All strata schemes in NSW must establish an administrative fund and a capital works fund (was called a “sinking” fund) to administer the finances of the strata scheme.

The administrative fund is used to manage the day-to-day expenses of running the scheme, such as maintaining and repairing the common property and personal property owned by the owners corporation, ongoing maintenance (such as garden care) and insurance.

Examples of expenditure from administrative fund

Day-to-day expenses of running the scheme including:

  • maintenance of the common property;
  • insurance;
  • recurrent expenses such as electricity, water and rates;
  • pest control;
  • window or carpet cleaning and lawn mowing services. The capital works fund is to ensure that there is enough money to pay for capital expenses for major works to the common property when a job needs doing. Contributions made by owners to the capital fund are not refundable if an owner moves out of the strata scheme, even if the money has not yet been spent.

Examples of expenditure from capital works fund

One off, or major expenditure, such as:

  • painting or repainting the common property;
  • acquiring, renewing or replacing personal property for the scheme;
  • renewing or replacing fixtures and fittings that are part of the common property;
  • replacing, repairing or upgrading the common property;
  • any debts, other than amounts covered by the administrative fund;
  • other capital expenses.

The Owners Corporation must prepare a plan of anticipated major expenditure to be met from the capital works fund. This also helps determine the contributions that the owners need to pay.

The plan is for a 10 year period starting on the first AGM of the Owners Corporation, and must be reviewed at least every 5 years. After the 10 year period is up, there should be a new 10 year plan completed.

Surplus funds in each account can be distributed among the owners.

Special levies

Owners Corporations can vote to introduce a special contribution or ‘levy’ where there are insufficient funds to cover expenses such as large capital works or unforeseen work.

Fund transfer

The Owners Corporation of schemes with more than two lots can transfer money from one fund to the other, or make a payment from one fund that would normally come from the other. However, the Owners Corporation must levy a contribution on the owners to repay that fund within 3 months after using that money.

Funds for specific purposes

A fund may be created for a specific purpose for a group of the lot owners who opt in. For example, some lot owners may want Pay TV services and have a fund established for this purpose. Interested lot owners would pay costs into this fund and use the service without passing costs on to other lot owners who do not wish to have the service.

Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.


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