Using reserve funds for strata titles – a best-practice approach

Strata value and resident satisfaction are directly related to the financial strength of the strata titles, where the reserve fund plays an important part. A strata owner must establish a fund to accumulate money for maintenance costs.

How is this done?

A strata owner needs to determine the amount of money that is to be paid into the fund, and levy contributions on the owners to raise that amount.

Strata managers should aim towards minimising unexpected costs and controlling operating costs needing to preserve the site’s standards and functionality.

Preventative maintenance is essential for cost-effectiveness.

Using a reserve fund to support regular maintenance avoids large sums being required in a short space of time. Ongoing maintenance reduces the likelihood of needing to raise money for unforeseen repairs or replacements through special levies, therefore increasing resident satisfaction. Preventative maintenance can also plan for any future replacement of infrastructure, scheduling it as part of the works to be undertaken with the ability to allow for the cost of this to be amortised along with overall ongoing maintenance. This helps to ensure the health of the reserve fund.

Keeping records

Regular reporting on the fund’s expenditure on maintenance and repair work can provide data to help determine future capital requirements, especially when done in conjunction with maintenance that both monitors and reports on the condition of the property. Together, these help establish visibility over spend and when able to establish, as a result, any particular area of the asset portfolio that is consuming a rising portion of repair costs, allows for early intervention before significant property damage occurs, further supporting effective utilisation of the fund.

Reserve fund balance

To understand whether there is adequate balance in the reserve fund, a full analysis of the property’s design, amenities, age, features, condition and history will need to be undertaken. Carried out as part of a long-term maintenance plan, a strata can leverage these to astutely plan and prioritise works to ensure the reserve fund is always in a strong position, and the site consistently well-presented and maintained.

If you aren’t sure where to start, contact a trusted property maintenance provider to help develop a maintenance plan suited to your site. Choosing a credible partner can not only help preserve a healthy reserve fund but help with a consistently well-presented property.