Can you project forward how much it will cost to maintain your development into the future - say 20years?
Can you foresee and identify major issues that may occur i.e roof problemsor estimate the wear and tear i.e interior common areas?
If you answered No to any ov the above, then you might need to consider using specialist expertise to create A Building Investment Fund for your development .
Building Investment Fund Management (BIFM) is a type of sinking fund that serves as a reserve created to build up sums of money that can be used to pay for large imaintenance and repairs in the future. The difference between Building Investment Fund management and a Sinking Fund (SF) per sae is that with BIFM the projected problems and maintenance requirements are professionally assessed ,quantifiable and managed; whereas A Sinking Fund, in it general sense, is an agreed sum of money put aside for future requirement, but may not necessarily be professionally assessed.
From our experience, this is one of the biggest downfalls in maintaining building value. The sums required can be significant over a 20 to 30 year life cycle. The fund should be initiated from the very first year and then adjusted as necessary annually and collected to avoid, as the work arises, the costs having to be funded through a special levy or a one off lump sum.
Funds and expenditure headings are specific to the development and will differ accordingly.
However, in simple terms infrequent but essential refurbishment or replacement headings are:
- Lifts (upgrades and/or replacements)
- Mechanical and electrical plant – lighting systems, pumps, fire alarm and safety systems, intercoms, security plant i.e. CCTV cameras
- Gates - motors and parts
- Roofs - major repairs to, or replacement of materials and parts
- Roads and car parks, footpaths/kerbs re-surfacing, repairs or replacement
- Replacement of windows (Management Company is often responsible for individual apartment windows)
- Repairs to building fabric i.e. re-pointing of brickwork
Whilst more regular refurbishment might include:
- Interior common areas - redecoration of walls, ceilings and woodwork (usually includes external side of apartment doors & door frames)
- Re-carpeting and re-tiling of floors
- Exterior repainting of walls, surfaces, balconies, railings and woodwork
The usual method of calculating how much money should go into the fund each year is to take the expected costs of future works and divide it by the number of years which may be expected to pass before it is incurred. However this requires specialist expertise and an assessment of the building fabric, materials and plant to ensure that all the provisions are identified and adequately accounted for such as the expected life of plant and equipment which will depend on the item in question and will be influenced by:
- The quality of the original installation
- The type and level of maintenance carried out
- Technological advances which may make an item obsolete or difficult to maintain
- Legislation, particularly Health & Safety
In the absence of the Directors seeking this professional advice from a chartered quantity surveyor, ODPM can assist the directors in the preparation of a Sinking Fund Estimate using current best estimates and guidelines.
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