North Queensland sinking funds don’t hit the mark

New findings by Queensland’s largest body corporate provider reveals the average North Queensland sinking fund will be drained before repairs have even begun if another major natural disaster strikes.

Excessive insurance premiums following Cyclone Larry and Cyclone Yasi has left building owners, apartment owners and investors with little choice but to offset the increased insurance fees by paying less into their sinking fund.

BCS Strata Management Far North Queensland Regional Manager Patricia Kite said most sinking funds don’t contain enough to cover the initial insurance excess.

“Insurance excess payments are generally required to be paid immediately when a building is damaged,” she said.  

“BCS Strata Management has negotiated with insurance companies to offer many of its customers an extended excess payment period, allowing repairs to begin right away.

“For building owners who do not have enough money available in their sinking fund, imposing a levy on all apartment owners, or applying for a loan is often the only option.

“This could leave many apartment residents homeless for months as the start of repairs is pushed back.”

Ms Kite said a number of variables including the age of the property, recent upgrades and what assets the body corporate has to maintain including swimming pools, marina berths, tennis courts and lifts must be taken into consideration when calculating an appropriate sinking fund.

The rise in insurance premiums is adversely affecting the North Queensland property market as a whole.

“People who purchased property while prices were high are receiving significantly lower than expected rental returns,” Ms Kite said.

 “Consequently, meeting mortgage, insurance and strata management payments is a struggle.

“Insurance companies should consider reducing premiums to ease the financial burden on these people, particularly if there are no natural disasters for a prescribed amount of time.”