Lyla Lindsey
Strata fees, also known as levies, are regularly paid contributions by each owner of a strata lot to the body corporate, which is responsible for the upkeep and management of the shared property. The fees cover shared expenses, including repairs and maintenance, utility bills, and administration costs for the strata management services. The amount of strata fees varies depending on factors such as the type and size of the property, the number of shared amenities, and the unit entitlement. Understanding strata fees is crucial for existing and potential strata owners in Western Australia to ensure a pleasant ownership experience and effective relationship with their strata management company.
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What You'll Learn
Administrative fund levy
Strata fees in Western Australia are typically comprised of two components: the administrative fund levy and the reserve fund contribution (also known as the "sinking fund"). This answer will focus specifically on the administrative fund levy.
The administrative fund levy, as the name suggests, covers the day-to-day costs associated with the management and maintenance of a strata scheme. This includes a wide range of expenses, such as cleaning and maintenance of common areas, landscaping, pest control, garbage collection, and utility costs for common areas. Additionally, it covers the cost of administrative tasks, including strata manager fees, accounting and auditing fees, insurance premiums, and legal fees. Other expenses may include repairs and maintenance of common property, such as lighting, plumbing, and electrical systems, as well as any ongoing maintenance contracts for elevators, fire safety equipment, or security systems.
The strata company will usually engage a strata manager to oversee the day-to-day operations and ensure the smooth running of the strata scheme. The strata manager's fees are typically paid from the administrative fund. This includes their professional fees for tasks such as coordinating meetings, maintaining strata records, and providing advice to the strata company.
Insurance is another significant cost covered by the administrative fund levy. Strata insurance is mandatory in Western Australia and provides coverage for the common property and the building's structure. The insurance policy may also include public liability coverage for accidents or injuries occurring in common areas.
It's important to note that the specific items covered by the administrative fund levy can vary from scheme to scheme, and some items may be excluded or included in the reserve fund, depending on the strata company's bylaws and budgeting decisions. Owners within the strata scheme typically contribute to the administrative fund based on their lot entitlements, which are determined by the size and value of their lot relative to the entire scheme.
Owners should be provided with regular financial statements detailing the expenses incurred and the balance of the administrative fund. This ensures transparency and allows owners to understand how their contributions are being utilised. It is the responsibility of the strata company and the strata council (if applicable) to ensure that the administrative fund levy is adequately covering the necessary expenses and that funds are being managed effectively. This includes budgeting, financial planning, and, in some cases, investing the funds to generate interest.
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Sinking fund levy
Strata fees are paid by owners of strata lots in Australia. They are contributions to the strata company's funds, which are used to maintain common properties. These fees are typically paid quarterly and can vary depending on the property type, the services offered, and other factors.
The sinking fund levy, also known as the capital works fund, is one of the three types of strata fees. It finances large ongoing capital expenditures and covers major strata expenses that are generally planned ahead of time. This fund is used to pay for capital expenses when they occur, such as getting, renewing, or replacing property or fixtures and fittings that are part of the common property. For example, it can be used to renew or replace outdoor furniture or a table in the foyer.
The sinking fund levy is designed to avoid lot owners having to pay large, one-off levies that may cause financial strain. By law, a 10-year capital fund plan must be in place at all times to anticipate major expenditures for the property. This plan is reviewed at least every five years and considered at each Annual General Meeting (AGM). During the AGM, the total strata budget is set, and all owners have the opportunity to vote on the budget and the appropriate levy contributions.
In some cases, unplanned expenditures may arise that cannot be covered by the sinking fund. In such situations, a special levy may be voted in by ordinary resolution. A special levy is an extra shared cost for owners, separate from regular strata levies. It can also be passed for any large and planned one-off strata expenses if agreed upon by the majority of owners in a general meeting.
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Special levy
A special levy is a type of strata fee that is used to cover emergency or extraordinary expenses that cannot be covered by the reserve or administrative levies. It is intended for unexpected, unplanned circumstances and expenditures that are necessary to ensure the safety and habitability of the strata scheme complex. For example, a special levy may be required for major roof repairs, replacing a lift, or addressing severe building defects that pose a risk to residents. These levies are paid as additional contributions and are approved at a meeting of the lot owners.
