What affects Strata Levies?
Strata levies vary between developments, so it’s important to have an idea of the amount of the levies and their frequency before you decide to purchase a property. Factors that increase Strata Levies include:
- Age and Condition – Older buildings may need more maintenance and repairs
- Location – Plans closer to the sea will often deteriorate quicker and require more maintenance
- Facilities – consider that facilities such as swimming pools, gyms and lifts need to be maintained and replaced so levies will typically be higher to accommodate these facilities
- Services – Common areas need to be kept neat and tidy so large expanses of common areas and gardens need to be factored in as well as utilities to light these areas and to provide common water.
Also consider the title of the property. Strata title property will include common areas that involve the structure and insurance of the building. Community Title levies will typically be cheaper as Lot Owners need only to maintain and insure Lot 1, being Association Property and Lot Owners typically maintain and insure their Lots at their own expense.
How much are Strata Fees in NSW?
Strata Levies are typically paid quarterly but frequency can increase or decrease depending on the needs of the property and are determined at the Annual General Meeting each year.
There’s no fixed standard for Strata Levies, which vary from scheme to scheme depending on how many communal facilities it has and other factors. In New South Wales, average Strata Fees can be anywhere from 0.3% to 1.2% of the property’s value (0.8%–1.2% with facilities, 0.3%–0.7% without facilities).
These Levies are calculated prior to, and then voted on at, the Owners Corporation AGM. The final figure will be distributed with the minutes to existing owners, whereas prospective buyers normally get this information through the work done by their lawyer or conveyancer.
Types of Strata Levies
Strata Levies in NSW are paid to the Owners Corporation under three categories:
1. Administrative Fund Levies
2. Capital Works Fund Levies
3. Special Levies
Administrative Fund Levies
These levies typically cover routine maintenance costs for common areas (e.g. cleaning, gardening, utility bills and minor repairs), Building insurance, utilities and management fees.
Capital Works Fund Levies
The Capital Works Fund (formerly known as the Sinking Fund) covers larger expenses, typically the replacement of items of a capital nature. Your Administrative Fund generally covers repairs whereas the Capital Works Fund becomes a savings account over time to ensure there are funds in place to cover long term replacement of building components such as gutters, fencing, repainting the building and other common areas. Plans can obtain a Capital Works Fund Plan to forecast the funds that will be required and the expected life span of components of common property. These figures then form the basis for levies to be set each year.
Special Levies are generally one off levies for unbudgeted expenditure or to top up the Administration or Capital Works Fund if they have become overdrawn and had to borrow from the other fund until a Special Levy is raised.
Who needs to pay Strata Fees?
You’re required to pay Strata Levies to the Owners Corporation if you own a Lot within a Strata Scheme however there can be specific circumstances detailed in the By-Laws where a Lots levy contribution can be varied.
How are Strata Levies calculated?
Strata levies are calculated by Unit Entitlement. Unit Entitlement is a method of assessing the relative value of one Lot against another, which are generally determined by the same factors that would determine a Lots market value, such as aspect, size, number of bedrooms and position in the building. In general terms, the higher the unit is in the building, the higher its unit entitlement and in turn the higher its proportion of levies.
How can a Strata Manager help?
Self-managed Strata Schemes don’t always make the best financial decisions, and this affects all Owners when levies are increased to cover avoidable expenses. Hiring an experienced Strata Management Company to handle accounting and financial management, among other services, can streamline your scheme’s spending and save all owners money.
Strata Managers have established relationships with local companies to help Owners Corporations secure the best rates on repairs and maintenance, insurance and other essential services. They’ll also make sure all legal paperwork is in order and up to date to help you avoid penalties.
Talk to our Strata Managers in NSW
Our specialists at Lake Group Strata have more than 25 years’ experience helping owners and developers to manage Strata Property in NSW.
We cover all areas across Newcastle, Lake Macquarie, the Hunter Region and Myall Lakes. Call our Charlestown office on 02 4942 3305 or our Maitland office on 02 4933 6466 to talk to our team today.