If you are part of a Body Corporate or Owners Corporation, you will hear the words levy and special levy being raised. But what is the difference between a levy and a special levy?
A levy is also known as a Body Corporate or Owners Corporation fee and is a regular financial contribution made by lot owners that go towards the maintenance of their strata property. Your levies contribute to two funds, the Administration Fund and the Sinking Fund.
The Administration Fund is primarily to cover the re-occurring day to day running costs of the Body Corporate/Owners Corporation such as cleaning, grounds maintenance, electricity for the common area and insurance.
The Sinking Fund is to pay for non-recurring capital expenditure items of the Body Corporate/Owners Corporation such as painting, re-roofing the building(s), resealing the driveway etc. The sinking fund must also maintain a reserve of funds for similar future capital expenses. The projected reserves and required contribution amounts are determined generally by experienced consultants within a sinking fund forecast report.
A special levy is often raised if the Administrative Fund or Sinking Fund do not have sufficient funds to pay for a necessary expense that has not being budgeted.
The other time when a special levy is commonly raised is when there is a deficit of funds in the Administrative or Sinking Fund.
If the Body Corporate/Owners Corporation is faced with a significant expense that has not been forecast, it must levy on each owner a contribution. This is known as a Special Levy. A Special Levy can only be determined at a General Meeting by ordinary resolution.
Living in Australia, we all know how unpredictable the weather can be.
If your Strata scheme is damaged by a fallen tree and your Body Corporate/Owners Corporation is required to pay a considerable amount to repair the damages, this is when a special levy will need to be raised.
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