The Emergence of Very Long-Term Maintenance Planning in the Unit Titles Act
The emergence of the amended unit titles act has elevated New Zealand to among the highest standards in the world of forward maintenance planning for unit title schemes. With most buildings now requiring a 30-year plan and a 3 yearly, professional review, NZ is leading the charge in reducing the number of unforeseen and unplanned building expenses.
The requirement to estimate maintenance costs, life cycles and funding for a period of 30 years sets New Zealand ahead of many established strata and unit title industries around the world. Close neighbour Australia only has a requirement to plan 10 years’ worth of forecast maintenance in most states with an understanding that regular reporting will allow for changes as they come to fruition. This however often means that a maintenance item due to expire in year 11 (not forecasted on a 10-year report) creeps up on owners unawares and leaves less than 6 years (if updated every 5 years per legislation) to fund a huge cost like roofing, often in the millions of dollars. To triple this outlook to 30 years for all buildings over 10 units is an incredible move by the New Zealand government. Now all unit title developments with 10 or more units should have a 30-year warning of large maintenance items due to impact owners and the finances of the body corporate. Whilst construction inflation has risen sharply over the last few years causing any planned maintenance to escalate (in some cases threefold) on budgeted costings, the combination of a 30 year outlook and 3 yearly reviews will ensure that owners are constantly adapting building funding to meet realistic costs.
Having completed millions of maintenance reports around the world, we know it is crucial that bodies corporate are updating their Long-term Maintenance Plans at least every 3 years as the act requires, if not sooner. It is pointless using an LTMP that is 5 or 6 years old when we have been impacted so heavily in the construction industry. Any predicted maintenance back in 2017/2018 will mean nothing in today’s costs that have seen an overall construction inflation above 10% p/a. Whilst the construction index inflation is at 10% we all know that the cost of certain materials is far higher. Just like when the government announces CPI at 8%, we go to the shops and milk has doubled in price, the same phenomenon occurs in construction. Products like steel have increased more than 100% in some instances and the per square meter rate on construction has increased more than 30%.
Having a 30-year outlook is designed to encourage owners and committees to forward plan their finances and begin saving money for huge ticket items like elevator and roof replacements. Over 30 years, these costings will change with advances in technology, building processes and the inflation of economies and be amended on each review. Body corporate managers and building managers will need to educate committees that costings that fall beyond year 10 of the maintenance plans are high level estimates and these will continue to change on each 3 yearly review. The important element is that BCs are saving some money towards these major expenses decades in advance, so as the price estimate becomes more accurate on each review, the BC is in a stable financial position to fund the maintenance. Proactive, timely maintenance will invariably save the body corporate a lot more money in the long term as opposed to a reactive style of dealing with maintenance issues.
With the strengthened requirements of disclosure during unit sales, NZ body corporate buildings must ensure that they constantly have an up-to-date Long-term Maintenance Plan prepared in accordance with the UTA or risk obstructing unit sales and property transactions. Managers will need to ensure that they are adding the cost of these plans and their reviews to the operating budgets every three years to ensure managers are not left liable for failing to keep these plans updated.
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