Updated: Apr 14
Levies are essential to the functioning of your property group, but where do your levies go?
Buying a property in a strata scheme, either as a property investor or as an owner-occupier, may represent the best opportunity to break into the Australian property market and can provide an alternative to traditional homeownership. As an owner in a strata scheme, you benefit from efficient management and significantly reduced maintenance responsibilities.
The maintenance and services your group benefits from are paid for by levies. Fees are determined at the AGM via the approval of a budget and payment due dates. Owners pay into the administrative fund and towards any works that enable the communal management of the scheme. The lot unit entitlement determines each owner's percentage as a proportion of the aggregate unit entitlement.
The amount of money paid and services available by any strata or community group can vary, so it's essential to understand what strata levies are and what they cover.
Where do my levies go?
It's not uncommon to find owners within strata suggesting that their quarterly levy contributions make up either the entirety or majority of their Community or Strata Manager's fees, but the truth couldn't be further from that.
Levy contributions are allocated funds paid into an Administration Fund and potentially also into a Sinking Fund. Each unit owner pays into the fund on a quarterly or bi-annual basis, and the levies are usually calculated by the Treasurer or your Strata Manager and determined by a budget that compares your Corporation's past expenses. Regular items on your budget may include routine grounds maintenance, gutter cleaning, minor maintenance repairs (think gate repairs, leaking gutters), insurance premiums, common electricity and water usage if your unit has only one water meter.
Some Corporations also budget for additional money either in the Administration Fund or Sinking Fund to help cover future maintenance items.
The amount of the levy contribution is agreed by Owners at an Annual General Meeting, with the contribution suggested through a budget prepared by the Strata or Community Titled Manager.
You can also see where your levies go by checking the financial statements sent out with the notice of your annual general meeting or by simply requesting an up-to-date financial statement from your Manager or downloading one from their online portal.
The management company's fees and charges are included in this budget and certainly are incorporated in the levy determination. However, these are the lesser of a Corporation's costs compared with items such as grounds and general building maintenance, insurance premiums, and utility charges.
To better understand proportionally where your levies go, we have analysed the expenses of a handful of corporations and applied percentages to their budgeted items.
Insurance premiums allow for 40% of corporation expenditure. Management fees comprise 27% of the payment, with the remaining 33% allowing for general repairs, gutter cleaning, grounds maintenance, utilities, and pest control.
The amount of levies you pay also depends greatly on the type of complex you live in, and comparing your strata contributions to those of your friends is not always that simple.
For example, excluding the bigger complexes with lifts, swimming pools and gyms, your Corporation may have large common gardens that are landscaped and maintained regularly, whereas your friend's Corporation may all have private rear yards where owners are responsible for maintaining their own gardens. Some Corporations pay for water use, whereas other complexes have water bills divided by SA Water and sent to the owners instead of the Corporation. Or it could simply be that your Corporation is more proactive in the upkeep of your property and ensures that it is well maintained each and every year, whereas other Corporations may know they have work to do and instead of increasing their regular levies, they simply agree to pay special levies for any maintenance items that arise.
Another area of confusion is when Strata owners compare their levies to Community Titles. If you own in a Community Title, you are only contributing to the maintenance, insurance and upkeep of the common property, and in most standard size complexes, this is likely just a driveway. Those owners are paying for their own building insurance and maintenance of their own houses, so the levies for Community Titles are so much lower than those of a Strata Corporation.
By knowing your Corporation's unique expenses and understanding where your levies go, both Owners and Managers can make informed decisions about how to best manage your Corporation.
Horner Management is always looking for ways to save you money and regularly undertake "pulse checks" on your insurance policy and utilities to ensure you get the best prices possible.
When routine expenses such as grounds maintenance and repairs need to be undertaken, we will always source 2 – 3 quotes to ensure you are getting the most competitive trade prices. We also work with groups that regularly have a low balance of funds to try to increase their general pool of funds available should work need to be done. For example, if your Corporation is covering your budget, but your budget suggests you will only have a balance of $100 or less per unit, we will recommend an increase in your contribution to avoid the need to raise levies in the case of any unacted bills that may arise.
It is also important to remember, the portion of your levies that doesn't get spent by the Corporation throughout the financial year accumulates and any surplus at the end of the financial year will remain in the Administration Fund and can be used in the future for unforeseen emergency maintenance items. It can also be transferred to the Sinking Fund to save for larger scale repairs.
Strata properties offer many financial and lifestyle benefits, but it's important to work with a professional body corporate manager to help in the efficient running of your group, minimising your risk, and securing your financial future.
Horner Management is an award-winning strata and property management group that has operated in South Australia for 40 years. We're dedicated to helping our clients manage their properties and building communities in which they are proud to live. Find out how we can help your group by requesting a free proposal or contacting our
team with your query.
Horner Management is a multi-award-winning strata management company based in Adelaide and covering Body Corporate, Community and Strata Title plus Property Management.