Capital Works Fund Guide

What is the capital works fund?

Under Section 80 of the Strata Schemes Management Act 2015 (SSMA), every Owners Corporation must establish a capital works fund — a dedicated pool of money to cover anticipated major expenses on common property. This is separate from the administrative fund, which covers day-to-day operating costs.

The capital works fund exists to ensure that when significant maintenance or replacement work is needed — painting the building exterior, replacing the roof membrane, upgrading the fire system, or resurfacing the car park — the money is already there. Without it, the OC faces special levies that can run into tens of thousands of dollars per lot owner.

The 10-year plan

Section 80 requires the Owners Corporation to prepare a 10-year capital works fund plan detailing anticipated major expenditure. The plan must be prepared for the first AGM and cover a rolling 10-year horizon from that point.

A 10-year plan is required for all strata schemes, with limited exceptions for certain two-lot schemes that meet specific exemption criteria.

What the plan should cover

The plan should identify all anticipated major works over the next decade, with estimated costs and timing. For a typical North Shore boutique building, this commonly includes exterior and common area repainting (typically every 7–10 years), roof and waterproofing membrane replacement, lift modernisation or major servicing, fire safety system upgrades, plumbing and drainage remediation, balcony and balustrade repairs, driveway and car park resurfacing, and fencing and landscaping renewal.

Review requirements

The plan must be reviewed at least once every 5 years, but the OC can review, revise, or replace it at any general meeting by ordinary resolution. In practice, committees should be reviewing the plan annually alongside the budget — costs change, timelines shift, and unexpected issues arise.

April 2026 changes

From 1 April 2026, new standard form requirements come into effect for 10-year capital works fund plans, along with sustainability provisions. These changes aim to standardise how plans are prepared and presented across NSW, making it easier for committees and lot owners to understand their building's financial position.

How levies are calculated

At each AGM, the Owners Corporation must determine contributions (levies) from lot owners to fund the capital works plan. The calculation is straightforward in principle: take the total anticipated expenditure across the plan period, account for what's already in the fund, and divide the shortfall across the remaining years and lot entitlements.

The challenge is getting the estimates right. Underestimating costs — or deferring maintenance that then escalates — leads to underfunded plans and eventual special levies. Overestimating creates unnecessarily high quarterly levies that frustrate lot owners.

This is where regular building inspections pay for themselves. A clear picture of what actually needs attention — and when — leads to accurate budgeting and fair levies.

The real cost of deferred maintenance

The most expensive decision a committee can make is to defer maintenance. A minor gutter repair deferred becomes water ingress, which becomes internal damage, which becomes a structural remediation project costing ten times the original fix.

This pattern is especially common in self-managed buildings on the North Shore, where committees may lack the technical knowledge to assess urgency, or may face resistance from lot owners who see levies as an unnecessary cost. The capital works fund exists precisely to prevent these escalation cycles.

Impact on property values

Prospective buyers and their solicitors increasingly scrutinise strata records before purchase. A well-funded capital works plan signals a well-managed building. A depleted fund — or a history of special levies — raises red flags and can materially affect sale prices across the scheme.

Getting professional input

While the legislation doesn't mandate professional quantity surveyor reports for all schemes, they're strongly recommended for buildings over 10 years old or with complex construction. A quantity surveyor can provide independent cost estimates for major works, helping the committee set realistic levies and avoid surprises.

For smaller boutique buildings, a structured maintenance inspection — identifying what needs attention now, what's coming in 2–5 years, and what's further out — can provide enough detail to prepare a credible plan without the cost of a full quantity survey.

What this means for your committee

A well-prepared capital works fund plan protects the committee, the lot owners, and the building itself. It demonstrates financial responsibility, supports informed decision-making at AGMs, and — critically — helps avoid the special levies that create friction and financial hardship within a scheme.

The upcoming April 2026 standard form requirements are a good prompt to review your current plan. If it hasn't been updated in the last 2–3 years, now is the time.

Disclaimer: This guide provides general information about capital works fund obligations under NSW strata law. It is not financial or legal advice. For specific questions, consult a strata lawyer or qualified quantity surveyor.