6 Essential Insights About the Property Improvement Plan and Reserve Fund

A property improvement plan — formally known as a Maintenance, Repair and Replacement Plan (MRRP) — is at the heart of every sectional title scheme. Trustees have a legal duty not only to keep the common property in good working order, but also to plan for its upkeep well into the future.

1. What the Law Says

The requirement for an MRRP comes from Management Rule 22, Annexure 1 to the Regulations prescribed under the Sectional Titles Schemes Management Act (STSMA). It states that every scheme must prepare a written, costed plan covering at least 10 years, and review it annually.

The plan must include:

• A list of major capital items on the common property (e.g., roofs, lifts, external paintwork, security systems)
• An estimate of the life expectancy of each item
• The current replacement value of each item
• The estimated future cost of maintenance, repair, or replacement
• The year in which such work is expected to take place

This plan must be tabled at the AGM for approval by the owners.

2. The Role of the Reserve Fund

The MRRP links directly to the scheme's reserve fund, which must be maintained in accordance with Section 3(1)(b) of the STSMA and Regulation 2 of the Sectional Titles Schemes Management Regulations, to ensure funds are available when major work is due.

By law, the reserve fund must:

• Be maintained separately from the administrative fund
• Be funded at the greater of: the amount necessary to achieve the MRRP, or the minimum percentages prescribed by the Regulations based on the previous year's operating costs

This means trustees cannot simply "decide" how much to put aside — it must meet statutory requirements.

3. Understanding Levies in This Context

Levies are the monthly contributions owners make to cover the body corporate's expenses. They are split into two components:

• Administrative Fund Levy — covers day-to-day running costs (gardening, cleaning, insurance premiums, electricity for common areas).
• Reserve Fund Levy — funds the MRRP projects.

If the MRRP forecasts significant projects (e.g., repainting the complex, replacing roofs), levy increases may be necessary to ensure the reserve fund can meet future obligations. Although unpopular, these increases are far less painful than sudden special levies.

Read more: Understanding Sectional Title Levies: 5 Key Insights for Trustees

4. How Trustees Prepare the MRRP / Property Improvement Plan

A practical approach includes the following steps:

1. Inventory — List every major capital item on the common property.
2. Condition assessment — Record the current state of each item.
3. Costing — Obtain updated market quotes for replacement and maintenance.
4. Timing — Estimate when each item will require attention.
5. Funding plan — Determine the reserve fund contributions needed each year.
6. Owner approval — Present the plan at the AGM for adoption.

Many schemes use a building condition assessor to ensure the plan is accurate and compliant.

5. Why Specialist Consultations Matter

Preparing an MRRP and setting reserve fund levies can be complex, involving building assessments, budgeting, and compliance with the STSMA and Prescribed Management Rules. Engaging the right specialists can help trustees:

• Draft levy and budget resolutions that meet statutory requirements
• Accurately assess the condition and life expectancy of major assets
• Prepare cost estimates and timelines that are realistic and fundable
• Ensure reserve fund contributions and spending align with approved MRRP items
• Avoid disputes with owners over project priorities or funding decisions

Specialists may include building inspectors, quantity surveyors, maintenance planners, or legal practitioners — depending on the scheme's needs.

6. What Happens if You Don't Have One

Failure to prepare and implement an MRRP can lead to:

• CSOS intervention and compliance orders
• Inability to complete urgent repairs due to lack of funds
• Rapid deterioration of common property and falling property values
• Emergency special levies that burden owners unexpectedly

The Bottom Line

The Maintenance, Repair and Replacement Plan is not just a best practice — it is a legal requirement that protects your investment. Backed by a well-funded reserve fund, it ensures that essential work is planned, budgeted for, and carried out on time. In other words, your MRRP is the roadmap that keeps your sectional title scheme healthy for the long term.

This is not a legal advisory blog post. Always check the relevant legislation or consult a sectional title legal specialist.