How are strata levies calculated? And are you paying too much?

Strata levies are a contribution paid by all owners to cover costs to maintain a strata property

For many people, strata fees and levies are a downside of living in an apartment or townhouse. However, many expenses, such as insurance and maintenance costs, also exist for house owners.

Curious about what your strata levies include and how they’re calculated? Or wondering why your strata fees are high? PICA Group covers the ins and outs of all you need to know when it comes to strata fees and levy payments:

• What common property expenses do strata levies cover?
• How are the strata levy payments used by the owners corporation?
• Why do I pay more levies than my neighbour?
• How are strata levies calculated?
• Why do levies vary building to building?

What common property expenses do strata levies cover? How does the owners corporation use the strata levy payments?

• General maintenance tools and equipment
• Cleaning services
• Gardens and grounds
• Lift services
• Gyms & pools
• Common property insurance
• Fire services
• Plumbing
• Electricity used on common property
• Strata and building management fees

How does the owners corporation use the strata levy payments?

Incoming money from levy payments allocates into three different types of strata funds managed by the owners corporation: administrative fund, capital works/sinking fund, and special levies.

1. Administrative fund
   These levies cover the day-to-day expenses incurred in community living arrangements, including insurance premiums, cleaning, gardening, electricity, plumbing, and fire inspections.

2. Capital works/sinking fund
   This fund is for capital expenses for significant repairs done on common property, such as repainting, renewing or replacing fixtures and fittings repairs to balconies or pathways.

3. Special levies
   These are levies raised by owners corporations when insufficient money is in the capital works/sinking fund to cover emergency, unexpected or planned upgrade expenses.

Why do I pay more strata levies than my neighbour?

The individual levies paid by each lot (your apartment or townhouse) is determined by the unit entitlement found in the schedule on the registered strata plan.

The unit entitlement is registered by the developer at the time the property is built and determines the proportion of ownership a lot holder carries and includes common areas. The unit entitlement quantifies the property owners’ legal and financial rights and obligations within strata or community living.

Unit entitlement is based on the lot’s market value when the strata plan is registered. Generally, the larger the lot, the more unit entitlement it has, which means higher levies for the unit.

How are strata levies calculated?

A qualified and experienced quantity surveyor or property valuer initially calculates your strata levies. It is their job to assess all the possible outgoings, prepare a schedule of the costs, and determine the levies payable.

Following the initial determination, levies are calculated at the annual general meeting (AGM) by the owners corporation or body corporate.

Firstly, there needs to be a budget set that shows the current financial situation and any estimates of payments to be made and received.

Before voting, the budget is distributed with the AGM notice or tabled at the meeting, where a majority vote is needed to approve the motion to set levies.

Why do levies vary building to building?

Your levy payments should be relatively low if you live in a consistently maintained small strata scheme with no lift, pool or other amenities and minimal gardens. You can likely expect to pay more if you live in a high-rise apartment with elevators, on-site security, a gym, a sauna, a swimming pool, a tennis court, and other facilities.

Less-visible costs for ongoing internal infrastructure upkeep can also be expensive. These include air conditioning, elevators, interior lighting, and hydraulic pumps. For example, lift maintenance can equate to around $6,000 per lift.

The most significant expense for most strata schemes is generally insurance. If your property has had multiple insurance claims, this may drive up the cost of your annual insurance premiums.

Your committee can help control costs with consistent preventative maintenance. However, if maintenance activities are left to chance, prices can increase and levies may rise.

Older buildings may have higher costs associated with more frequent repairs. Newer buildings may not have as much maintenance but may have more infrastructure and amenities to keep up with.

Your strata scheme may have been the subject of legal action for owners who haven’t paid their levies in the past. So your strata levies may also contribute to paying debts instead of improving the property.

If you’d like to learn more about managing your strata property’s financials, download your free Community Living guide on strata financials.