Strata Levies Rest At Very Heart of Strata Living 18/01/2010 Those thinking of buying a strata title apartment need to welcome strata levies rather than view them with trepidation, because they are more friend than foe.
The levies not only pay for the day to day costs of operating and maintaining the building but are also the basis for the accumulation of money – referred to as sinking funds - which pave the way for longer term security.
The case is well stated by Mr Richard Tooker, director of one of the state’s largest strata management groups, New South Wales Strata Management, whose company oversees the operation of virtually scores of strata schemes.
“The periodic levies can be a sticking point that some people fail to understand. A problem can arise because there is no hard and fast rule which says how much money should be set aside to maintain common areas of the building and its surrounds.
“Money is needed on a regular basis to handle not only regularly occurring maintenance, but to also cover more serious repairs that can develop over time and will at some stage require attention.”
He says that back on 2007 the NSW Office of Fair Trading, which overseas The Strata Schemes Management Act, put in play changes that require funds to be set aside in a ‘sinking fund’ that anticipates future needs. This provides strata owners with considerable security and tamps down any cause for a ‘surprise’ levy created through the rise of an unplanned event such as the need for a roof to be replaced or other major work. The legislative changes, it seems, have relegated the old ways of administering such needs to the dust bin.
According to The Act, sinking funds must be in place to cover future needs that extend a decade ahead. This insistence on forward planning prevents the need of extraordinary levies that could previously see owners faced with out of pocket expenses.
Mr Tooker says it is the function of the Owners’ Corporation to ensure that adequate levies are held in trust to meet these needs; and to perform this task they often rely on the oversight abilities of their Strata Managing Agent.
“The Strata Management Company is usually asked to take on a watching brief to ensure that the Owners’ Corporation adequately prepares for a wide range of eventualities.”
Mr Tooker says that experience is the key.
“These levies are based on sensible estimates of maintenance and replacement costs. With the funds set-aside on a regular and well planned schedule. Even the trust funds themselves are safe as they are indemnified due to the Strata Managers standing as a fully licensed agent, a NSW State requirement, thus providing owners with an additional level of protection.”
A second point that sometimes raises questions he says is the differential in levy costs that can exist between several units in the same block.
Mr Tooker answers this by noting that a more expensive unit or one better placed in the block can draw a higher levy due to its considerably higher value.
“What determines the amount of an apartments levy is referred to as ‘unit entitlements’. This can be affected by whether the unit is located in a high position, comprises more rooms, and has larger spaces or some other feature that contributes to a higher value.”
Mr Tooker says that the oversight of such matters is amongst the many roles Strata Manager can be asked to take on.
Others roles include the maintenance of books and records, an oversight of overall financial management, and access to reasonably priced and fully licensed tradesmen. They may also be required to provide an assurance that the buildings’ insurance package is suitable, is regularly reviewed and correctly valued.
New South Wales Strata Management (formerly Gilmour Strata Management) commenced business in early 1991, as a member of the highly respected J A Gilmour & Sons group of companies. Licensed solely and specialising only in strata management services, the company has steadily grown to become one of the largest such organisations in New South Wales.
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