What do our body corporate fees and strata levies actually pay for?
Firstly, what are strata levies and body corporate fees?
In a strata property, individual lot owners pay a strata fee or levy to the body corporate to cover the costs of the maintenance, repair, and safety of assets such as building, gardens and equipment. The fees also pay utility bills for common areas, as well as insurance, any strata or building management fees and other professional costs.
The amount of the fee is often based on the size or value of an individual unit, with larger units paying more. Each year at the AGM, the committee will usually propose a fee structure for the following year, and this is then voted on by owners. Depending on the rules of the body corporate, levies can be due each month, each quarter or once a year.
What do strata fees cover?
Strata fees cover all the expenses incurred in managing and maintaining a strata property. These can be pretty wide and varied, and generally include:
- Maintaining and repairing all the things inside and outside the building that are not an individual unit owner’s responsibility.
- Looking after common areas, gardens, lobbies etc. This can include cleaners, gardeners, pool and window cleaners, security staff etc.
- Ensuring the safety of the building and its infrastructure through inspections and safety reports, including fire alarms, lifts, water pumps, electrical sub-stations, fire doors, balconies, steps and flooring.
- Paying management and professional fees to strata managers and accountants, and paying wages to caretakers, concierge or building managers.
- Residential strata insurance to cover damage and repair to buildings and common areas, personal injury and liability cover as well as compulsory employee or volunteer cover in some states.
- Power and water (and possibly internet, phone and/or gas) supply to common areas, managers’ offices and shared facilities.
- Future capital expenses if not covered separately by a reserve of Sinking Fund (also known as Capital Works fund). In some states a sinking fund is optional, in some others it is mandatory and must be kept separate from the administrative fund.
In some cases, where an unexpected expense has arisen such as a major repair cost or even legal fees, the body corporate can propose that a special levy be imposed on owners. It’s almost always the case that funds raised from a special levy must only be used to cover the cost of that unexpected event.
Naturally, if there were no strata fees, then there’d be no way for the body corporate to cover its costs, so each state and territory has laws which guide how strata fees can be set and charged, and how to chase up unpaid fees1.
Flex Insurance lets you choose what's included in your cover so you can choose your insurance yourself. Find out more about our Residential Strata Insurance product:
Different properties will have different costs to cover
Strata levies and body corporate fees vary considerably from state to state and property to property, but since the fees need to cover the things in the list above, it’s fair to say that the more assets and facilities a property has, the higher the fees are likely to be. The body corporate for a simple set of units with no lifts, minimal common garden, and relatively little in the way of shared services such as lobby or building manager, is likely to incur a fairly small annual strata levy /body corporate fee. At the other end of the scale, owners in a large, luxury apartment complex with numerous lifts, a concierge, a pool, manicured gardens, barbecue terrace and a gym can naturally expect to pay more.
Of course, other things come into play as well, such as the age of a property (older buildings need more maintenance), the number of units amongst which to divide the annual costs, and whether the property is in a major city or the regions, with inner city properties often charging higher fees.
To find out more about strata insurance costs and what's covered, view the strata insurance page for your state below:
- Strata insurance Qld
- Strata insurance NSW
- Strata insurance Vic
- Strata insurance SA
- Strata insurance WA
Do strata levies/body corporate fees include council rates?
No. Property laws and local government laws are completely separate. Individual lot owners still need to pay council rates to the local council directly.
How can high strata levies/body corporate fees be avoided?
The first thing to do is look at the financial statements of your body corporate to see where your fees are being spent. All expenses must be recorded, however it may still be possible to make savings. You can ask your body corporate committee or strata manager to review ongoing contracts such as cleaning, gardening or maintenance work, and get quotes from other suppliers. Small common gardens or lawns may even be managed by owners themselves.
Service agreements with strata managers can also be reviewed to make sure you’re getting value for money and the service you need, and importantly, check that strata insurance is tailored to your property, and isn’t simply relying on a one-size-fits-all approach.
Get a quote for your needs today:
What happens if you don’t pay your strata levies?
In addition to being unfair on other owners, and leaving the body corporate short of cash, failing to pay strata fees can quickly become a serious problem for the owner , because most strata laws throughout Australia allow body corporates to charge cumulative late fees as a percentage – and these grow quickly.
The laws also allow body corporates to issue legal proceedings, after a set time has passed, to recover unpaid fees. These are much like other debt recovery processes, with the same rules of enforcement5.
Get an online quote in minutes
Want a quote for Strata Insurance? Click the button below to use your online quote form:
References:
[1] https://www.lendi.com.au/inspire/property/strata-fees-explained-7-questions/
[3] https://www.lookupstrata.com.au/strata-fees/#Q7