If you have lived in either a townhouse or an apartment in South Australia, you might know something about Strata Title and fees.
Here is everything you need to know about a Strata Corporation and the regular levies (or strata fees) paid by the Owners.
What Is a Strata Titled Property?
Strata titled properties are a form of property type for which you can own to reside in or own to invest in. It is significantly different to Torrens titled properties, where you own your whole property and the land it encompasses. With a Strata property, you will be a part Owner of common land and common property and be a member of a community of Owners with responsibilities and obligations towards one another this shared property and towards each other.
This type of property ownership is not just limited to residential buildings either, as some Strata or Community titled properties in South Australia may be made up of Commercial buildings or sheds or even a mixed-use property of commercial and residential lots or units.
Here are the many types of building that may be part of a Strata Titled Property:
- Industrial unit
- Retail shops
So now that we have an idea of what a Strata titled property is, why are the unit Owners invoiced Stata costs/strata fees/ levies, and what are these levies for? Where do these fees go? and what are these fees comprised of?
Learn more about Strata Title: What Is A Strata Title: What You Need To Know 2021
What Is A Strata Fee?
Strata Fees are more commonly known as strata levies or contributions. These funds are being raised to put towards the group’s ongoing running costs, maintenance and insurance. The maintenance is specifically for common property and common areas such as;
- Gate repairs
- Stair maintenance
- Pool maintenance
- General Building repairs (roofing, guttering, windows, doors, and external walls
- Lift maintenance
- Common services and equipment such as;
- Electrical costs
- Water costs
- Fire protection services
- Other costs such as;
- Management services
- Legal services
- Debt collection
- Consultant fees
- Building and Liability Insurances as mandated
- Other Insurances either required by State Law or optional
The frequency and amount of fee that every Owner needs to contribute are decided annually at the AGM annual General Meeting) by the Unit Owners in attendance (or voting by proxy).
If managed professionally, part of the services provided by the strata manager likely is to provide your group with a proposal for a budget based on what they believe your Strata Corporations annual costs to be (and long term costs).
A Strata fee/ Strata levy is usually paid quarterly, based on Annual (plus long term) expenses. These will be distributed by your Strata Managers or the Treasurer when self-managed, in line with the agreed amounts to raise at the last Annual General meeting.
This, of course, also varies between the different states and depends on the strata laws in place.
However, there are three main types of strata fees:
- Administrative Fund Levies: These are expenses incurred each year, such as cleaning, electricity, plumbing, gardening, insurance, water, etc., recurrently
- Sinking Fund Levies: These are expenses made for long-term upkeep and maintenance work, not occurring every year, such as painting, roof replacement, timber works, etc. This works essentially as savings account for a rainy day, but with some idea of what that rainy day may bring.
- Special Levies: these are generally one-off levies called for a specific purpose such as unknown maintenance, emergency works and shortage of funds. These are often works that were not budgeted as part of a sinking fund (or the group may not have a sinking fund). Perhaps a project where funds were being raised needs to be prioritised sooner than expected or were more expensive than originally anticipated. Again these works would not be recurrent annual expenses but more one-off projects such as a driveway replacement or guttering replacement.
Learn More About Strata Fees: Everything You Need to Know About Strata Fees in South Australia
What Does My Strata Fee Cover?
Your Strata Fees or Strata levies will go towards all of the items as mentioned earlier and more. Each property is different, so the short and long term costs of running and maintaining these properties are also very different. For example, one group may have a large area of common ground, which requires substantial and regular gardening. In contrast, another may have a small amount of common ground, mainly just a carpark. Some Corporations may pay all the water usage through one common meter paid for by the Strata fees, whereas another may have individual water meters on each unit.
The type of items each Strata must cover is detailed above. However, if you are looking at purchasing a Strata unit, to determine what the costs are for that property, look at the most recent financial statements or budgets to get an idea of the regular costs. Then look at the last few sets of minutes to determine if any long term projects are being considered or already approved for the group, and whether or not these costs are incorporated in the existing levies and strata fees, or if a special levy is anticipated to cover the cost of the works.
How Are Strata Fees Calculated?
The strata fee that you need to contribute is decided by the body corporate at the AGM. The Members determine the amount that owners need to pay by owners, but after reviewing and considering a budget put together by your group’s Manager or the Committee.
Members can accept the budget or vote to amend it. However, this budget needs to consider all the group’s ongoing regular expenses and any unexpected expenses that may come.
