Hi Susan and everyone
After our discussion about the 5% capital gain levy on our title, and my suggestions of levying the improvement fund through monthly contributions, I set down and put it into the attached table.
For the table below I have assumed a housing price increase of 10% per annum. This seemed too high for the Dunedin market 3 years ago, but recently we have had increases of far more than 10 % p.a.. You have to double the numbers in the table if you want 20% increase in property value or half it if its only 5%.
I was startled to find that the total of annual contribution would be $65,000, compared to the provisional body corp fee as calculated by Min of $76,000 (see our most recent body corp rules). So Susan, I do understand your strong reservation to a monthly improvement contribution!
As this Improvement Fund is only to be used to improve the common, and that indefinitely into the future as it is a covenant on the title, the common will be improved indefinitely. At an assumed annual 10% increase of property values, Toiora would have improved the common by the equivalent of $657,000 (or the cost of an Alva Street unit) within 10 years. This calculation is also valid for collecting the capital gains levy through sales as per our covenant on our title, though the money would come in big lump sums whenever someone sells on. The first 10 years will be easy to spend the money: finish the kitchen, the heritage fence, tunnel house, skylights to the dining room together with better insulation and lights, solar panels to Alva Street, solar panels to High Street, common electric car, 10 electric bikes, 2nd common electric car. Eventually, though, we will have to get golden taps for the guest bedrooms. On the other hand, no-one might sell and we have to wait longer to do any of the former listed improvements.
At present we bought (and any new owner now will buy) a dwelling with the bonus of a good common ownership in cohousing. Through the indefinite 0.5% improvement per annum to the common, some time in the future people will buy into Toiora for their part of the common ownership with a nice dwelling attached. We might be changing from a ‘neighbourhood' into a ‘commune' (dare I say it, and I don’t mind commune, though I know lots don’t even like the word community).
I’m sure that bankers, who are very used to calculating capital gain and creating wealth (often on fractions of percentage points), can see our scheme much clearer, than we ourself, and are wary of it.
Don't misunderstand me, I am very much in favour of a common development fund. But I would like to see a setup whereby we can regulate the contribution per annum up or down, pending on need, and independent from relying on sales of units. This is in accordance with the act section 121 (b) as stated by Simon Milne in his most recent letter to us. The banks must be fine wit it.
Happy thinking Rainer
Please call me if you need an urgent reply.
Rainer Beneke +64 21 144 7700
rainer.ucol@gmail.com