Why Our Long-Term Maintenance Plans Make More Sense for Everyday Owners
When planning for future maintenance in multi-unit developments, the conversation often turns to the idea of Full Funding, a concept frequently used to support the use of a Reserve Study. Find out more about Reserve Studies here.
The logic of Reserve Studies goes something like this - Work out the lifespan of each building component, estimate the replacement cost, divide the replacement cost by the number of years of life remaining, collect that amount each year and put it in a fund so that when the time comes, the cash is ready and waiting.
It sounds rational, responsible, and reassuring But is it practical for the average New Zealand body corporate and its owners?
At Plan Heaven, we think there's a better way, and below we explain why.
1. The spreadsheet is likely to be wildly inaccurate
While there are many theories about the life and durability of most building elements, the truth is, nobody really knows how long each will last.
For example, in theory, it is often suggested that metal roof claddings have a life of 20 to 30 years. In reality, the most common roof cladding in New Zealand is factory-finished galvanised steel (Colorsteel or similar), which has been in use since the early 1990s. In the mid-2020s, 30 years later, this cladding was showing no sign of widespread failure, and we now appreciate that it hasn't been around long enough for anyone to know for sure.
So, in reality, it's not unreasonable to think many of these roofs could last 50 to 70 years or more, and having the funds available for replacement in year 20 or 30 is almost sure to be unnecessary.
2. Some systems are maintained, not replaced
Most building elements are never replaced en masse, so there is no point in attempting to estimate the life and cost of replacement for a total system.
We could use plumbing and drainage systems as an example. In this case, it might be more accurate to predict replacements down to the last tap, pipe, and drain, but that would be a costly and mostly pointless exercise.
Another element we could use as an example is timber windows and doors In heritage buildings, these have been proven to last over a century with only basic maintenance.
The Old Government Buildings in Lambton Quay, Wellington, is the largest timber building in the southern hemisphere and once housed the government It was built in 1876 from native timber The rusticated weatherboards are Kauri, and the sash windows are glazed Totara.
It is one of New Zealand's most treasured heritage buildings.
Using this building as an example, if you are asked how long weatherboards last, one answer might be "indefinitely if you maintain them correctly".
3 Some systems are replaced systematically, piece by piece, over time
My father-in-law was a joiner, and when he retired, he proudly held up his hammer and said, "This is the same hammer I started my apprenticeship with". Then added "it's just had six new handles and three new heads".
That's your HVAC system, where fans, filters, and controllers are replaced, component by component, when they fail Unless there is a major event, such as a fire or earthquake, the whole system will never be replaced in one project.
The same goes for your fire protection systems, security systems, lift, swimming pool, and so on.
We don't need to plan to replace each of these items. We just need to plan to maintain them and replace components that fail or become obsolete.
4. Update your LTMP frequently
An alternative and more useful way to ensure peace of mind is to update your LTMP frequently. We have several options for updating that allow this to be done at a reasonable pric. See this help page on our website.
Each time you update your LTMP, you can reconsider what you said last time in light of new evidence But for this to be of full value, your earlier LTMP should explain why an amount is budgeted If it's just a line in a spreadsheet with no commentary explaining where this amount came from, it's going to be difficult to reassess. That's what you get with your average LTMP that uses the Reserve Funding method.
Reserve Studies aren't big on commentary. But at Plan Heaven we are. If we budget for something, we like to explain why and how we calculated the amount.
5 Big savings tied up, doing nothing
When a body corporate aggressively saves for every theoretical future expense, it can quickly accumulate a large reserve fund. While that sounds prudent, it also ties up real money that could be helping owners with mortgages, education, or life in general. For some, seeing $10,000 of their money sitting in the BC account while they struggle with household cash flow is hard to swallow. And fair enough.
Our approach is to encourage a healthy closing balance in the body corporate's reserves, weighed against the benefits of allowing owners to have access to their own tax-paid dollars when the body corporate has no current plans for them.
How much should you have? We've written another article on that. It's published on our website here.
6 Ownership Is short
In support of the previous point, there is another disincentive to having too much of each owner's cash in the body corporate's account.
The average New Zealand property changes hands every eight years, so most owners don't stay long enough to enjoy the benefits of a 30-year plan. So it’s understandable that many want to focus their contributions on maintenance that protects the value of their investment during their ownership and not someone else’s in the 2050s.
This is different from an institutional property owner, whereby the shareholders have a duty to prudently govern the enterprise in the interests of all stakeholders, including the new ones who will take over in the future.
See this article on Reserve Studies to better understand who may benefit from this type of planning.
7. Planning for the building, not just the spreadsheet
At Plan Heaven, we believe a good long-term maintenance plan should be practical, realistic, and easy for all owners to understand and adopt.
We look at what maintenance is likely to be required and when. Then we estimate roughly how much it will cost, and from there, we can calculate the minimum level of cash in reserve to realistically cover the planned work. We prefer to round the budgets to the nearest $1,000, but in its $100.
It's simple, really, and we make an effort to keep it that way. Our plans are written for unit owners, not academics.
Ends. Updated April 2025. JB
If you have any feedback or questions please use the feedback form.
The Plan Heaven team.
Disclaimer. Plan Heaven is not qualified in law and any comments made on this website are only the opinion of Plan Heaven and should not be regarded as legal advice. Our comments are merely providing some thoughts on how the legislation might be interpreted and how we go about attempting to meet its requirements. You should not rely on this information in isolation and do you own homework and at all times if you wish to be sure of your position relating to legal matters you should seek advice from a suitably qualified lawyer.