot as a minimum at any one time. For larger schemes, however, it is crucial to incorporate such factors as age, construction type, aesthetic appearance, current state of the scheme and any maintenance contracts in place (e.g. lift or painting contracts).

Dakota Panetta
Solutions in Engineering
E: [email protected]
P: 1300 136 036

This post appears in Strata News #593.

Question: We are going through a lift replacement costing $200,000 which hadn’t been provided for. How do we start saving for the next lift replacement in 25 years time? Can you check my calculations?

Lift replacement provision in the sinking fund.

We are going through lift replacement at our high rise after 25 years.

The cost is $200,000, which had not been provided for. We solved our problem using saved funds for painting which was due to be done in 2027 plus a $2,000 levy for this year. We will replace the painting money over the next 5 years at an increased rate to cover the $275,000 costs.

How do we make sure we have enough funds for the next lift replacement in 2047 (25 years away)?

My calculated cost of $200,000 (2022) at 3% CPI per year = $418,000 in 2047. This will start us at $8,400 next year, and end up with a contribution of $27,000 in 2047, giving us $400,000.

I feel discussion around this philosophy might be warranted as there are lots of lifts to be replaced in the years ahead. How are other buildings managing this type of maintenance? Have I got my calculations right?

Answer: Commission a new maintenance report/ sinking fund and advise the consultant of this situation. They can work with you to set up the future maintenance so that the levies are as low but consistent as they can be.

The cost to replace the lift in a scheme should always be factored into a maintenance plan. In most schemes it will be the largest expense if not, than one of the largest.

You are pretty accurate with your timeline of replacement, although most lift technicians will say 15-20 years.

This cost needs to be interjected into your current maintenance plan. Whilst the levies seem to be a shock to you now, it is only because you have not been allowing for the funding of the lift to date. You haven’t had that additional $200k in there to save up for, hence really, your current levies are far too low.

Can I suggest that you commission a new maintenance report/ sinking fund and advise the consultant of this situation and they or we can work with you to set up the future maintenance so that the levies are as low but consistent as they can be.

Peter Berney & Dakota Panetta
Solutions in Engineering
E: [email protected]
P: 1300 136 036

This post appears in the March 2021 edition of The QLD Strata Magazine.

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