OMCs: Once-off levies
Unfortunately, we are seeing more and more Owners’ Management Companies (OMCs) that are required to approve and charge out a once-off levy. This is where a large expense arises, and the OMC does not have an adequate sinking fund to cover the cost (refer to our previous post on sinking funds0.
Mainly, these relate to expenses that are unexpected such as fire safety issues or repair of building defects. These may be uncovered after some routine work is carried out or when an inspection is commissioned by the directors.
The issue with these large once-off projects is that the cost can be substantial and to complete the work the OMC may require all or a vast majority of the members to pay the levy quickly, so it has the cash reserves to commence the work. This is not always achievable, and it can put the directors of an OMC in a difficult position, in deciding what work is done and what is not.
It is vital that directors of OMCs engage qualified staff to assist with such projects. In a lot of cases the OMCs existing property management agent will be able to supply some of the expertise while also engaging the services of other qualified individuals.
An important element of these projects is how the OMC communicates the initial findings of the issue, the planned work, and the overall cost to the members. The ideal case would be that the works have the full support of all members, but this is not always possible. Approval of the levy will be required at an EGM of the members and directors need to ensure that they have provided members with all the information necessary on the planned project.
Larger scale projects may require a board member or an individual working for the property management agent to take control of the project. It goes without saying that the correct accounting for the levy income, amounts received, and project costs are hugely important. Any over or under-runs will need to be flagged to members and a decision on what to do will need to be made.