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Strata levies are a crucial part of being a lot owner in an owners corporation or body corporate. These financial contributions are typically paid quarterly and are designed to cover the ongoing costs to help keep the property well-maintained to hold or increase its value.
All owners within a strata property are legally obligated to pay the agreed strata levy. However, it is not uncommon for these amounts to fluctuate between quarters and years, with some periods requiring higher payments than others. Understanding the reasons behind these variations can help owners and committee members anticipate and manage their finances more effectively and avoid any surprises when larger levies are due.
This article will explain the factors influencing strata levies and why these amounts can change over time.
Your levies are an estimated cost of your property’s expenses per year. The forecasted costs are budgeted and divided between the lot owners of the property, which are collected and held in your property’s financial account.
Your levies and fees are used for a range of planned and unplanned property expenses to keep the property clean, safe, and compliant. A lot of the time, residents might overlook the ongoing maintenance that is being undertaken on the property, which incurs costs.
To keep your property running smoothly and in good condition, your property may require some or all of the following:
Maintenance and upkeep of the building
Periodic or unexpected repairs
Building insurance
Strata management fees
An onsite facilities manager
Contributions to the capital works or sinking fund for long-term repairs and upgrades.
Cleaning, landscaping, and upkeep of any common areas and amenities
Utilities to any common areas (for example, electricity to run elevators or lighting common areas)
Your property may also choose to pay higher levies for the capital works or sinking fund. This fund is held in reserve as a savings account for unexpected repairs and costs. Properties may need to issue a 'special levy' (a levy in addition to the standard levy amount) to all owners when unexpected repairs or unbudgeted property maintenance is required. This decision is at the discretion of the property owners and will form part of the budget that is approved at your property's AGM.
Your committee decides how your property’s funds will be allocated. However, you do have a say. Every year, your committee will create a budget based on their knowledge of the expected expenses that your property will incur for the following 12 months. This will determine levy amounts, which will be approved via vote during your annual general meeting (AGM).
It is beneficial for each owner to read the contents of the AGM documents. Every owner is empowered to have a voice regarding how property funds are allocated. However, you can make a more informed decision when you understand what you are voting for during your AGM.
Your levies are decided by your owners corporation or body corporate and are for the upkeep of your property; they don't go to your strata or body corporate manager. Your property's strata or body corporate management fees are usually a very small percentage of your property's expenses. To review your property's budget and account balances, you can find this information in your previous AGM documents.
Budgeting the annual expenses for an owners corporation or body corporate typically involves careful planning. Committee members usually prepare and present the next annual budget a few months into the new financial year. This is done during this time to help get a complete picture of the expenditure of the previous period and help better estimate the upcoming expenses.
The financial year of the owners corporation or body corporate may not always fall from 1 July to 30 June as it does for taxes. Instead, this timeframe can be modified by the owners corporation or body corporate depending on factors and legislation specific to the state.
In this section, we’ll dive into the timeline of how annual levy contributions are set and the areas in which these amounts can fluctuate each financial year.
For this example, the owners corporation or body corporate financial year starts on 1 January – 31 December. However, it is always best practice to confirm what your property’s specific financial year begins and ends by reviewing the strata plan, community title scheme, by-laws and building rules. If you are unsure where to locate these details, your strata manager can help provide guidance.
FY 2024 AGM held start of Q2
Levy due 1 January
Levy due 1 April
Levy due 1 July
Levy due 1 October
Levy amount from 2023 AGM estimate
Levy amount from 2023 AGM estimate
Levy amount set at 2024 AGM
Levy amount from 2024 AGM estimate
Levy due 1 April
Levy due 1 July
Levy due 1 Otober
Levy amount from 2024 AGM estimate
Levy amount from 2024 AGM estimate
Levy amount set at 2025 AGM
Levy amount set at 2025 AGM
The committee reviews the previous year’s expenditures to prepare a budget and it should also cover unexpected costs. A total budget is prepared for managing the building for the upcoming financial year.
The annual budget is presented at the AGM for review. This allows owners to make informed choices when voting on the proposed budget
The AGM timing varies by state and territory, as different jurisdictions have different legislative requirements.
AGMs needs to take place within three months of the start of each body corporate financial year.
All owners should be given a notice no fewer than 21 days before the AGM.
AGMs are required yearly, with no more than 15 months between meetings.
Owners should receive a notice at least seven days prior with the agenda, financial statements from the previous year, and the proposed upcoming annual budget.
