Administration and Capital Works Funds

What can and can’t be paid from the administrative and capital works fund.

The Strata Schemes Management Act NSW 2015 sets out the management of the two required funds of the owners corporation – the administration fund and the capital works fund.

Owners corporation must at every annual general meeting must estimate how much money it will need in its administrative and capital works fund. “Estimates” are the line items in the budget which is put to the owners corporation at the annual general meeting (AGM). These line items determine what the individual levies are.

What are the estimated items that an owners corporation must budget for under section 79(1)?

An owners corporation must estimate how much money is needed for the administrative fund for actual and expected expenditure;

• to maintain in good condition on a day-to-day basis the common property and any personal property vested in the owners corporation, and
• to provide for insurance premiums, and
• to meet other recurrent expenses.

An owners corporation must estimate how much money is needed to credit to its capital works fund for actual and expected expenditure;

• for painting or repainting any part of the common property which is a building or other structure, and
• to acquire personal property, and
• to renew or replace personal property, and
• to renew or replace fixtures and fittings that are part of the common property, and
• to replace or repair the common property, and
• to meet other expenses of a capital nature.

What money can be paid out of the Administrative Fund (s73(4))?

An owners corporation must not pay any money from its administrative fund except for the purpose of payments:

(a)  payments of the kind for which estimates have been made under section 79 (1),

(b)  payments made in accordance with this Division on a distribution of a surplus in the fund,

(c)  payments to a member of the strata committee of the owners corporation in accordance with this Act,

(d)  other payments in connection with exercising its functions under this Act or the by-laws, or the Strata Schemes Development Act 2015, except payments that are permitted to be made from the capital works fund,

(e)  any monetary penalty payable by the owners corporation under this Act,

(f)  the transfer of money to the capital works fund or to pay expenditure that should have been paid from the capital works fund.

What money can be paid out of the Capital Works Fund (s74(4))?

An owners corporation must not pay any money from its capital works fund except for the purpose of:

(a) payments of the kind for which estimates have been made under section 79 (2),
(b) payments made in accordance with this Division on a distribution of a surplus in the fund,
(c) payments of amounts for the purposes of Part 11,
(d) the transfer of money to the administrative fund or to pay expenditure that should have been paid from the administrative fund.

Note: with the exemption of 2 lot strata schemes which can resolve not to establish a capital works fund if the owners agree and the buildings are physically detached from each other and there are no other buildings in the strata scheme.

Can monies be transferred from one fund to another (s76(1)(a)?

Section 76 (1)(A) allows an owners corporation to transfer money from its administrative fund to its capital works fund or by meeting from its administrative fund expenditure that should have been met from its capital works fund. Section 76 (1)(b) allows the transfer of money from the capital works to the administrative fund. Section 76 (2) allows these temporary transfers of money from the two separate funds, provided the owners corporation, not later than three months after the disbursement, make a determination under Section 81 of an amount sufficient to recoup the amount of the disbursement.

Thus, in effect, temporary transfers are allowed between funds as long as due process is followed.

Any questions, just ask your accredited Strata Plus strata manager.