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Levies can be confusing and frustrating for communities in strata properties. Much of this comes down to poor management, planning and communication. However, there is also confusion around what levies are and how they operate legally. This article will help you understand the different types of levies in strata schemes and what your obligations are in New South Wales.

What Are Levies?

A levy is a contribution that an owner pays to the owners corporation (the body that manages the strata scheme). Levies are the means for an owners corporation to pay for services that the owners use, or to maintain the property that all owners share. This might include:

  • pest control;
  • plumbing;
  • electrical works;
  • gardening;
  • gym equipment; or
  • pool maintenance.

The owners corporation holds the money that you pay in levies in an account. More often than not, you will pay this money through a managing agent and the payments will be made to a trust account directly. These payments are not paid to the manager. If your manager is taking payments and then passing those payments on to the owners corporation as levy payments, they may be in breach of their obligations as an agent and your owners corporation should get legal advice on the issue.

How Does the Owners Corporation Calculate Levies?

Generally, this contribution is calculated based on how many entitlements the owner holds, which are detailed on the strata plan.

For example, a scheme might have 10 lots with a total of 10 entitlements. Therefore, each owner has one entitlement. If the levy raised were $10,000 in a given year, then each owner would pay 1/10th or $1,000 for the year. Often, the owners corporation will split the $1,000 into four equal instalments (quarterly payments).

However, this general position can change. For example, this may occur if you:

  • alter your lot and cause the insurance premiums for the owners corporation insurance to increase. An owners corporation can levy additional amounts that reflect the increase in premiums; or
  • own an additional storage space that has addition entitlements.

What Are the Different Types of Levies and How Are They Made?

Regular Contribution Levies

You will make regular contributions towards the two funds of an owners corporation:

  1. Administrative Fund. This is for the day to day expenses such as your pest control, waste collection or energy bill for the scheme; and
  2. Capital Works Fund. This is for capital expenses or maintenance requirements that are more infrequent like painting the exterior of the building.

An owners corporation is required to estimate the amount it requires for each of these funds. It does this through an analysis of past financial data. This data is also a requirement for the Annual General Meeting (AGM) notice, so owners are aware of where their levies have been allocated or saved. The levy amount and when it will be paid is typically determined at the AGM. Commonly, you will be required to pay the levies in quarterly payments.

Special Levies

The owners corporations requires special levies when a scheme does not have enough money. They can be raised towards either fund. Special levies broadly operate in the same way as regular contributions but the owners corporation commonly raises them as a single amount with a single purpose. Often, the owners corporation will require the owners to pay the special levy in a single instalment to ease cash flow concerns. Special levies can be raised throughout the year via an AGM.

What Are Your Rights and Responsibilities?

It is important to remember that you cannot avoid paying levies because you did not receive a notice. You must pay the levies as they fall due regardless of whether you receive the notice outlining your payment. While this is a tactic often used to avoid special levies, it is ineffective. Therefore, it is important that you:

  • keep your records up to date;
  • budget for the levies based on the amounts raised at each AGM;
  • attend the meeting, or submit a proxy vote (this is the best way you can affect the outcome of levies raised);
  • pay on time, or if you don’t receive a notice, follow up with the secretary or manager to obtain a copy of the notice to avoid late payment penalties or a buildup of interest.

The owners corporation will generally give you 30 days from the date of the notice to pay the levies. If you are experiencing hardship, then you may be able to negotiate a payment plan with the owners corporation. However, it is important to remember:

  1. in strata, there will always be levies. These will always be set out in the strata information certificate when you buy into the scheme; and
  2. the levies always increase and will include special levies occasionally. If the levies aren’t increasing, you can expect a significant special levy soon. The most effective schemes increase general levies every year to create savings and avoid raising excessive special levies.

Levies as Debts

Once levies are due, they are a debt. They accrue interest and the owners corporation can recover them just like ordinary debts. If a debt dispute ends up in court, it may affect your credit rating. If you can’t afford the levies or cannot negotiate a payment plan, it may be best to sell out of the scheme altogether rather than avoid paying.

Key Takeaways

Properly understood, levies are a tool to benefit your community. Therefore, it is important to remember to:

  • budget for levies;
  • understand the difference between regular contribution and special levies;
  • attend the AGM; and
  • pay on time, even if you haven’t received a notice.

Please note that LegalVision can no longer assist with these matters. For any other legal questions or concerns, please contact our lawyers on 1300 544 755.

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