Are My Body Corporate Levies Too High?

Why is it hard to say whether body corporate levies are too high?

“I’m paying $xxx in body corporate levies, is that too high?”

It’s a question that we get a lot here at Strata Management Consultants ™ and I’m sure if you ask every strata manager out there it would be in their list of top 5 questions that they’re asked.

And of course – we understand – whether you’re an owner-occupier or an investor it’s a very important question.

One of the first things we do with every building and strata management Committee that we work with is to review the financial statements. May not necessarily sound fun but it’s very informative for us.

The income and expenditure statement and balance sheet tell many things:

• The financial health of the owners corporation as a going concern;

• How much money is collected from each owner and what it is being spent on;

• What facilities and amenities the building / owners corporation has;

• The state of arrears and the quantum of levies owed to the owners corporation; and

• How much the strata management company is charging the owners corporation (by summing up all the line items that go into the strata manager’s pocket).

If your financial reports leave you with more questions than answers, it may be worth getting an independent review. Speak with a strata expert here to understand whether your current management arrangements are delivering value.

What is the right way to assess whether body corporate levies are fair?

The approach that should be taken isn’t whether you’re paying $1,500 per year when think you should be paying $1,300 – or why is it that your friend in a similar building pays $200 less per quarter in body corporate levies…

Yes – no pools, no lifts, and no tennis courts – should in general result in lower owners corporation levies…. However, each and every building is different. Each and every owners corporation is different.

Each building is at its own stage in its life cycle and have its own set of issues to contend with. So, there are at least quite a few variables that stem from that.

The approach we adopt is looking at each line item in the financials. Owners wanting to take the next step can also review practical ways to reduce unnecessary owners corporation costs.

What should you look for when reviewing your owners corporation financial statements?

Look at each and every line item in your latest full year’s income and expenditure statement and ask the following:

• Caretaking/cleaning/building management costs divided by 52 weeks in the year – does that seem fair and reasonable for the services that we receive as a building?

• What fire safety and essential services equipment do we have around the building – does the costs to service/check this equipment seem appropriate?

• Insurance premium – what exactly is the policy covering (replacement value, machinery, public liability, office bearer’s liability)? Do we have the right coverage and are the amounts sufficient? Have had claims in recent years? How much has the insurance premium been increasing in the last few years?

• Lift service costs – how many lifts do we have? How many stops is each lift (i.e. how many floors does the lift service)? How long is the lift service contract? How many times per year does the lift technician attend to service the lift? Are parts included in the contract in the fee or just labour? What is the emergency service call fee? Should we speak to another lift service company to get another opinion on the lift servicing cost?

• Repairs & maintenance – what has happened in the real world? Have we had plumbing issues or has the garage door been repaired? Did we obtain multiple quotes for larger scopes of work? How good and reliable are our tradespeople?

• Utilities – what is commonly and what is individually metered? Do the lights in the basement stay on all the time or should they be a sensor system? Is there a water leak if the water bill is unreasonably high? Would the owners corporation benefit from switching hallway lights to LED?

• Strata management costs – how good is the service, advice, and responsiveness that we’re getting from the strata manager? Did the strata management company get given the contract from the builder or developer without due process? What should be included in their contract and what extras is the owners corporation being charged? If the strata manager’s costs are reasonable and their performance is exceptional should we agree to a pay increment when the contract comes up?

So that’s certainly not a definitive list but hopefully it helps with your investigations and in helping to understand where your body corporate levies go.

How can a strata consultant help you review your owners corporation finances?

Strata Management Consultants Melbourne specialises in helping Committees and Owners Corporation to better understand their building and management requirements. One of the key facets of what we do to review the owners corporation to ensure that it is operating both efficiently and effectively. We ask Committees the right questions about the quality of their building’s operation and review the financial statements to better understand the costs of the owners corporation (i.e. where does your body corporate levies go). Feel free to get with Strata Management Consultants by speaking to us on 03 9007 2618.