Levies (or fees as they are known in Victoria) are vital to ensuring the smooth running of a strata property. While levies may seem like an unnecessary payment, without levies important financial obligations may be missed leaving the possibility for detrimental problems!

To clear up the confusion around strata levies/fees and how they’re calculated let’s break it down into simple, easy to understand bites…

What are levies?
Lot owners in a strata property are required to pay levies to cover the financial obligations of their property.

What do levies cover?
Levies cover payments for:

• Building insurance.
• Maintenance of common property, facilities, and amenities.
• Any contracted on-site staff (such as cleaners, gardeners, maintenance personnel or similar).
• Common property utility bills.
• Management fees (strata managers and building managers).
• Building works.

How are levies calculated & approved?
Fundamentally levies are determined by a property’s overall yearly budget and the funds required for the capital works fund (known as the sinking fund in Queensland and the maintenance fund in Victoria) and the administrative fund.

The administrative fund is used to pay for the day to day running expenses of a property, including the payment of insurances, repairs and management fees.

The capital works fund is used to pay for both expected and unexpected large-scale works. For example, repainting the property or replacing roof tiles would be paid for using the capital works fund.

Committees and owners corporations are usually very reliant on their strata professional to determine these figures as expert knowledge and experience are pivotal in producing an accurate budget.

The budget of a building is affected by four main factors:

• Onsite facilities (pools, lifts, gyms, gardens, garages, etc.).
• Building structure (including size).
• Building age.
• Management fees (strata and building management fees).

Once the overall building budget is calculated it is then divided by each lot’s entitlement in determining the levies. The way lot entitlements are calculated varies from property to property. In some instances, all lots within a property have the same entitlements and thus the same levies, while in other properties, entitlements are calculated based upon lot size and the facilities associated with a lot.

The proposed budget and thus the proposed levies are presented at the general meeting. The budget then needs to be approved by a majority of owners.

Levies are usually paid on a quarterly basis but this is dependent on the property. It’s important to pay levies on time as if levies are left in arrears interest may be charged. Significantly overdue levies can be recovered by owners in court.

We hope these tips have helped to shed some light on how strata levies are calculated.

This article first appeared on Homely.com.au.