Financial Management
In this article
- What a maintenance fund (sinking fund) is and why it matters
- When a maintenance fund is legally required
- What a 10-year maintenance plan must include
- Signs that your maintenance fund may be underfunded
- Best practice for Tier 3, 4 or 5 OCs
The best way to avoid special levies
A well-funded maintenance plan is the most effective way to avoid the financial shock of large, unplanned special levies. Regular contributions spread the cost of major works over many years.
A maintenance fund — formerly known as a sinking fund — is a dedicated reserve of money set aside by an owners corporation to fund future major repairs, replacements, and maintenance of common property.
When is a Maintenance Fund Required?
⚖️ Tier 1 and 2 OC requirement — OC Act 2006
Tier 1 and 2 owners corporations (more than 50 occupiable lots) are legally required to establish and maintain a maintenance fund with an accompanying 10-year maintenance plan.
Tiers 3, 4 and 5 owners corporations (2-50Lots) are not legally required to have a maintenance fund, but it is strongly recommended as a matter of best practice. Without one, unexpected major repairs must be funded through special levies — which can place significant financial strain on lot owners.
The 10-Year Maintenance Plan
Tier 1 and 2 owners corporations must prepare a maintenance plan covering at least 10 years that identifies:
- All items of common property requiring maintenance, repair, or replacement over the period
- Estimated costs for each item
- Expected timing for each item
- The annual contribution required to adequately fund the plan
Common items in a 10-year plan
Roof replacement, external painting, lift modernisation, fire safety upgrades, plumbing and drainage, car park waterproof membrane, pool equipment replacement, intercom systems, pathway resurfacing, and hot water system replacement.
Signs your maintenance fund may be underfunded
- The balance is significantly below the accumulated liability in the maintenance plan
- The OC has needed to raise multiple special levies for items that should have been anticipated
- Visible deterioration of common property because repairs are being deferred
- The annual contribution has not increased in line with building costs over recent years
For Tier 3, 4 and 5 OCs
Even without a legal obligation, a simplified maintenance plan identifying major items likely to require attention over the next 10 years (with estimated costs) is a practical starting point. Reviewed annually, it protects all lot owners from financial shocks.
Frequently Asked Questions
💰 What is the difference between a maintenance fund and a sinking fund?
They are the same thing. ‘Sinking fund’ is the term used in other states. ‘Maintenance fund’ is the current terminology under the Owners Corporations Act 2006.
🔒 Can the OC spend maintenance fund money on other things?
The maintenance fund should be used for the purposes identified in the maintenance plan. Using it for operational expenses or unrelated costs may breach the committee’s obligations and could be challenged by lot owners.
📋 Is the maintenance fund balance shown on the OC certificate?
Yes. The OC certificate typically includes information about the maintenance fund balance — important for prospective purchasers assessing the building’s financial health.
📊 How is the annual contribution to the maintenance fund determined?
It is determined based on the 10-year maintenance plan and the current fund balance. It should be sufficient to cover anticipated costs as they arise over the plan period.
📋 Key takeaways
- Tier 1 and 2 OCs (50+ lots) are legally required to have a maintenance fund and 10-year plan.
- Tier 3, 4 and 5 OCs (2-50 lots) are not legally required to have one, but it is strongly recommended best practice.
- An underfunded maintenance fund is one of the biggest drivers of unexpected special levies.
- The maintenance fund balance appears on the OC certificate — important for prospective buyers.
- Review and update the maintenance plan at least annually, and ensure contributions match anticipated costs.