What are Body Corporate Fees? 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.
Travis Henry, Senior Accountant for SSKB stated “Prompt payment of contributions by owners is essential to ensure the scheme can operate smoothly and efficiently. Adequate funding/cash flow allows services to be provided for the benefit and enjoyment of all owners. In turn a well maintained and presented scheme generally commands higher relative asset values compared to one that isn’t.”
So, lets take a deeper look into Body Corporate Fees.
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:
- Administrative Fund
- Sinking Fund
- Insurance Contributions
You might be thinking, what does this mean? Where are the Body Corporate Fees going?
The simple answer is into your Body Corporate bank account. Whilst SSKB facilitates this, the levies are not SSKB fees. Our fees are only a small portion of your levies. Let’s go into more detail on this.
What does the administrative fund cover?
A Body Corporate must have an administrative fund if it is registered under the Standard, Accommodation, Commercial or Small-Schemes module.
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, insurance and other service providers such as your Body Corporate Manager.
What does the sinking fund cover?
Every financial year, Body Corporate Committees must prepare a sinking fund budget. This is to ensure the sinking fund has sufficient finances to provide necessary and reasonable spending for the financial year for major capital works such as painting the building or retiling the footpaths. This is also necessary to ensure an amount is reserved to cover likely future spending for at least 9 years after the current financial year. Building up funds reduces the likelihood of having to ask lot owners to make a large, one-off payments to sinking fund levies via a special levy – although it does not totally remove the possibility of this occurring.
A proposed sinking fund budget must accompany the Annual General Meeting notice when it is distributed to lot owners every year. Most Committees will engage a professional report writer to produce a sinking fund forecast. This enables the Committee to determine what amount will be levied to lot owners for the sinking fund levy.
The purpose of the fund is to ensure the Body Corporate has ‘savings’ and does not need to impose significant levies on owners each time an item needs repaired or replacement.
What do insurance contributions cover?
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, the Body Corporate 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.
Finally, what are special contributions?
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. This will reduce the likelihood of a one-off payment occurring.
If you have any further questions regarding Body Corporate Fees, your sinking fund or any other queries please don’t hesitate to contact your Community Manager.
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