What is a MRR plan?

According to the Sectional Title Schemes Management Act, each body corporate is required to establish a reserve fund, including a ten-year maintenance, repair, and replacement plan (MRR).

A MRR plan’s purpose is to ensure that the body corporate has enough funds to cover the costs of maintaining and repairing the common property over a ten-year period without having to raise any special levies. Ultimately, protecting the owner’s investment.

When implementing the reserve fund plan and calculating the annual reserve fund contribution, a few key factors must be considered. 

Things to consider;

Accuracy of an MRR plan

The act stipulates that a plan be in place; however, the accuracy of the plan is crucial to ensuring the operational wellbeing of the scheme.  

We recommend all schemes have their MRR plan updated each year by specialist building consultants. Consultants will have the expertise to advise on the plan and provide onsite visits to assess the condition of the common property. They will also  ensure the costs being budgeted for are based on accurate quotations and take inflation into account over the ten year period.

Accurate and Timely Financial Services

Affordability of expenses in a MRR plan

The affordability of expenses should be reviewed annually alongside the annual budget. The act stipulates the minimum amount that should be contributed to the maintenance reserve fund. It is important for trustees to consider the ten year cash flow of the plan to ensure that the legal requirements are met as per the act. They should also consider the reality of sufficient annual contributions to cover all future estimated projects and costs.

It is vital not to fall into the trap of only contributing the minimum amount required for the year in order to keep levies down. This will ultimately lead to a cash deficit and maintenance being postponed to future years. 

A delay in maintenance on a property will have severe implications. A deteriorating building will result in an increase in maintenance costs. This could potentially also result in a special levy being raised in order to cover the higher costs of maintenance and repair, particularly if the repairs become more urgent. 

Effective Maintenance Management

How we manage an MRR plan

At FMS Property Managers, we utilise the reserve fund software in WeConnectU. This enables us to enter the reserve budget into the accounting system and report on annual costs against the approved maintenance reserve budget.   

This is a fundamental reporting tool for trustees and management. Monthly accounts are also able to be reviewed and managed on the platform. The tool also assists in the planning of the year’s projects, ensuring the costs and expenses are kept within budget. In this way, we are able to easily analyse the yearly spend and review which projects need to be carried over in the maintenance plan for the new year.

As your trusted Managing Agent, our primary goalremains unwavering: to provide exceptional customer service and maintain the seamless operation of your property.

We can help you draft your MRR Plan. Contact us to find out more.

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