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How high is too high for strata levies?

By Salina Ng

Have you just found out there is an increase to your strata levies? Nobody likes paying levies, but how high is too high when it comes to levies? And what is the money used for, anyway? The following will help demystify the world of strata’s and the levies attached to them.

“If you think it’s too expense to hire a professional to do the job, wait till you hire an amateur.”

Red Adair, firefighter 

When do levies go up?

The strata manager may put a motion for an increase in levies on the meeting agenda but they cannot impose the increased levies. Strata levies are decided at the annual general meeting (AGM) and must be discussed and accepted by a vote of the owners. Levies are normally only increased in line with the increase in running costs of your strata scheme, if there is a need to do new works or there are additional expenses.

Different types of levies

Strata levies are generally divided into two separate funds — the administrative fund and the sinking fund.

  • The administrative fund covers the general day-to-day running expenses of the strata scheme, like insurance, gardening, pool maintenance and lift maintenance.
  • The sinking fund covers longer-term maintenance and repairs, like repainting the building, and is used for any anticipated or unexpected expenses. If there are not enough funds to cover the unexpected expenses, a special levy will be needed to be raised.
  • A special levy covers extraordinary expenses that cannot be covered by the sinking fund.

 

Are the levies you are paying fair?

There are many different elements that can affect your levies, making it very hard to estimate whether they are fair or otherwise. The trouble with getting an accurate idea of what is a fair level for levies is that you are often comparing apples with watermelons. Strata levies will vary depending on several factors including the size and style of the common property and building, location, age, and facilities available.

Facilities such as lifts, gyms, pools, saunas and secure parking are often found in newly built buildings and although they look very appealing they will certainly cost you in terms of strata fees. If the strata scheme’s building is older it will also cost more to maintain.

 

Who is running your strata?

Another big factor in the cost of strata levies hinges on whether the strata scheme has active or passive strata management, and a Council of Owners (this is an annually elected group of owners who make decisions for the complex). An excellent strata manager is a big plus for any strata scheme, whereas poorly managed strata schemes will have negative flow-on effects for years. Sometimes the Council of Owners can choose to keep levies as low as possible, which sounds good, but can be a drawback when it sacrifices much-needed maintenance works.

 

Maintaining the value of your property

If the strata scheme is actively spending money on maintaining a building, it often prevents maintenance problems getting more expensive — ensuring the property maintains its value. Proactive maintenance can save you money in the long term and if it’s enhancing the property, you get the benefit of adding value and capital growth. However, there is a fine balance between adding value and over-capitalising.

If the Council of Owners is doing its job properly by maintaining a healthy sinking fund to look after future repairs and maintenance, that adds to the levies too. As reported on Domain, there is a strong argument that units in well-maintained buildings with relatively high levies hold both their rental and resale values better than units in rundown buildings with low levies.

 

What should my levies be?

There is no hard and fast guide to fair levies as there are a lot of factors that can impact the levies, which are particular to the individual strata scheme itself. Each strata scheme fares differently terms of the building condition and Council of Owners management, and financial viability for determining strata levies and issues in any of these will impact levies. There is not a lot of sense in comparing with other strata schemes and it is best to look at the history of the strata scheme to see how it has performed and the reason for the levies.

For example, insurance for the building and the strata managers fee tend to be the highest costs in the budget, but what if your strata complex has lifts, gates or pools? Is the water consumption included in your strata levies? These are just some of the things assessed when determining levies.

Want to know if your levies are too high? Give us a call and we can go through your strata complexes budget and performance.

About the Author

Salina Ng has been in the real estate and property industry for over eight years and her skills and services go well beyond strata. As a strata manager at the Empire Estate Agents office in Victoria Park, Salina has a diverse set of skills, including liaising and assisting lot owners and the care of the common area and strata complex. Salina works closely with the Council of Owners, lot owners and managing agents of the strata complexes she manages in Perth to ensure that they are satisfied with how the complex is managed. If you have also had a new strata development in Perth Salina, along with Jamie our licensee, are experienced in taking your strata management development from concept to registration and beyond.

Need more information on this topic? Or can we help you with other property management questions? Feel free to call and speak to us at Empire Estate Agents on (08) 9262 0400 or email reception@empireestateagents.com.

 

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