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Strata levies, also known as body corporate fees in Queensland and owners corporation fees in Victoria, are used to maintain your building and pay for operational expenses such as insurance, utility bills and garden maintenance. As such, your property’s size, age, design and onsite facilities affect your levy payments. Other factors may influence your payments too.
Keep reading to find out which aspects of your strata property could be inflating your strata levies.
Did you know the amount you pay in strata levies varies from property to property? Here are 7 factors that influence how much or how little you pay in strata levies:
Small strata properties typically have less common property. This means less cleaning, repairs and maintenance, lower utilities, and less infrastructure to maintain. This sometimes translates to lower strata levies.
However, small is not always better as fewer owners share the costs. Larger, more complex properties like BMCs are more expensive to run but have economies of scale that reduce the cost per owner because more people share the costs. Economies of scale are also helpful when there is a need to raise special levies for unexpected or urgent expenditures, as owners have less financial impact.
In larger properties, you may need additional staff like a building manager. While this can lead to higher strata levies, they also increase property value, enhance upkeep and make for a safer and more compliant property.
A building’s age, condition and how well maintained it has been historically can also contribute to whether the strata levies are high or low. Older buildings typically need more maintenance and repairs and can be at a stage where infrastructure needs replacing. For example, a hot water tank could reach the end of its life and cost $15,000 to $20,000 to replace, or the balconies may need re-doing.
However, older buildings don’t always have more expensive levies. If a building is well-built, has been well maintained its whole life, and has preventative maintenance carried out when required, then the strata levies may remain low.
The following common property facilities will influence how much you pay in strata levies:
This is especially true in small to moderate-sized properties with fewer economies of scale.
A strata plan is the documentation of the subdivision of the land and building. It also determined what is common property. The more lots there are in a strata plan, the less each lot owner will need to contribute to maintaining common property.
Very few people consider the impact design has on ongoing maintenance costs, which can lead to higher strata levies. Architectural trends can require expensive building materials to achieve a particular look. These may result in higher maintenance costs, which can blow out your strata levies.
For example, timber decking looks great but is prone to warping and rotting. Timber needs to be regularly oiled and treated to prevent it from needing repairs. Timber decking around a standard pool can cost anywhere between $7,000 to $10,000 a year to maintain.
Lawns and gardens require regular attention too. If you don’t have economies of scale to share the costs, it’s wise to choose low maintenance native plants that require less watering or gravel and paving where appropriate.
Onsite services such as landscapers, building managers, concierge, cleaners, loading dock managers all add to the annual budget, which influences each lot owner’s strata levies. If you live in a large strata property, the cost split between many owners may be minimal. The strata committee will need to find a balance between maintenance and costs for smaller complexes.
For example, there was a committee that explored having its lobbies, lifts and each floor vacuumed and cleaned each day for better presentation. However, after receiving cleaning quotations, they realised the additional cleaning would raise the levies past an acceptable level so instead pared back this routine cleaning to every second day. The compromise was met favourably by all owners.
The insurance premium for common property generally makes up a large portion of annual expenditure, which is funded through strata levies. The more expensive the building replacement value is, the higher the insurance premium. Claim history also affects the insurance premium. If your strata property has had multiple claims over the years, the premium will be higher than if it had few or no claims.
How your property is managed factors into how much you will pay in strata levies. Poor budgeting and careless spending can have drastic financial flow-on effects for years and place financial burdens on owners.
The individual strata levies paid by each lot is determined by the unit entitlement for your lot, as set out in the schedule on the registered strata plan. Unit entitlement determines the proportion of ownership a lot holder carries, including common areas.
Unit entitlement is generally based on the lot’s market value at the time of registration of the strata plan. Generally, the larger the lot, the more unit entitlement it has and the higher the strata levies for that unit.
If you’ve noticed that strata levies vary significantly from building to building or even lot to lot, you’re right. This occurs because factors such as your strata property’s size, the building’s age and condition, common property facilities on your strata property, the strata plan and property’s design, onsite contractor services, insurance costs and financial status and your lot’s size can ultimately affect how much you pay in strata levies.
However, higher strata levies aren’t necessarily a bad thing. It may just mean your property is well-maintained, and your committee is proactive with repairs and maintenance.
If you’d like to find out more on managing the financials for your strata property, download our FREE Community Living guide here. We also provide our customers with an intuitive, modern, and easy-to-use dashboard and 24/7 access to their financials and related information via CommunityHub. To find out more about the services we offer, click here for a free strata assessment.
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