Capital Expenditure (CapEx) Plans

Capex Plans

Many clients typically review budgets annually and a part of this is to plan for cyclical/larger items of expenditure in future years. These can be items specifically added into a budget as a one off or planned for using a reserve fund as per the lease terms. To assist in this, they arrange a Capital Expenditure (CapEx) plan by a third-party independent professional, usually a surveyor.

This CapEx plan or Planned Preventative Maintenance Report (PPM) will determine all pre-planned and cyclical maintenance required at your development and factor in any assets there may be. Assets are anything which may incur expenditure as they come to the end of their life span. Examples of assets included in the CapEx plan are:

• Lifts
• Roofing systems
• Vehicle gates & shutters
• Internal decoration
• Carpets & flooring
• External decoration
• Water pumps
• Intercoms

These plans aid with budgeting and provide an independent assessment of what future works each development needs to consider. This greatly assists in ensuring adequate budgeting of the reserve fund (where reserve funds are permitted by the lease). If your lease does not allow for a reserve fund to be collected, the report will aid you in knowing at what stages you may be asked for extra service charges to cover for the works. The CapEx plan can then be revisited each year and updated to assist with future budgets and check on the progress of the projects listed in the report. The reports are presented in a traffic light fashion, highlighting the more important works to prioritise further assisting budgeting.

There can sometimes be a misconception that these plans may deter potential purchasers. We find that it is quite the opposite; these reports serve as evidence that our clients have a credible plan and costings for the future maintenance of their building and that funds are being collected to ensure these items can be addressed when required. Potential purchasers and their solicitors will be reassured that building maintenance has been identified, ensuring the purchaser knows what they are buying and what their future commitments look like and there is sufficient funding in place. All Landlords, including Residential Management Companies, are obliged, under the terms of the leases for the properties, to maintain the building and to carry out necessary works, some of which are to be within specific time frame (every five years for internal painting for example – please refer to your lease for this information). Without an understanding of what is required over the next 10 years it is very difficult for them to fulfil their obligations.

Burns Hamilton has recently partnered with a local surveying firm, Bennington Green, to develop these CapEx plans and strongly recommend that our clients consider having these reports carried out for the reasons listed above. If you are interested in pursuing a CapEx plan, please contact your Property Manager for further information and they will be happy to assist.