The committee has a duty to help manage the funds to keep the owners corporation or body corporate financially sound, which sometimes means adjusting levy amounts to account for anticipated future costs. For instance, if the committee expects a large expense in the next quarter, they may increase the levy in the current quarter to spread the financial burden more evenly over the year. These amounts can be set or altered through the following situations:
Increased costs and budget forecasts for the upcoming year may require a higher levy contributions introduced at an annual general meeting for the new financial year.
Proposing increased levy amounts through a general meeting within the financial year to cover additional ongoing expenses for the property.
Additional special levy strata payments are introduced through a general meeting within the financial year to help fund unexpected costs.
Because the annual budget is generated to cover your strata property’s financial period, there are a variety of expenses that could be forecasted in the annual budget, including routine maintenance, administration costs, insurance coverage, future planning for large projects, and any unexpected or emergency costs.
Sometimes, estimates might not be right when originally created due to various factors (listed below) that may impact actual vs. anticipated costs. Hence, levies for all owners may need to be increased to meet these expenses, resulting in higher payment through the owners corporation or body corporate.
Sometimes, unexpected repairs or emergencies that are not accounted for in the initial annual budget can arise. For example, severe weather events like storms or floods can cause damage to the building, requiring urgent repairs.
If the capital works or sinking fund cannot cover these costs, the strata scheme may need to raise special levies to address the shortfall. Depending on the financial impact, these payments are often charged in a single or couple of quarters, causing the levies to be higher than usual.
For instance, in the aftermath of a natural disaster like a hurricane, the cost of building repair materials can significantly increase due to higher demand. Consequently, levies might have to be raised to cover the inflated costs.
The cost of services, utilities, and materials used to maintain a strata property can increase over time due to inflation and market conditions. Rising costs for building repairs, insurance premiums, landscaping, cleaning, and administrative fees can cause strata levies to fluctuate yearly.
If a severe storm unexpectedly damages a significant part of the building’s roof, it may require urgent repairs not accounted for in the annual budget, which can lead to require an increase in levies to cover the costs.
Many strata buildings require specific maintenance and repairs for particular seasons or weather conditions. For example, pools and outdoor areas might also need additional cleaning and servicing during summer, resulting in higher levies. Although these works may be planned within the annual budget, additional levy amounts may be incurred in the corresponding quarter if the work exceeds the anticipated amount.
In the warmer months, there is a spike in pool usage. Due to wear and tear, equipment used to operate the pool may need to be replaced or repaired. The costs of this type of work may then be reflected in higher strata levies for those quarters.
For example, a project like lift replacements, external façade repairs, or major plumbing upgrades can require significant outlays, resulting in a temporary increase in levies for that quarter. While these projects are planned and budgeted for, the levy amounts may spike to accommodate the additional expenses during the work period.
Some utilities, such as water or electricity, may be billed quarterly. These costs can fluctuate seasonally depending on various factors, impacting the amount charged in strata levies if the amount is higher than anticipated or not accounted for.
Spikes in utility rates from the energy provider could result in higher bills and increased levies.
Occasionally, a strata scheme may incur additional legal or administrative fees, particularly if disputes, compliance matters, or contract renegotiations require the committee to engage in legal or other professional services. The cost of these fees could be allocated to a specific quarter, resulting in a temporary increase in levies for that period.
A dispute with a contractor over building renovations might necessitate legal counsel, adding to the scheme’s expenses. This extra cost could trigger an increase in levies for that period.
New government regulations, such as fire safety standards or environmental upgrades, can require strata schemes to undertake significant projects to ensure compliance. These projects can lead to temporary or ongoing increases in levies as the strata scheme addresses the necessary changes to comply with legal standards.
New fire safety cladding requirements imposed by the state government could result in higher levies to fund the repair work needed to maintain compliance.
While the success of community living relies upon each owner making their contribution, sometimes we fall on financially hard times, and regular payments aren’t possible. When this happens, your strata, body corporate, or owners corporation manager can help you apply and submit a payment plan to your committee.
Your committee will assess the reasons you provided when applying for a payment plan, calculate whether the property can afford to have you on a plan and decide to accept or deny.
Before renewing your agreement, take a moment to compare your options. Our quick and easy form can be completed in less than 30 seconds.
Strata levies are a commitment an owner takes on when buying into an owners corporation or body corporate and are integral to the efficient running of the property. While fluctuations in levies are sometimes unavoidable, understanding how they are calculated and what influences them can help owners and committee members plan more effectively. By staying involved in the budgeting process and preparing for future expenses, you can help maintain the financial stability of your strata or body corporate scheme.
To learn more about managing your strata property’s financials, download our FREE Community Living guide here. To find out more about the services we offer, click here for a free strata assessment.
This article is edited by Lauren Shaw Regional General Manager and Licensee-in-Charge on August 2024.
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