Each lot owner is required to pay a share of the body corporate expenses and the body corporate is regulated by the Body Corporate and Community Management Act 1997 and Regulation Module.
The body corporate fees or levies are classed into predominantly 2 types of funds: the administration fund and the sinking fund. Some schemes also have a levy purely for raising money for insurance.
The Administrative fund covers:
The purpose of the administration fund is basically to pay for the day-to-day smaller recurrent expenditure items for the scheme like plumbing, gardening, electrical or even fire protection costs. It also includes often what is the largest item for this fund is paying the annual insurance premium.
- Maintaining common property and assets, such as pool cleaning and garden maintenance
- Regularly recurring expenses such as pest control, bank fees, professional fees etc.
The Sinking fund covers:
The sinking fund levies are for raising money for future capital infrequent expenditure for major items like the roof, fencing, roadways or maybe structural repairs.
- Infrequent expenses of a capital nature, such as consultant fees or fire control
- Major and long-term expenditures for the future, such as replacing the air conditioning or repainting the building
The Insurance fund covers:
- Insurance premiums for the insurance of the common property for replacement value and public liability
How are body corporate levies paid?
Each owner pays their body corporate levies to the body corporate account – although these may be collected by the body corporate manager on their invoicing system on behalf of the body corporate. They are usually paid at quarterly intervals, although this is determined by each body corporate scheme. These combined funds will then be spent in accordance with the approved budget to meet the expenses of the body corporate.
Why do body corporate levies increase over time?
Body corporate levies increase as the cost of goods and services increases over time. For example, an increase in the cost of the gardener’s fees or the insurance policy will result in an increase in the cost of the levies. This is necessary so that the body corporate can meet its expenditure.
What happens if owners don’t pay their levies?
When levies are not paid on time, or not paid at all, administrative and sinking fund levels can quickly drop below what is necessary to pay the costs of maintaining the property. If the situation becomes drastic, a special levy may then become necessary to cover expenses.
Special levies are not ideal, as they require large sums of money at short notice – and owners dread them. In short, if levies are not paid the body corporate cannot afford to pay its bills. Paying levies in a timely manner helps to ensure the building’s services and facilities are kept to a high standard, and thus maintains the value of each owner’s investment.
Without proper upkeep, the building would quickly start to look unattractive, pose health risks and lose appeal to potential buyers. Imagine overgrown gardens, cockroach-infested units, dangerous walkways, peeling paint and leaking rooves, and you get an idea of what body corporate fees are preventing.
What are the Rights Between Body Corporate Owners and Tenants in a Complex?