Paying levies or contributions is a fundamental part of living in a strata scheme. When sharing a building and common property with other owners, it is only fair that all contribute to the upkeep and running of the body corporate.
As an owner in a strata scheme, you will receive contribution notices outlining amounts you are required to pay, and what accounts they will contribute to. The notice may have up to three accounts listed:
The pie chart above illustrates administrative fund expenses based on data collected from Gold Coast bodies corporate over the years 2009-2012 by SSKB Director Paul Wood.
Your contributions to the administrative fund cover the day-to-day running costs of the body corporate, and the general maintenance of common property and body corporate assets. This includes repairs, caretaking fees, lift maintenance contracts and body corporate management contracts.
The most common expenses covered by the sinking fund for bodies corporate in the Gold Coast according to Paul Wood, Director of SSKB.
The sinking fund is designed to cover infrequent expenses of a capital nature. Your contribution amount is determined by a sinking fund forecast – a report which estimates major expenditures in the next 10 years.
The purpose of the fund is so that the body corporate has ‘savings’ and does not need to impose significant levies on owners each time an item needs repair or replacement.
Your insurance contribution is a payment for the Building replacement and reinstatement insurance.
In most cases, the insurance premium is included in the administrative fund budget. However, for bodies corporate with lots who have varying interest entitlements, the insurance premium will be listed as a separate amount.
If your body corporate is titled as a Building Format Plan, it is responsible for the insurance of the building and the common property.
If your body corporate is titled as a Standard Format Plan, it is responsible for the insurance of common property only and individual residences are the responsibility of the owners.
The cost towards the Public Liability and Office Bearer’s Liability portion of the premium is always included in the Administrative Fund.
Your body corporate may encounter unexpected or abnormal costs which have not been budgeted for. In this case, a special levy may be required to cover these costs.
Your body corporate can manage the number of special levies required by having realistic and thorough administrative fund and sinking fund budgets in place.
Though many lot owners wish for lower levies, it is important to ensure the levies are sufficient to have financially healthy administrative and sinking funds.
“It’s important to find that balance between spending, finding value for money and ensuring facilities and services are kept up to the standard they should be-maintaining the value of all lot owners’ investments,” says Paul Wood.
Star BMS can help you budget and manage your sinking fund forecast.
Star BMS is a building management service delivering a comprehensive and diverse range of professional services, including: sinking fund forecast, facility management, building maintenance inspections to work health & safety reports. All services are provided by experienced individuals with expert knowledge.