The amount of body corporate fees is one of the most frequently asked questions from apartment buyers. And it’s easy to understand why – with money tighter than ever these days, potential buyers need to ensure they can afford to pay their obligations. Most people want to make sure that the money they are investing in fees is used sensibly and that they are getting a good return on their investment. Here are some strategies to help ensure the money you spend on body corporate fees is used wisely.
Buy smart when apartment shopping
The very best time to make sure you’re spending your body corporate fees wisely is before you’ve even started to pay them. The unit or apartment you buy will have a huge impact on how much you’ll be paying in fees, so it’s smart to choose your apartment wisely.
Two of the biggest fee drains are building maintenance and facilities. If you choose a building that comes with a lot of facilities (think gyms, pools, barbeques, games rooms, libraries, well-maintained gardens etc.) you’ll be paying a lot more in fees – whether you end up using the facilities or not. It’s no use trying to argue that you shouldn’t have to pay for maintaining the pool when the last time you used it was eight years ago. If you’ve bought into the building, you’ll be paying just as much for the pool as the residents who use it every day. It may not seem fair, but your building comes as a package deal, and you pay for the right to use those facilities, not necessarily for the actual use of the facilities.
Still, it’s easy for owners to feel they are wasting their money on facilities they don’t use. Prevent this from happening before you even move in, by choosing a building with facilities you are actually likely to use. Yes, the apartment you want might be in a convenient location, but if you end up paying higher levies for facilities you don’t use, you might be better off financially to buy an apartment in a less-convenient location with fewer facilities. The money you save on facilities can then be spent on transport. Sure, that rooftop entertaining area might be enticing, but if you only use it once in a blue moon, you’re far better off without it.
The cheapest body corporate fees can be found in buildings with few or modest facilities. If you don’t mind walking up the stairs, then don’t pay the costs on a building with a fancy, high-tech lift.
Similarly, maintenance costs can be reduced by choosing:
- Newer buildings, which generally don’t need as much maintenance as older buildings.
- Smaller buildings, which don’t require as much maintenance, cleaning or work as larger buildings. However, the maintenance costs for larger buildings can also be quite reasonable, as economies of scale mean there are more owners to contribute to costs. Mid-size buildings often come with the most expensive levies, so are best avoided if you’re trying to reduce costs.
- Buildings without location issues (for example, inner city buildings may need to deal with noise, pollution and security issues).
- Buildings without environmental issues (for example, buildings near the sea may need to deal with storm and saltwater damage).
- A building constructed from low-maintenance materials (such as brick; wood buildings can be a lot more expensive to maintain).
Choose your apartment wisely so that you don’t waste your fees on things that you don’t want and won’t use.
Have your say about how fees are spent
If you’re going to invest a great deal of money in a property, it makes sense to get involved with how it’s run. If you’re concerned with how your body corporate fees are being spent, then join the committee and have a say in the decisions. Getting involved is the first step in ensuring that your body corporate fees are spent wisely and well – and it’s a step that many people don’t take.
First, you’ll need to be elected to the committee. Committees often struggle to find members, however, so there’s a good chance that most committees would welcome an interested and dedicated owner. Once on the committee, you can get involved with your building’s financial matters, and help ensure that body corporate fees are spent shrewdly.
Review your insurance
Like many things, shopping around can help you find a better deal and prevent money from being wasted. Do some research (or use a broker to compare insurance companies) and compare premiums and coverage offered by different policies. You’ll probably be able to find one at a lower price point that still meets the needs of your body corporate.
As well, you should check that the replacement value of the building is accurate. Bodies corporate are required by law to conduct an independent valuation of the building at least every five years. This helps ensure that the value of the building always remains accurate. However, it’s usual practice for insurance companies to automatically increase the building’s value each year on the policy. Over time, this value increase imposed by the insurance company may end up exceeding the actual value of the building. In cases where this is happening, correcting the value of the building with the insurer may reduce the premium.
Use your fees wisely around the building
Your first port of call is to closely look at where money might be wasted in the everyday operations of your building. Are lights always left on unnecessarily? Does air-conditioning always need to be on in certain parts of the building? Use sensors to control light use, timers to control air conditioners, and use off-peak electricity tariffs wherever possible. Larger buildings could consider bulk buying electricity to save costs. There are many ways to save money on costs in your building, which will lead to lower body corporate fees being required. Increasing energy-efficiency is a big one.
So is making sure that equipment and facilities around the building are properly maintained. Preventative maintenance is extremely important to prevent bigger problems down the track. You might think you are saving money by skimping on routine maintenance, but this oversight may well end up costing the body corporate far more in the long run. Then the body corporate will be faced with the cost of emergency repairs, which can quickly spiral out of control. Regular maintenance at the correct time will save you money in the long run and protect your investment in the building.
Don’t forget to apply for tax deductions
Body corporate fees are usually tax deductable, as long as you keep a record of the expenses accrued by your property. Don’t forget to claim them (although keep in mind that fees used for special purposes aren’t usually tax-deductable).