UNDERSTANDING BODY CORPORATE LEVIES: HOW THEY ARE DETERMINED AND WHAT THEY COVER

In all strata communities, lot owners jointly share the responsibility of maintaining and managing common property and facilities. This responsibility involves paying body corporate levies, which fund the necessary expenses. Knowing how body corporate levies are calculated helps ensure transparency and gives owners a clear understanding of where their money goes. Here, we break down the key factors that influence levy amounts and explain the process in simple terms.

Levies are payments made by all owners to cover the costs of maintaining common areas, insurance, administration, and other shared services. Levies are usually divided into three types:

• Administrative Fund Levies: Cover daily expenses like cleaning, gardening, insurance, and utility bills.
• Sinking Fund Levies: Save up for long-term expenses such as major repairs or replacements, like painting buildings or fixing the roof.
• Insurance Fund Levies: (if applicable) Cover the costs of insuring the buildings and common areas.

How are Levy Amounts Calculated?

Several factors influence how much each owner has to pay:

1. Contributions Schedule Lot Entitlement (CSLE) Each unit in the body corporate has a CSLE, which is a number that shows the unit’s share of ownership in the body corporate. This number is influenced by factors like the size of the unit, access to facilities, and market value. The CSLE determines how much each unit pays towards the levies.

Example: If your unit is larger or has more access to facilities like a pool or gym, your CSLE might be higher, meaning you pay more in levies for this contribution.

2. Interest Schedule Lot Entitlement (ISLE) Some bodies corporate adopt ISLE different to the CSLE, which are used to calculate each owner’s share of the common property and body corporate assets if the scheme ends (e.g. a scheme could be terminated if all lot owners agreed to dispose of the scheme because they wanted to redevelop) and the value of the lot for calculating local government rates and charges, and other costs including insurance contributions.

Example: If your unit has a higher market value, your ISLE might be higher, meaning you pay more in levies for this contribution.

3. Annual Budget The body corporate committee (with the assistance of the body corporate manager when engaged) creates an annual budget that estimates the costs for the upcoming year. This includes short and long-term expenses. The budget is approved at the Annual General Meeting (AGM) and divided among all owners based on their CSLE.

Example: If the total budget for the year is $100,000 and your unit’s CSLE is 2%, you would pay $2,000 for the year.

4. Number of Units/Lots The total number of units in the community affects how much each owner pays. More units mean the costs can be spread out more, potentially lowering the amount each owner pays.

Example: In a building with 50 units, each owner might pay less for contribution for shared pool costs compared to a building with only 10 units because the expenses are shared among more people.

5. Common Property and Facilities The more facilities and common areas there are, the higher the maintenance costs. These costs need to be covered by the body corporate levies.

Example: A complex with a pool, gym, and extensive gardens will have higher levies than one with just a small garden.

6. Insurance Body corporate insurance covers the buildings when registered under a building format plan and also for some standard format plans and common areas. Insurance costs can be high and vary based on factors like property value and claims history.

Example: If the insurance premium for the complex is $30,000 for the year, this cost is divided among all the owners based on their ISLE.

7. Maintenance and Repairs Regular maintenance and unexpected repairs add to the budget. A well-maintained property might have lower short-term repair costs but still requires ongoing upkeep.

Example: If the lift in the building needs repairing, the cost will be shared by all owners through their levies.

How Your Individual Body Corporate Levies Are Calculated

1. Determine the Total Annual Budget Add up all the expected expenses for the year, including administrative, insurance, and sinking fund costs.
2. Assign Unit Entitlement Amount Each unit’s CSLE and ISLE is used to determine its share of the budgets.
3. Calculate Individual Levy Amounts Multiply the unit’s CSLE and CSLE by the total of each budget to find out how much each unit needs to pay.
4. Example: If the total budget is $100,000 and your unit’s CSLE is 2%, your annual levy would be $100,000 x 0.02 = $2,000.

Where Do I Find My Unit’s Lot Entitlements?

The lot entitlements for your unit are in the community management statement (CMS) for your scheme. This document is created by the developer and lodged with the government. You can get a copy from your body corporate manager or the Titles Office.

How Do I Know What My Levy Contributions Are and When They Are Due?

Your body corporate will send you notices about your levy contributions, often through the body corporate manager. These notices include:

• The amount you owe
• The due date
• Any discounts for early payment
• Penalties for late payment
• Any previous overdue payments

In part 2 we will explain interim levies and how these are determined. If you have questions about your levy contributions, contact your committee or your body corporate manager where appointed.

Article contributed by Adam Ford, Partner – Archers the Strata Professionals