Understanding Body Corporate Levies

Proposed annual budgets are presented for lot owner consideration at each Annual General Meeting of the body corporate. Upon (majority) consent of budgets, the Strata Manager or alternatively the Secretary, is required to issue Notices of Contribution upon each lot owner that is registered within the scheme. These contributions are called “Body Corporate Levies”. Body Corporate Levies are calculated in accordance with the body corporate Schedule of Contribution Lot Entitlements or Schedule of Interest Lot Entitlements. In simple terms, the higher your (individual) contribution lot entitlement, the greater your contribution is towards the overall cost to manage, maintain or repair shared common areas.

Keep An Eye On Body Corporate Spending

Strata Mastery answers some of the top questions relating to levies and body corporate spending. 

Each lot owner must contribute towards the repair and maintenance of common property (e.g. shared recreational facilities, maintenance of building infrastructure, building insurance). An annual budget is determined to meet projected short term and long term costs.

Body Corporate Levies will be comprised of 2 different types of expenses:-

The Administration Fund Budget must contain estimates of necessary and reasonable expenditure to cover frequent or routine type expenses. Try and think of this fund as your daily working account.

Or

The Sinking Fund Budget must raise a reasonable amount to cover necessary and reasonable capital or major expenditure items that may clock around every few years and therefore are classified as “infrequent” but are generally large ticket items such as full building paintworks.

Once again, body corporate budgets and levies are adopted at each Annual General Meeting. At that meeting the body corporate must, by ordinary resolution:

• agree on administrative and sinking fund budgets for the financial year
• work out, based on the agreed budgets, the amount that each lot must pay
• decide the number of instalments the levies must be paid in
• set the date when each instalment is due.

The body corporate must give each owner written notice of the contributions they owe. This notice must be given at least 30 days before a contribution is due.

The contribution notice must include:

• the amount owing
• the due date
• any discount that can apply
• any penalty if the payment is overdue
• any previous payments that are overdue.

If a contribution is not paid by the due date, the body corporate can start debt recovery action to recover the amount. If a debt has been overdue for 2 years, the body corporate must start debt recovery within 2 months of that date. This does not stop the body corporate from starting debt recovery earlier.

Additional levies, known as a special contribution, must be collected by the body corporate if it has to pay for unexpected costs during the financial year. These can be costs that were either not included in the budget or not enough money was set aside to meet them.

Here’s the thing – there are no short cuts to getting budgets right within a body corporate.

It is not unreasonable for lot owners to assume that voting committee members (who are appointed to office) are aware of their body corporate legislative and building compliance obligations. For those who have recently joined us, we are referring to the various Codes of Practice, Australian Standards, Building Regulations etc., which also fall outside the Body Corporate & Community Management Act or Work Health & Safety Act. Standards which your Strata Manager may not be aware of. The first step is to understand and clearly identify all known fixed and non-fixed assets on common property.

As a volunteer committee member however, you maybe wondering whether you are qualified to ascertain these costs.

The mistake often made by body corporate is in determining these costs without seeking professional or suitably qualified advice, OR assuming that they are on track, only to find out that there are significant unanticipated or unexpected costs to be met.

Your body corporate may be relying solely on a Quantity Surveyor’s Sinking Fund Forecast, or previously established, day-to-day body corporate running costs to determine their administration and sinking fund budgets. If only it was that easy!