What are Levies, who decides them and how are they apportioned?

Date 14 Mar 2024
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Strata Sphere Management

Date Strata Sphere

What are Levies, who decides them and how are they apportioned?

What are levied contributions?

Strata levies are your contributions towards the upkeep of the scheme. Levies (or contributions as they are also known) ensure there’s enough funding for administrative requirements, regular repairs, maintaining the building’s current condition and providing for future capital work.

Who decides upon levied contributions?

Strata levies (also known as body corporate levies or owner’s corporation fees) can be confusing. Let’s clear things up and understand why they matter.

As a Lot Owner within a Strata scheme, you contribute to the upkeep of the scheme through levies. They’re essential to protect your investment.

But who decides the amount? Where does the money go? Can you have a voice? Read on to find out!

Who decides the amount?

It’s actually you and your fellow owners!

The Lot Owners within the scheme make up the Body Corporate. Each year, owners have the opportunity to participate in the Annual General Meeting (AGM) to discuss and vote upon the proposed annual budgets.

The annual budgets are like a roadmap for your scheme’s finances. They detail how much money is needed to cover expenses like repairs, maintenance, and administration for the coming year. It also determines how much will be saved in the Sinking Fund for future projects. This annual budget is initially drafted and agreed upon by the appointed Committee and then submitted to all Owners to vote upon at the AGM. The proposed levies along with the entire budget are presented and voted on at the AGM. This meeting is your chance, as a lot Owner to understand where your money goes and have a say in how the expenses are managed. The budget motion within the AGM Notice will also specify the levy payment schedule, whether it’s quarterly or annually.

What is an Administrative Fund for?

The administrative fund covers the day-to-day running of the scheme, including expenses for maintaining common areas. This means paying bills for various services such as insurance, accounting, management fees, local taxes (rates), utilities (energy and water), cleaning, pest control, maintenance of grounds and gardens, general maintenance and repairs.

What is a Sinking Fund For?

In Queensland, all strata schemes must have Sinking Fund, sometimes referred to as a Capital Funds Fund. This fund acts like a savings account specifically for current and future major expenses related to the common property.

Think of it as an investment in your schemes value. Here’s what it typically covers:

  • Keeping things fresh: Painting or repainting common areas.
  • Fixes and upkeep: Major repairs and maintenance of common areas.
  • New and improved: Replacing or upgrading furniture, fixtures, and fittings in common areas.
  • Replacement of plant and equipment such as a lift
  • Planning and execution: Project management and related expenses for these capital works.

By contributing to the Sinking Fund, you’re helping to:

  • Maintain your schemes value: Proper maintenance prevents costly repairs later on.
  • Avoid special levies: Having a healthy Sinking Fund reduces the need for surprise one-off charges for major repairs.

How are the levies apportioned?

The total amount needed is divided amongst owners based on their lot entitlements. This determines your individual levy contributions.

What is a Special Levy?

Sometimes, unforeseen expenses arise that exceed the amount collected in regular levies. In such cases, the Body Corporate might need to issue a special levy. This is a one-off additional payment to cover the deficit.

What if I am not able to pay my strata levy?

Paying your strata levies on time is crucial in the smooth running of your scheme. Here’s what can happen if you fall behind:

  • Discounts: If your Body Corporate offers a discount for on time payments, you face the risk of not receiving this benefit.
  • Penalty Interest: The Body Corporate (being made up of all owners) may charge you interest on any unpaid levies after the due date. This adds up quickly, so it’s best to avoid it.
  • Recovery Costs: If the Body Corporate has to involve debt collectors or lawyers to recover unpaid levies, you might be responsible for covering those additional costs.
  • Non-Financial: You face the risk of being unfinancial and risk the ability to cast a vote at either Committee level, if you are a committee member, or at General Meeting level.

By paying your levies on time, you can avoid these hassles and contribute to a well-maintained scheme for everyone.

It is important to remember that the Body Corporate budgets accordingly each annum, with the expectation that all funds will be collected from Lot Owners to cover all expected expenses on the given year. By failing to meet your statutory obligations, your scheme may be at financial risk.

If you do find yourself in a position whether you are not able to meet your obligations by any given due date, begin paying the amount you can afford and get in touch with the Committee via the Strata Manager straight away.

Author – Kassie Tredrea, Strata Sphere Management