What Are Strata Levies and How Are They Calculated?
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If you’re part of a strata committee, you’ve probably heard of strata levies more times than you can count. But even so, some lot owners still find the concept confusing, especially when the calculation side of things comes up.
So, let’s break down what strata levies are and how to calculate them.
What Are Strata Levies?
Strata levies are the regular contributions that owners pay for the ongoing running costs of the building or complex. These costs include everything from garden maintenance and building insurance to major upgrades, such as repainting the exterior or replacing the elevator.
Think of strata levies as the financial fuel needed to keep the shared areas and systems running smoothly. They don’t cover personal expenses like electricity in units, but they do cover everything the community shares.
Types of Strata Levies
There are three main types of levies:
- Administrative Fund Levies. These cover day-to-day costs such as cleaning, insurance, utility bills for common areas, and basic repairs.
- Capital Works/Sinking Funds Levies. These are for future major repairs and upgrades, like roof replacements, refurbishing the lobby, or resurfacing a car park.
- Special Levies. These are one-off payments raised when the regular funds aren’t enough for something unexpected, like emergency repairs or major upgrades that weren’t planned in the annual budget.
How Are Strata Levies Calculated?
This is where things get slightly technical, but it’s not as complicated as it seems once you know what’s involved.
Here’s how the calculation process works:
Budget Preparation
The committee, usually with the help of a strata manager, prepares an annual budget for the next financial year. This includes estimating all expected costs for the administrative and capital works funds.
Lot Entitlement
Each unit or lot has a lot entitlement, which is usually determined by its size, location, or market value at the time the strata plan was created. This part is important because levies are divided based on each owner’s lot entitlement.
Annual General Meeting (AGM)
The proposed budget is presented at the AGM. Owners vote on it, and if passed, the total amount is then broken down and invoiced according to each lot’s entitlement.
Payment Frequency
Levies are usually paid and collected quarterly, though this can vary. Some committees go for monthly payments, especially if they prefer to avoid lump-sum payments. Late or missed payments can result in penalties or fines.
What Can Affect the Cost of Strata Levies?
Every building is different in many ways, and that difference is taken into consideration with their levies.
Factors that can affect the amount include:
- Age and condition of the building. Older buildings might need more maintenance, leading to higher levies.
- Number of shared facilities. The more amenities a lot has, the higher its levies will be.
- Past financial management. If the previous committee didn’t raise enough levies, the current one might need to do so.
- Unexpected expenses. Things like water leaks, storm damage, and compliance upgrades can also lead to higher levies – though these are mostly temporary.
