How do body corporates fund maintenance?

In order to fund the maintenance of the buildings and all other parts of the common property, as well as offset all expenses incurred in the day to day running of the scheme, every body corporate is required (S3(1)(a)(b) of the STSMA) to establish and maintain an administrative fund to cover its expenses. Additionally, every body corporate must establish and maintain a reserve fund, and must prepare a 10-year maintenance, repair and replacement plan (MRRP), for this purpose.

The Trustees estimate the body corporate’s expected expenditure from both the administrative and the reserve funds in the form of budgets.

Budgets are considered at each annual general meeting and, once approved by owners, the Trustees resolve the required contributions and the instalments in which they must be paid, as well as the interest rate that will be applied on overdue instalments.

Contributions are then divided amongst owners in accordance with the participation quota (PQ) of each owner’s section.

The PQ, expressed as a percentage to four decimal places (unless the management rules specifically require otherwise, i.e. a notional PQ), is calculated by dividing the floor area of each owner’s section(s) (as reflected on the sectional plan) by the total of all the floor areas of all the sections in the scheme.

The Trustees then instruct Intersect to collect these contributions on their behalf and, at the same time, issue instructions with regards to applying interest on overdue instalments. Should Intersect not be successful in the collection of contributions from an owner, the matter is referred back to the Trustees, pursuant of an instruction to hand the account over to a collection attorney, as Intersect does not act as a debt collector, as defined by the Debt Collector’s Act. All costs incurred in doing so are recovered from the defaulting owner.