One of the most difficulties a scheme encounters is addressing a substantial cost that catches everyone off guard. The necessity for a 10-year maintenance, repair, and replacement strategy has forced Trustees to engage in forward-thinking and planning. Nevertheless, certain expenses still evade prediction.
A Practical example of unforeseen expenses is as follows:
After receiving an unexpectedly high-water bill, the body corporate discovered a major water leak. After a thorough investigation, they enlisted the services of a plumber who successfully repaired the leak in the main communal water line. The repair expenses totaled R10,000, while their outstanding debt to the Council amounted to R65,000. Unfortunately, neither the Body Corporate's administrative fund nor the operational account had provisions for such expenditures. The trustees passed a resolution to access funds from the Maintenance Reserve Fund. Their intention is to utilize these funds to cover the plumber's costs and to settle the outstanding Council debt. Given that neither the mainline repair nor the council debt was accounted for in the maintenance plan, the trustees' options were limited. Fortunately, the Act allows for certain extraordinary situations in which the trustees are granted some flexibility within the strict confines. PMR 24(5)(b) outlines the circumstances in which trustees can access funds from the reserve fund for expenses not originally covered in the maintenance plan.
PMR24(5)(b) Money may be paid out of the reserve fund and in accordance with the Trustees’ resolution and the approved plan, alternatively if the Trustees resolve that such payment is necessary for the purpose of urgent maintenance, repair, or replacement expense.
The trustees are advised to settle the outstanding debt owed to the council to avoid incurring interest charges. To achieve this, it is recommended that the trustees consider collecting the cost through a one-time special contribution from members. Additionally, the trustees should utilize funds from the reserve fund to cover the plumber's expenses, report this expenditure to the members promptly, and make necessary adjustments to the maintenance reserve plan and proposed reserve fund budget. These adjustments should be presented for approval at the upcoming Annual General Meeting.