What Are Levies?

As a lot owner in a strata scheme, you are required to financially contribute towards the running/operating costs associated with your building and common property.

These financial contributions are called levies. The amount and frequency of levy payments are generally decided on an annual basis at the Annual General Meeting but are typically paid in quarterly installments.

Lot owners pay levies to meet the financial obligations of the Body Corporate including:

• Building maintenance
• Building insurance
• Maintenance of common areas (including any swimming pools, gyms, lifts or fire servicing equipment and installations)
• Onsite caretaker, gardener or cleaner
• Any common electricity or common water
• Sinking fund costs
• Costs for management

Monies raised by the levies can be divided into two separate funds: the administrative fund and the sinking fund.

Generally, as part of your management agreement, your body corporate manager will send out levy notices on behalf of the body corporate.

It is important for levies to be paid on time as interest and late payment fees are usually applicable for late payments and the Body Corporate cannot effectively maintain the scheme without funds.

It is also important to remember that it is the owners who vote on and approve the budgets, that determines the amount of levies that lot owners need to pay.

How Are Levies Spent?

Your levies are paid into one account, but are separated into two separate but important funds which are the:

The Administrative Fund

The administrative fund covers general day-to-day expenditure. The amount must be enough to cover:

• The cost of maintaining common property
• Payment of insurance premiums
• Any other recurring expenses not covered by the sinking fund or special levies.

For example, gardening, cleaning, utility bills, management fees, bank charges, and any small repairs.

The Sinking Fund

The sinking fund pays for expected and unexpected long-term expenses such as repairs and maintenance (for example, driveway replacement or major external painting).

The sinking fund also needs to budget for any estimated or unexpected expenses such as structural damage due to accident or damages caused by mother nature. While these repairs are quite difficult to predict, the sinking fund is expected to have enough money in it to cover them. If not, a special levy must be raised to cover the cost.

How Are Levies Calculated?

The Body Corporate determines how much money is needed in both the administrative and sinking funds. These amounts must be supported by a budget that is presented to all owners, both at the AGM and then in the supporting minutes.

Owners vote to either accept or amend the proposed budget. The budget must take into account the amount needed in both funds to cover expected and unexpected expenditure. It must also consider the existing financial situation of the Body Corporate.

Levies are calculated based on each units entitlement. Sometimes all units in a corporation have the same (equal) entitlement. Sometimes entitlements vary based on the size or amenity of each unit.

Other elements that can contribute to the amount include:

• The size of the building or buildings
• The age of the building or buildings
• The amenities (for example, pool, tennis court or gym).

Amenities such as pools, tennis courts and gyms generally increase levy costs.

Paying Your Levy

Levies are generally payable on a quarterly basis, and a notice is issued by the treasurer of the Body Corporate or the strata manager.

Levy notices are generally sent three weeks prior to the due date. This gives owners ample time to plan for and make the payment. Regardless of whether an owner receives a notice, they are still obligated to pay the levies on time.

You can always refer back to your last Annual General Meeting Minute to locate the levy periods and due dates if you are unsure.

Unpaid Levies

If you cannot pay your levy by the due date, interest is calculated on the overdue amount. Owners who cannot or do not pay their levies become ‘unfinancial’ and you will be unable to vote in meetings until the debt is collected.

There are several steps that the Body Corporate will take to recover the unpaid levies, including all interest. While at first, a notice will be sent to the owner to request payment of the levy, the matter will be turned over to a debt collector and then a solicitor if the levy remains unpaid.  If all attempts fail, the Body Corporate can recover the unpaid levies, in court, as a debt.

Unpaid levies put a strain on all other unit owners, especially if they are required to make up the shortfall.  The act of reclaiming the unpaid levies can also cost a lot and this cost is also recoverable from the unit owner.

If required, the Body Corporate may look to implement payment plans to help recover overdue levies. This may occur in the case of financial hardship for unit owners. If you are in this situation, it’s always best to approach your body corporate manager to discuss payment options, before a situation of unpaid levies even arises.

Have a question about body corporate levies? Contact Stratacare today!


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