Report on Multi-Unit Developments - Law Reform Commission

every development for the purposes of, amongst other things: ―reasonable
provision for future maintenance and repairs.‖ 9
6.09 In England and Wales, the Commonhold and Leasehold Reform Act
2002 requires the mandatory establishment of a reserve fund in certain
circumstances. 10 Similarly, the Singapore Building Maintenance and Strata
Management Act 2004 requires the establishment of a fund which covers
service charges, administrative costs and all expenses normally associated with
building investment funds prior to the establishment of the owners association. 11
6.10 A number of elements of the legislation in these States should be
noted. In the case of smaller developments, legislation generally provides that
reserve funds should be set up only at the discretion of the owners‘
associations. 12 The Commission sees great merit in this approach. 13
6.11 Legislation dealing with reserve funds in other countries varies in
terms of detail on the type of expenditure to be covered. For example, s.116 of
the South Australian Community Titles Act 1996 provides that the fund should
be used only for ‗non-recurrent expenditure‘. This in turn is defined as
―expenditure for a particular purpose that is normally made less frequently than
once a year‖. Some legislation uses a basic, catch-all formula:
―a reserve fund shall be used solely for the purpose of major repair
and replacement of the common elements and assets of the [owners‘
association]‖. 14
Provisions in other jurisdictions take a more considered and detailed
approach. 15
6.12 The Commission considers that a composite of both approaches is
preferable. As discussed later, in the interests of avoiding any misunderstanding
as to the function of building maintenance funds, the Commission recommends
9
Sectional Titles Act 1986, s.37 (1)(a).
10
See section 39(1), Commonhold and Leasehold Reform Act 2002.
11
Building Maintenance and Strata Management Act 2004, section 16.
12
See for example, s.70 of the New South Wales Strata Schemes Management Act
1996and s.62 of the Australian Capital Territories Unit Titles Act 2001.
13
See paragraph 6.32 below.
14
Ontario Condominium Act, S.O. 1998 c.19, section 93(2).
15
See for example the Australian Capital Territories Unit Titles Act 2001, s. 61(3)
which lists the particular circumstances under which owners corporations may
make payments from their reserve funds.
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