What are body corporate levies?
Body corporate levies are the financial contributions lot owners make towards the running costs of their building and common property. In Queensland guidance, these contributions are called owner contributions, although owners commonly refer to them as levies.
For schemes covered by the Body Corporate and Community Management (Standard Module) Regulation 2020, the body corporate prepares budgets, approves the contributions payable by each lot and decides how many instalments are required. Levies therefore do not have to be paid quarterly in every scheme.
Your levies pay for the costs of operating and maintaining the scheme. The amount depends on your body corporate’s budgets, the facilities in the scheme and the contribution schedule applying to your lot.
What do body corporate levies pay for?
Levies can fund the services and obligations your body corporate is responsible for, including:
- maintenance of common property
- building insurance
- cleaning, gardening and common utilities
- body corporate management and other administrative costs
- maintenance of facilities such as pools, gyms, lifts and fire installations
- major repairs and replacement work through the sinking fund.
Facilities and services vary between schemes. A scheme with a pool, tennis court, gym or lift may have higher operating and maintenance costs than one without those facilities. Building size, age, contracts and the level of maintenance required can also affect the budget.
Insurance and maintenance are two significant areas of body corporate expenditure. You can read more in our body corporate insurance factsheet and body corporate maintenance factsheet. The administrative fund budget must allow for necessary and reasonable spending on common property, body corporate assets, insurance and other recurring costs.
A body corporate may also need to raise a special contribution if an unexpected cost was not included in the budget or the amount set aside was not enough to meet the cost. A special contribution is not automatically required every time the sinking fund is insufficient. The body corporate must decide whether one is needed and approve it by ordinary resolution.
What is the difference between the administrative fund and sinking fund?
The administrative fund and sinking fund are the two main body corporate funds. The body corporate must prepare a budget for each fund every financial year. Money cannot be transferred between the funds, so each budget needs to cover the type of expenditure that belongs to it.
The administrative fund covers the scheme’s day-to-day and recurring expenses. Depending on the scheme, this may include:
- regular common-property maintenance
- insurance charges
- gardening and cleaning
- electricity and other utilities
- body corporate management
- postage, secretarial costs and minor repairs.
The administrative fund budget covers necessary and reasonable expenditure for the financial year. It also sets the amount to be raised from owners for those expected costs.
The sinking fund covers longer-term capital expenditure and major maintenance. It may be used for work such as major external painting, structural repairs, replacement of common-property fences or replacement of other major items.
The sinking fund budget must allow for expected capital and non-recurrent spending in the current financial year. It must also reserve an appropriate amount for anticipated major expenditure over at least the next 9 years. A sinking fund forecast may help the committee plan for this work, although each body corporate decides how to estimate its likely spending requirements.
How are body corporate levies calculated?
The body corporate works out how much is needed in the administrative and sinking funds through its budgets. The committee prepares proposed budgets for owners to consider at the annual general meeting, and the budgets can be approved by ordinary resolution. Owners can vote to accept or amend the proposed budget.
The budget must consider the scheme’s expected expenditure and existing financial position. If the proposed budget changes at the annual general meeting, the contributions payable by owners must also be adjusted.
Once the budgets are agreed, contributions are generally calculated using each lot’s contribution schedule lot entitlement. These entitlements are recorded in the community management statement. The relevant regulation module can affect the calculation, and some items, such as certain building insurance costs, may be calculated differently.
Some schemes have equal entitlements for every lot, while others have different entitlements. The amount you pay is therefore not necessarily the same as the amount paid by another owner.
For more practical information, see our guide to body corporate levy factors and why comparisons can be challenging.
When are body corporate levies due?
The body corporate decides the number of instalments and the due date for each instalment when it fixes the contributions for the financial year. Check your body corporate records and contribution notice instead of assuming your scheme uses a quarterly payment cycle.
The body corporate must give you written notice of the contribution payable at least 30 days before the payment is due. The notice must state the amount, due date, any available discount, any applicable penalty and any previous arrears.
Keep your contribution notices and check the due dates carefully. If you have not received a notice, contact your body corporate manager or the body corporate to confirm the amount and payment details. You should still arrange payment by the due date recorded for the contribution.
What happens if body corporate levies are unpaid?
If a contribution is not paid by its due date, the body corporate may apply a penalty where the applicable requirements have been met. The penalty is simple interest at a stated rate of no more than 2.5% for each month the contribution is overdue.
The body corporate can recover the unpaid contribution as a debt. It may also recover reasonable costs incurred in recovering the amount, subject to the applicable recovery rules. Recovery may involve a debt dispute claim in QCAT or proceedings in a court.
If a contribution remains unpaid, recovery action can place pressure on the scheme’s finances and create additional costs. Other owners do not automatically become responsible for the unpaid amount.
If you are experiencing financial hardship, contact your body corporate manager early. The body corporate may be willing to discuss payment arrangements, but a payment plan is not guaranteed. Raising the issue before the due date gives everyone a better opportunity to consider the available options.
Body corporate levies fund the scheme’s everyday operation and longer-term needs, with the amount and payment dates set through budgets, entitlements and contribution notices. If you need help checking your levy notice or payment details, contact StrataCare at reception@stratacare.com.au.
