Let’s face it – when we hear the words ‘strata levy’ or ‘strata fees,’ they often conjure up images of tedious financial matters—like what could be worse than sorting through a pile of paperwork on a Saturday afternoon? But while the topic of strata fees often gets a bad rap, they play a crucial role in maintaining the health and well-being of your strata property.
So what are strata fees? We’re going to explain the often misunderstood concept of strata fees (or strata levies), uncover what they include, and discuss why they’re an essential aspect of managing strata schemes.
What are strata fees?
Strata levies, also known as strata fees, are the financial pulse of your strata property. They’re recurring payments made by property owners within a strata scheme, but they’re far from the mundane fees you might associate with everyday expenses.
Think of strata levies as a collective investment by the owners’ corporation into the well-being of your shared or common property in your strata community.
Who pays a strata fee and how are strata fees calculated?
In a strata scheme, individual lot owners pay strata fees or levies to the body corporate.
The fee amount is often based on the value of each unit (aka unit entitlement), with larger units paying more. Each year, at the Annual General Meeting (AGM), the committee proposes a fee structure for the following year, which owners vote on.
Depending on the body corporate’s rules, levies can be due monthly, quarterly, or annually.
What is the average strata fee
If you’re in NSW and part of a small-scale body corporate, you might be looking at around $1,200 to $2,200 per year.
But if you’re living it up in a sprawling apartment complex with all the amenities you can dream of, then your annual levy could climb to a heftier $8,000 to $10,000 or even more. Think of it as the premium package with all the extras.
And if you’re in a townhouse? Your strata fees are often a bit easier on the wallet compared to those in apartments.
But what do average strata fees cover? Let’s break it down:
1. Management costs
A strata fee covers the cost of hiring a strata management company or strata manager.
A strata manager (or strata company) is responsible for overseeing daily operations, handling administrative tasks, and ensuring everyone in your strata scheme is adhering to the relevant strata management acts and regulations. This includes making sure the owners corporation pay strata fees and collecting unpaid strata fees.
2. Maintenance of common property
Strata fees cover the ongoing care and repair of common property in your strata plan.
Regular maintenance efforts to keep your shared amenities at the top of their game (and maintain the value of your strata building) can only happen with the payment of strata fees.
3. Sinking Fund for a Rainy Day
Life is unpredictable, much like the weather.
Just as we’d all like to set aside savings for unforeseen events, strata levies contribute to a capital works fund or sinking fund.
This financial cushion is ready to cover significant future expenses such as a roof replacement or a fresh coat of paint for your property’s exterior. A sinking fund is all about being prepared and planning for the future. It’s your safety net for future expenses that might pop up beyond the current financial year.
4. Strata Insurance
Think of strata insurance as the ultimate protection plan for your property.
A portion of your strata levies goes toward this insurance, which typically covers the building’s structure and common areas. It’s your safety net against damage or liability issues that may arise.
The best part? The insurance premium is distributed among all owners in the strata scheme, ensuring that it doesn’t strain anyone’s budget.
5. Emergency and special levies
Life sometimes throws curveballs. In such cases, additional levies might be imposed to cover sudden or emergency expenses that exceed the budgeted strata levies. Special levies can also be used to cover expenses for bigger dream projects like installing electric car charging stations or giving the pool a complete overhaul.
These levies are typically decided upon through a vote among the owners corporation, ensuring that everyone has a say in how costs are managed.
You can read more about special levies here.
What is the value of strata levies?
Now that we’ve peeled back the layers of what strata levies include, let’s talk about their true value. Strata fees might not be the life of the party, but understanding their significance is a game changer. Here’s why:
1. Property Condition
High strata levies can be perceived as a burden, but they often signify a property with top-notch amenities and exceptional maintenance.
In contrast, unusually low levies might raise eyebrows, hinting at a potential lack of funds for essential upkeep.
The key when looking at strata properties is finding the levies that align with your preferences and provide the lifestyle you desire.
2. Strata Management
Having a strata company manage your strata community makes life easy for everyone in the owners corporation. Here’s why a strata managers’ role is so important:
- Specialised expertise: They bring expertise to the table of your strata scheme. They’re well-versed in strata laws, regulations, and best practices. With a strata company behind them, they can ensure your property adheres to legal requirements and operates smoothly.
- Administrative efficiency: They handle complex administrative tasks, maintaining financial records, recording meetings, and fostering transparent communication among owners.
- Maintenance and repairs: They coordinate routine maintenance and prompt repairs, enhancing the property’s value and appeal.
- Financial management: They manage finances, collecting levies, preparing budgets, and allocating funds to areas like the capital works fund and strata insurance premiums.
- Conflict resolution: They can mediate disputes impartially. This helps to promote a harmonious community within your strata property. And who doesn’t want to get on with their neighbours?
- Compliance and risk management: They ensure regulatory compliance and manage strata insurance to protect against unforeseen events and liabilities.
- Proactive planning: They envision the future of your property, much like a forward-thinking strategist. They craft 10-year capital works plans, reducing the need for sudden special levies by setting aside funds for major projects.
- Communication hub: They facilitate effective communication among owners, ensuring everyone’s voice is heard and decisions are made collectively.
- Vendor management: They liaise with service providers, ensuring cost-effective and efficient service delivery.
- Peace of mind: Ultimately, they provide the owners’ corporation with the peace of mind you deserve. They handle complexities, allowing you to enjoy the benefits of where you live without the stress of day-to-day management.
3. The Section 184 Certificate
The Section 184 Certificate, also known as a Section 184 Strata Inspection Report, is a document that provides essential information about the financial and administrative health of a strata scheme or owners’ corporation. It’s usually required when buying into a strata community and includes:
- Financial Information
- Insurance Information
- Other Information
- Meeting Minutes
The certificate is a step in due diligence for buyers and helps make informed decisions before finalising a purchase agreement. If you’re reviewing one it’s important to ask:
- Does the property’s expenditure seem appropriate for its amenities and condition?
- Is there a well-documented 10-year capital works plan in place, and are levies likely to increase in the future due to this plan?
- How much are the strata management fees, and is the strata scheme seeing the benefits of this service?
4. Capital Works Plan
Think of this as your property’s wellness program.
This plan offers insight into potential fee increases that may be necessary for major projects in the future, such as a roof replacement or an exterior makeover. It’s all about maintaining your property’s health and aesthetics so it stands the test of time.
5. Strata Management Fees
Just as you scrutinise the cost of living, it’s wise to understand the cost of strata management services from a strata company. Get quotes from different providers to ensure you’re getting the best value for your investment. The goal is to find a management company that aligns with your strata’s needs without breaking the bank.
The Owners Corporation banks with Macquarie Bank and utilises the DEFT payment system for Levy payments.
This enables payment by BPAY, Credit Card over the phone, Electronic Payment via www.deft.com.au or payment at Australia Post.
All of these options, as well as the total payable, will be listed on your next levy notice sent to you (or included with this letter if any amounts are currently due).