The need for a special levy may arise due to insufficient funds in the reserve or administrative funds. It is important for strata companies to plan ahead and anticipate unexpected expenses within the sinking fund. However, in some cases, the issue may relate to something hazardous that requires immediate attention. For instance, failure to fix dangerous problems, such as severe building defects, in a timely manner could lead to worsening conditions.
The frequency and rates of special levy payments are typically dictated by the scheme by-laws. These levies are evaluated based on unit entitlement, which calculates a lot's value against others to determine its market value based on size, position, number of bedrooms, and aspect. Special levies are typically combined with other levy types, such as the administrative fund levy and sinking fund levy, into one payment invoiced at the start of each quarter.
To avoid special levies, it is advisable to maintain a healthy balance in the sinking fund. Lot owners can actively participate in the management of the strata company by joining the committee and ensuring proper planning and budgeting. By reviewing budgets and financial statements, lot owners can identify if the sinking fund is low, indicating a higher risk of requiring a special levy.
Special levies are not uncommon in strata buildings, especially when dealing with major repairs or maintenance. However, they should ideally be reserved for extraordinary circumstances and not as a replacement for proper financial planning and budgeting by the strata company. As a buyer, it is important to review historical fees, amenities, and upcoming items to understand the financial obligations associated with strata living.
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Common property maintenance
Strata fees, also known as levies, are contributions that each strata owner is required to make to the body corporate, which is responsible for the upkeep and management of the shared property. These fees cover shared costs such as repairs and maintenance, utility bills, and administration costs for the strata management services.
The strata manager plays a crucial role in managing common areas in a strata scheme. They collect strata fees, organise repairs and maintenance, manage budgets and financial matters, and handle administrative tasks such as organising meetings and record-keeping.
The strata fees cover the day-to-day management and expenses of the building, including cleaning, gardening, utilities such as electricity for common areas, and building insurance premiums. They also contribute to a sinking fund or capital works fund, which finances large ongoing capital expenditures and unexpected expenses. For example, if the sinking fund cannot cover an expense due to unforeseen circumstances, a special levy may be imposed to address issues such as severe building defects that could pose a risk to residents' welfare.
The amount of strata fees varies depending on factors such as the size, age, and condition of the building, the number of shared amenities and facilities, and the unit entitlement, which is based on the property's value in the strata scheme. In Western Australia, strata companies are bound by the Strata Titles Act 1985, which outlines their duties and functions, including ensuring adequate insurance, preparing budgets and financial statements, and maintaining records.
It is important for strata owners to understand how their strata fees are allocated and to participate in the management of the strata company by attending meetings and reviewing financial records. If there are concerns about the allocation of funds, these can be raised at the Annual General Meeting (AGM) or during regular council meetings, and changes can be proposed and voted on.
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Utilities
Strata fees cover common utilities such as water, electricity, and gas consumed in shared spaces like stairwells and gardens. However, individual utility bills within private units are not included in these fees, and property owners are responsible for their utility expenses.
To reduce strata fees, some strata buildings create an embedded network by combining all the utilities of the entire building and negotiating a better rate with the utility company. The electricity is then divided back up among the units. This reduces levies by lowering the amount required to cover utility usage in common areas such as pools, gyms, hallways, and carparks.
The administrative fund levy, one of the three types of strata fees, covers the daily expenses of the scheme, including utility fees. These utility fees cover the cost of utilities in common areas.
It is important to note that strata costs can vary depending on the type and size of the strata property, with larger and amenity-rich complexes demanding higher fees. For example, fees for a newer strata building with features like lifts, pools, or gyms would be significantly higher than those for older, smaller strata properties with fewer amenities.
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Frequently asked questions
Strata fees, also known as levies, are contributions each strata owner is mandated to pay to the body corporate, which is responsible for the control and management of the common property.
Strata fees cover shared expenses, including repairs and maintenance, utility bills, and administration costs for the strata management services. They also cover common area maintenance (shared spaces like lobbies, hallways, elevators, and stairwells).
Strata fees are calculated based on unit entitlement, which means that one lot's value is calculated against another to determine the market value based on size, position, number of bedrooms, and aspect. The fees also depend on the age and condition of the building, with older buildings typically having higher levies to cover ongoing repairs.
Strata fees are typically paid quarterly and can be combined into one payment at the start of each quarter.
