strata 101 part 5 financial management & records 6 august 2012

© Copyright 2012 Teys Lawyers www.teyslawyers.com.au

Strata 101- Financial Management & Records A 7 Part Training Series for New Queensland Body Corporate Managers, 6 August 2012


Overview

1. Financial year and budgets

2. ContribuKons and levies

3. Financial accounts

4. Documents and record management

5. InspecKon of records


Financial Year and Budgets

ü Financial year ends on the last day of the month for the month in which the plan was registered eg if plan was registered 15 August, financial year is 1 August 1 to 31 July

ü Admin fund budget for cost of maintaining common property, insurance and non-‐capital expenditure

ü Sinking fund necessary and reasonable spending for major works this year and a reserve for the at least the next 9 years


Are the Levies Too Low?

Deficits • AdministraKon fund goes into deficit

Neglect • Sinking fund not expended “just in Kme”

Crisis • Sinking fund balance short of plan


Is the AdministraKve Fund Budget Correct?

•  Provision for bad debts and recovery costs?

•  Watch for rampant increases for electricity and insurance

•  Look for a small surplus each year of about 10% of income


Is the Sinking Fund Budget RealisKc?

•  Following the sinking fund plan + / -‐ 10%?

•  Spending according to the plan?

•  Saving according to the plan? •  Not having a plan is negligence

•  Not following the plan is negligence


Developers’ Hate Paying Levies

•  Strata managers can be sod on developers

•  Serious arrears puts financial pressure on the remaining owners

•  Consider winding up proceedings that will come to the aeenKon of the developer’s bank


Signs of Good Levy Management

1.  Measurement of delinquencies

2.  Wrieen levy collecKon policy in place

3.  Policy followed consistently 4.  Interest charged on

outstanding levies 5.  Discount offered for early

payment


Financial Accounts

•  Accounts must show income and spending for each financial year

•  If done on an accrual basis, must show assets and liabiliKes

•  Must be audited unless the body corporate by special resoluKon decides not to have an audit


Documents and Record Management

•  Must keep forever –  The roll –  Registers –  Contracts > 6 years –  Important noKces –  Plans and drawings –  Each insurance policy –  Exclusive use rights


InspecKon of Records •  Lot owners, buyers,

mortgagees and their agents may inspect and take copies of records

•  Privacy laws apply to body corporate records and there should be a privacy policy for the body corporate

•  Body corporate may be liable for incorrect details on a cerKficate


Next Week

•  Management rights

1.  What are they?

2.  How are they granted?

3.  How are they transferred?

4.  Do they have to be extended?

5.  How are they terminated?


About the Presenter Michael Teys is the Founder and Principal Lawyer of TEYS Lawyers. He has a Bachelor of Laws and practices exclusively in the area of strata and community title law. He is a Fellow of the Australian College of Community Association Lawyers. He was formerly an Adjunct Lecturer with Charles Sturt University. He has also been the CEO of a publicly listed company and one of Australia’s largest strata management companies managing over $8B of residential and commercial property. Michael appears weekly on SKY News Business Channel's Property Success with Margaret Lomas and is a regular panellist for the property edition of Your Money, Your Call for the same channel. You can read Michael’s blog at www.michaelteys.com and follow him on Twitter at @MichaelTeys.com

Teys Lawyers practice nationally in strata and community title law representing owners corporations, bodies corporate and apartment owners. The firm’s practice groups include building defects, strata community disputes, strata title property law, by-law / rules and levy / fee collection.

TEYS Lawyers provide an entirely cloud based working platform for their team. The firm provides flexible working arrangements and has remote working locations in Queensland and Victoria.

strata 101 part 5 financial management & records 6 august 2012

Economy & Finance