The strata fees will be different for every Strata unit complex, depending on the required recurrent expenses and/or agreed to by the Members. Some groups, for example, may have common lighting as a recurrent expense, and others may not. Factors that go into determining these fees include:
the age, location, property type, insurance costs, operational costs, amenities and more.
In some Strata Corporations, there may be other premium amenities that can also add to the group’s costs, such as pools, gyms, elevators, function centres and much more.
All of this will increase your strata fees needed to cover the ongoing costs.
This fee may be set to be paid in variable frequency options, such as paying your contributions/ levies. Annually or quarterly (most common). This will be decided at your AGM.
Learn More About Strata Fees: How are Strata Fees (levies) calculated?
What Happens if I Can’t Pay My Strata Fee?
Unit Owners are responsible for paying the strata fees (levies) on time when due, as pre-determined by the Corporation at a Members meeting.
If you cannot pay your levy on time, it is important to reach out to the Strata Manager or Committee for your group and request an extension or alternative for payment. The total cost of your levy is always your responsibility, and just as you need to pay your other invoices, such as electricity, you must also pay the Strata Corporation. If you do not, there will be consequences such as interest and reminder fees applied to your account and could also result in Debt collection action taken against you or, in instances of long term arrears, Court actions.
In instances where you are struggling due to hardship, ignoring your incoming levies will not assist you. Reaching out quickly to express the issue with your Manager or Committee, so you can work together to get you back on track is vital. Communication is always the right approach to these matters.
When your levy is overdue, you also lose voting rights at your meetings (except on decisions requiring a unanimous vote). This means that you are losing your voice for decision making.
Remember that if you are dissatisfied, holding back, your levy fees will not resolve any issues. Maintaining your voting rights is the best way to be heard on any matters. Also, suppose the group does not have sufficient funds to cover the costs of running the group. In that case, you may find that additional levies are also raised to keep the Strata Corporation able to transact its financial and maintenance obligations. These shortfalls, in turn, put additional pressure on all unit Owners.
How Do I Avoid Levies in Arrears?
Strata Management Companies usually provide three or more weeks notice for a levy (unless it is an emergency). They will also provide some time after the due date, before interest and reminder fees are added to your account.
Work out your budget in advance. If your quarterly levies are financially draining as a lump sum, perhaps consider getting in advance and then paying into your account more regularly so that you can pay in smaller sums each month?
Where possible, before purchasing a unit, ensure that you understand the quarterly fees and the current condition of the property to determine whether this is a unit that you can personally afford, not from the purchase price but the ongoing cost perspective. For example, if the minutes and condition of the building highlight that there are major future works on the horizon, and there are few funds in the Strata Corporation account to put towards these works, do you have enough fund reserves personally to contribute your portion of ongoing costs in the years ahead?
Who Is Responsible for The Payment of Unpaid Strata Fees
The group can review and determine how and when funds are raised for certain items, and collectively the group can negotiate at a meeting what the fees will need to be to ensure the group meets its obligations. Some of the group’s costs, for example, are quite fixed. Members can obtain quotes for items to try and lower the ongoing costs or one-off maintenance costs. Still, they need to do the works, or to meet their electricity costs, for example, cannot be removed from a budget as they need to be met, and so the group must ensure that whatever levy/ fees are being raised, are sufficient to meet the group’s needs. If enough funds aren’t raised, the group could find an impact on the health and safety of the residents in the building.
Once the Members set a contribution level/ levy at a meeting, each Owner must pay these levies to ensure compliance under the Strata Titles Act 1988 and ensure that the group can meet its costs.
If you are an owner in a Strata Corporation, then the costs of maintaining and running the Strata are a collective responsibility of the Unit Owners. This means that there is a responsibility upon you to pay your levies/ fees.
You, the Unit Owner, is responsible.
In some commercial situations, the Commercial lot Owner may choose to include the Strata levies into their Lease arrangements with their commercial Tenants. This does not remove the responsibility of paying the Strata levy from the Unit Owner. It merely means that they can choose to recoup the costs from their commercial tenant, provided it is part of their lease.
Before you decide to invest/own in a strata property, you need to understand all these factors so you are aware of your obligations and the group’s costs. You must do your research so you know how everything works before you make an informed decision.
If you have any questions about strata management in Adelaide, contact us at:
08 8276 0426
It’s your Community.
This article and the information provided represent general advice and do not consider any specific financial situations, objectives, or needs of an individual or Body Corporate/ Strata Corporation. Before you decide whether to acquire a certain product, you should read the relevant product disclosure statement, policy wording and/or consult your Insurer.