Body Corporate Levies: Factors That Influence Costs and Why Comparisons Are Challenging

Every owner in a body corporate is required to contribute to levies, making these contributions a common point of comparison—whether it’s between neighbours in the same complex or friends and family in different suburbs.

Despite similarities in properties, there are always differences: the nature of the complex, the number of lots, the building’s history, and the individual decisions of each body corporate. All these factors can influence the amount of levies an owner pays.

In this article we will explore why comparing levies is challenging and the various factors that lead to differences.

Where Levies Go?

Every owner in a body corporate makes financial contributions (called ‘levies’) for what is necessary for the operation of the body corporate and the upkeep and improvement of the common property. Levies go into a body corporate fund, controlled by the body corporate not to the body corporate manager.

A body corporate in Queensland is not a business and is considered a not-for-profit entity. Since there is no profit motive, the only goal is to set levies at the amount required to maintain the common property of the body corporate. (in both the short and long term)

Why Comparisons Can Be Difficult

Building Characteristics

Each building has unique attributes, such as the number of units, fixed costs, and long-term goals. Therefore, comparing levies between buildings is difficult because their cost structures are inherently different.

Decisions Shaping the Building’s Future

Decisions made by a body corporate over time shape the future of their building. Choices about maintenance schedules, repair timelines, and long-term planning vary from one scheme to another. These decisions impact levies.

For example, a building that is exposed to harsher weather conditions (from the sun, rain, sea) will generally need maintenance activities undertaken at a more frequent rate than a similar building exposed to less harsh conditions. The required need for more maintenance would increase levies.

Impact of Complex Size and Features

Owners often expect lower levies in smaller developments. However, while the total amount required to maintain a smaller complex may be lower, the amount paid per owner may not be.

For instance, the cost to maintain an elevator, security system, or a shared rooftop garden can be similar whether it’s in a small building with 10 units or a larger one with 50 units. Although the cost is divided among more owners in a larger complex, the per-owner expense in a smaller complex can be higher due to fewer people sharing the cost.

Similarly, consider the cost of a building manager or concierge service. In a larger development, the cost is spread among a greater number of owners, reducing the per-owner expense. However, in a smaller complex, each owner bears a higher portion of this cost, potentially making levies comparable to or even higher than those in larger developments.

 

Some Key Factors Influencing Levy Differences

Insurance Premiums

Insurance is a significant annual expense for most buildings and can greatly affect levies. Factors like the building’s history, including past insurance claims from storms, floods, or poor construction, can increase premiums for subsequent years.

Building’s Maintenance History

A building’s maintenance history significantly influences the levies that owners must pay. A history of frequent or significant unexpected repairs and defects can lead to higher levies. This pattern of maintenance and repair decisions directly impacts the financial demands placed on owners, increasing the levies required to ensure the building’s upkeep and overall condition.

Sinking Fund Adequacy

If a body corporate has kept levies low for several years, its sinking fund may lack sufficient savings for necessary upgrades or maintenance. This can result in a levy increase or a special levy to ‘catch up’ for impending costs like resurfacing a driveway or repainting the exterior.

Frequency of Services

Higher levies compared to neighbouring buildings might be due to more frequent services. For example, if your gardener and pool cleaner visit weekly, while your neighbour’s service is monthly, this contributes to higher costs. Smaller schemes with fewer owners to share the expenses make these seemingly minor costs a larger portion of each resident’s contribution.

Building format plan vs standard format plan

The type of subdivision plan, whether building format or standard format, influences the body corporate’s maintenance and repair responsibilities. For example, in a building format plan, the body corporate is responsible for the roof and gutters on all lots, which generally increases levies. For more information on format plans, see our article (link to article on format plans).

Energy and Utility Costs

Energy and utility costs can significantly influence body corporate levies. The expenses for electricity, water, and gas used in common areas and facilities contribute to the overall levies. Additionally, investments in sustainability initiatives, such as installing solar panels or energy-efficient lighting, can have an initial cost that impacts levies, although they may result in long-term savings.

 

Understanding the complexities and factors influencing body corporate levies can help owners make informed decisions and set realistic expectations. Each building’s unique characteristics, maintenance history, and financial decisions contribute to the variability in levies, making straightforward comparisons challenging.

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