News

If you’re living in or considering buying into a strata-titled property, you’ve likely asked yourself, what are strata levies? These are regular financial contributions made by lot owners in a strata scheme, used to manage and maintain the building’s common property and services. Understanding how they work is essential for budgeting and for ensuring your property remains in good condition over time. For many Sydney property owners, strata levies are a standard part of owning within a shared complex, and knowing what to expect can help avoid surprises.

Understanding the Purpose of Strata Levies

Strata levies exist to ensure that shared spaces and services within a strata scheme are well maintained. From lifts and gardens to external walls and roofs, these communal areas require regular upkeep. Strata levies fund this ongoing maintenance, helping to protect the overall condition and value of the property.

They also allow the owners’ corporation to meet financial obligations like insurance premiums, legal compliance, and day-to-day running costs. Without consistent funding through levies, essential services may suffer delays, or maintenance might be deferred, which can lead to higher expenses later. By pooling resources through regular contributions, residents share the responsibilities and costs of property ownership more fairly and effectively.

Strata schemes operate on collective decision-making, and the financial health of the scheme is closely linked to how well levies are managed. These contributions are not optional; they are a legal requirement under strata legislation and are essential to maintaining the building’s value and safety.

Types of Strata Levies

There are generally three types of strata levies that owners may be required to pay. Each serves a different purpose and ensures financial stability across both routine and unexpected expenses in the property’s lifespan. These levies are determined during meetings of the owners’ corporation and are set according to projected financial needs.

Administrative Fund

This levy covers everyday operational expenses. Think of cleaning services, lighting in shared hallways, insurance premiums, water bills, and regular servicing of fire equipment. It ensures that the property runs smoothly without financial gaps in day-to-day maintenance.

The administrative fund also includes costs such as common property electricity, minor repairs, and pest control. Essentially, if it’s part of the regular running of the building, it’s likely paid from this fund. The stability of the administrative fund reflects how effectively the building is being managed on a routine basis.

Capital Works Fund

Previously known as the sinking fund, this levy is for long-term repair and upgrade works. These include larger-scale projects like repainting the building exterior, replacing roofing, or upgrading essential infrastructure such as plumbing or electrical systems. Planning ahead with this fund prevents the need for emergency funding later on.

A well-maintained capital works fund shows foresight. It is typically based on a 10-year plan, which outlines when significant works might be required. The goal is to avoid lump-sum demands on owners by building up a reserve gradually.

Special Levies

Special levies are raised when an unplanned or extraordinary cost arises—such as damage from a storm or urgent building repairs that weren’t accounted for in the existing budget. These are generally one-off charges agreed upon by the owners’ corporation and are divided based on each owner’s unit entitlement.

They are not always predictable, which is why the capital works fund is so important. However, when special levies are needed, transparency in communication is vital. Owners are usually notified in advance, and the reasons for the additional contribution are clearly outlined in meeting minutes or correspondence.

Who Pays Strata Levies and How Are They Calculated?

Strata levies are paid by all lot owners within a strata scheme. Payments of levies are typically collected on a quarterly basis and are essential to maintaining the functionality and safety of the shared environment.

Levies are calculated based on unit entitlement, which is assigned to each lot at the time of registration. Unit entitlement reflects the value and size of each lot relative to others in the scheme. This means that owners of larger or more valuable lots generally pay a higher proportion of the total levies.

Budgets for each financial year are discussed and approved at the Annual General Meeting (AGM), where owners collectively agree on the amount needed to fund the administrative and capital works funds.

The formula is relatively simple: the total funds required for the year are divided according to each lot's entitlement. For example, if a lot has a unit entitlement of 10 out of 100, the owner would be responsible for 10% of the total levies. Transparency in budget planning ensures owners understand where their money is going.

What Do Strata Levies Cover?

Strata levies are used to cover a wide range of expenses that keep the shared parts of the property functional and compliant. These may include:

Building insurance General maintenance and repairs Cleaning and gardening of common areas Lift servicing and maintenance Security systems Utilities for common areas (e.g., lighting, water) Fire safety compliance and inspections Legal and consultancy fees

For buildings with pools, gyms, or communal entertaining areas, levies also cover regular servicing and equipment maintenance. In older buildings, levies may be higher due to the increased need for repairs and system upgrades. Meanwhile, newer developments may start with lower levies but should still plan for future expenses.

Good strata management involves clearly outlining what these levies cover and providing financial statements to all owners. These documents help track spending and ensure accountability.

Consequences of Not Paying Strata Levies

Failure to pay strata levies can result in several consequences. Interest may be charged on overdue amounts, and the owners’ corporation has the right to initiate debt recovery proceedings through legal channels.

Additionally, owners who are not financially up to date may lose the right to vote at meetings, which limits their say in how the property is managed. Persistent non-payment may also lead to higher levies for other owners to cover shortfalls, placing pressure on the community as a whole.

In extreme cases, unresolved debts can lead to legal action or the sale of a lot to recover funds. It's always advisable to communicate early with the strata manager if you're facing financial difficulty. Most schemes are open to payment plans or alternative arrangements to avoid escalation.

Conclusion

Strata levies play a crucial role in maintaining and improving shared spaces within strata properties. From regular cleaning to large-scale renovations, these contributions ensure the building remains a safe, compliant, and enjoyable place to live. Understanding how levies are calculated and what they cover helps lot owners make informed decisions and stay proactive in managing their property.

Ultimately, strata levies are about shared responsibility. They help ensure that all owners contribute fairly to the upkeep of the property, and they support the long-term sustainability of the strata community. Staying informed and involved is the best way to protect your investment.

Talk to Strata One Today

If you're unsure about your levy obligations or need guidance on managing your property more effectively, contact Strata One. We’ll help you understand where your money is going and ensure your strata community stays financially healthy and well-maintained.