What Do Your Strata Levies Include?
Firstly, it’s important to understand what Body Corporate levies are.
Paying levies or contributions is a fundamental necessity of living in a strata scheme. When sharing a building and common property with multiple owners it is only fair that all contribute to the upkeep and the running of the Body Corporate.
As an owner in a strata scheme, you will receive contribution notices outlining amounts you are required to pay and what funds they contribute to. The notice commonly has up to three funds listed:
Administrative Fund
Sinking Fund
Insurance Contributions
You might be thinking, what does this mean? Where does my money actually go?
The simple answer is into your Body Corporate bank account. Whilst SSKB facilitates this, the levies are not SSKB fees. Our fees are only a small portion of your levies. Let’s go into more detail on this.
What do Strata Levies cover?
Strata levies cover expenses incurred in maintaining and managing strata properties. These expenses generally include:
Maintaining and repairing all things inside and outside of the strata building that are not the responsibility of an owner.
Upkeep of common areas such as, gardens and lobbies. This can also include fees paid to cleaners, gardeners, pool and window cleaners.
Regular inspection costs to ensure the safety of the building and its infrastructure is up to standard eg. fire alarms, lifts, water pumps, fire doors.
Management and professional fees paid to strata managers, accountants, building managers.
Residential strata insurance to cover loss or damage to common areas, personal injury and liability.
Power and water costs to supply common areas and shared facilities. Occasionally internet, phone or gas expenses are also incurred.
What does the Administrative Fund cover?
Every Body Corporate is required to have an administrative fund if it is registered under the standard, accommodation, commercial or small schemes module.
Your administrative fund contributions cover:
The day to day running costs of the Body Corporate,
The general maintenance of common property
Body Corporate assets. This includes repairs and maintenance, caretaking fees, lift maintenance contracts, insurance and other service providers such as strata managers.
What does the Sinking Fund cover?
Every financial year, Body Corporate Committees will prepare a sinking fund budget. This is to ensure the sinking fund has sufficient finances to provide necessary and reasonable spending for the financial year for major capital works eg. painting. It is also necessary to ensure an amount is reserved to cover likely future spending for approximately 9 years after the current financial year. By building up funds this reduces the likelihood of having to ask lot owners to make a large, one-off payment via a special levy. However, this doesn’t totally remove the possibility of this occurring.
The overall purpose of the fund is to ensure the Body Corporate has ‘savings’ and does not need to impose significant levies on owners each time a repair or replacement is needed.
A proposed sinking fund budget must be attached with the AGM notice when it is distributed to lot owners every year. Most Committees will engage a professional report writer to produce this forecast.
What do the Insurance Contributions cover?
Your insurance contribution is a payment for the building replacement and reinstatement insurance. Most times the insurance premium is included in the administrative fund budget. However, for Bodies Corporate with varying interest entitlements the insurance premium is listed as a separate amount.
If your Body Corporate is classified as a standard format plan, the Body Corporate is generally responsible for the insurance of common property only and individual residences are the responsibility of owners.
If your Body Corporate is classified as a building format plan, it is generally responsible for the insurance of the building and common property.
The cost towards the Public Liability and Office Bearer’s Liability portion of the premium is always included in the Administrative Fund.
What are Special Contributions?
Occasionally, there is an unexpected expense that hasn’t been budgeted for that has arisen. Typically, this is a major repair costs or legal fee. The Body Corporate may then require a special levy to cover this cost. The funds raised from a special levy can only be used to cover the costs of an unexpected event.
Your Body Corporate can manage the number of special levies required by having realistic and thorough administrative fund and sinking fund budgets in place.
It is important to ensure that levies are sufficient to have financially healthy administrative and sinking funds. This will reduce the likelihood of a one-off payment occurring.
If you have any further questions regarding levies, your sinking fund or any other queries, don’t hesitate to contact your Community Manager or email info@purestrata.com.au.