Ava and Nick are looking at buying a unit titled apartment.  Before they signed an Agreement for Sale and Purchase, they wanted the vendor to obtain details of accounts and funds held by the Body Corporate, so they could get an idea of whether the Body Corporate would be able to fund any future works required on the building or whether extra levies would be required.

They discovered that the Body Corporate had multiple funds, and were confused as to what each of the funds related to, so took legal advice.

The new laws relating to unit titled properties require the establishment of a day to day account but also refer to other funds. The funds are:

  1. Operating account – this is for every day expenses, eg insurance, cleaning of common areas, lawn mowing.  This fund is compulsory.
  2. Long Term Maintenance Fund – this is exclusively for repairs included in the Body Corporate’s Long Term Maintenance Plan. This fund is not compulsory.
  3. Capital Improvement Fund – this is to cover capital improvements to the complex that are not included in the Long Term Maintenance Fund, e.g. turning a grassed area into a swimming pool.  This is not a compulsory fund.
  4. Contingency Fund- this is for any other unbudgeted expenditure.  This is not compulsory.

It is important to ensure that your Body Corporate has set up appropriate funds to deal with upcoming plans for improvements or repairs, as this will be relevant to those (like Ava and Nick) looking at buying into your buildings