Do Strata Fees Include Council Rates?

If you’re part of a strata community / owners corporations, you might be puzzled by the two distinct bills you receive: strata fees (i.e. your quarterly OC levy notice) and council rates. Let’s clarify this for you.

Do strata fees include council rates? No, they don’t. Strata fees are collected by your Owners Corporations to maintain the shared spaces of your property—like insurance, upkeep of gardens, lift servicing, communal cleaning costs, common utilities, and pay for the Management Fees charged by the OC manager. Strata fees ensure that your communal living areas are functional and enjoyable.

Council rates, however, are charged by your local council to fund broader municipal services such as road upkeep, community library, public parks, waste collection (assuming your OC doesn’t have a private collection contract), and stormwater systems.

Understanding that strata fees and council rates are separate charges is essential. Strata fees focus on your immediate community, while council rates support the wider area you live in. This knowledge is key to managing your property-related finances effectively.

What are Strata Fees?

Strata fees also referred to as OC levies or body corporate fees under the Owners Corporation Act 2006 (‘OC Act’), are mandatory contributions made by all owners in a strata scheme. These fees are the financial fuel for the upkeep of common areas — those spaces that belong to all residents, like gardens, pools, and lobbies. They’re the reason the lights stay on in the hallways, the elevators run smoothly, and the exterior walls remain vibrant and inviting.

How are strata fees collected? These fees are typically collected quarterly by the appointed OC management company and held in the OC’s trust account. 

But what exactly do your hard-earned strata fees cover? Here’s a breakdown of the most common expenses:

  • Common Area Maintenance: This is the bread and butter of strata fees. It covers the cost of keeping the building and grounds in good working order. Examples include cleaning hallways, lobbies, and common areas; gardening and landscaping; lift maintenance; repairs to common areas like pools, gyms, and barbecues; and general wear and tear on building elements like roofs, paint, and plumbing.
  • Utilities:  The cost of electricity, water, and gas used in common areas like hallways, lobbies, and laundry facilities is typically covered by strata fees.
  • Insurance:  Strata schemes need insurance to protect against unforeseen events like fire, damage caused by natural disasters, or public liability claims. The cost of this insurance is shared amongst all owners through strata fees.
  • LTMP – Long Term Maintenance Fund (Sinking Fund):  Smart strata Committees plan for the future by setting aside funds for major repairs and replacements that will inevitably be needed down the line. This could include repainting the building exterior, replacing the roof, or upgrading common area facilities.

Strata fees are not determined arbitrarily but the OC Act requires the strata Committee to prepare a budget for the upcoming year, outlining the expected expenditure on all these items. This budget is then used to calculate the amount each owner needs to contribute, typically based on the unit entitlement of their property. 

What are Council Rates?

While strata fees keep your building running smoothly, council rates are your contribution to the broader community you live in. Issued by your local council, these rates are a mandatory annual charge that funds a wide range of essential services and infrastructure that benefit everyone in the area.

The funds collected from council rates are vital for maintaining and improving the community’s infrastructure and services. They support various local services such as waste collection, recycling, maintaining parks and sports facilities, and ensuring public safety. Additionally, they contribute to the upkeep of local roads, libraries, and community centers, which are essential for the well-being and development of the area.

Calculating council rates involves a specific formula. The total amount needed by the council for general rates is divided by the total value of all rateable properties in the area. This results in a ‘rate in the dollar’. Each property’s rates are then determined by applying this ‘rate in the dollar’ to the property’s assessed value.

Why Are Strata Fees and Council Rates Separate?

The key difference lies in who benefits. Strata fees directly impact the upkeep and smooth running of your building and its amenities, benefiting only the residents within the scheme.  Council rates, in contrast, contribute to a broader range of services that improve the overall liveability of your entire neighborhood.

Think of it this way: strata fees are like paying dues to a private club for access to its facilities, while council rates are your contribution to the upkeep of the entire town square.

The entities responsible for each charge also differ. Strata Committees manage and collect strata fees, while your local council sets and collects council rates.

Understanding the distinction between these two charges helps you manage your budget effectively and appreciate how each contributes to your overall living environment.

Conclusion

So, do strata fees include council rates? The answer remains a clear no. Strata fees and council rates are distinct charges with separate purposes. Strata fees ensure your building and its shared amenities are well-maintained, while council rates contribute to the broader services enjoyed by the entire community.

While you might be looking for ways to minimise your overall living expenses, it’s important to remember that strata fees play a crucial role in maintaining the value and functionality of your property. Strategies to reduce these fees often involve proactive participation within your strata community, such as attending meetings, contributing to discussions, and seeking cost-effective solutions for maintenance and repairs.

For a more detailed breakdown of your specific strata fees and council rates, consult your strata documents and review your local council’s website. These resources will provide a clear picture of the services covered by each charge.

If you have further questions or require assistance navigating complex strata situations, speak to us via office@strataconsultants.com.au or on 1300 917 848.

 

The contents of this article or website are only intended to provide a general overview of the topics discussed. The author of this article makes no representations as to the accuracy or completeness of any information and the information is not intended to constitute investment, legal or professional advice. You should seek professional advice before acting or relying on any of the content. This article does not contain references to any specific company, organisation or individual, unless expressly specified.
Posted
May 08, 2024
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