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A wave of panic has run through StrataLand in the past couple of weeks – hardly a tsunami but more than a ripple – with the news that the Fire and Emergency Services Levy (FESL) was going to be removed from insurances and added to your council rates.
More than one reader thought this mean that they would be paying more, based on the government’s literature which was (as usual) mostly about houses.
“I understand that from July 1st, the annual fire services levy will be collected via council rates rather than via buildings insurance,” says Kendle on the Flat Chat Forum.
“It is stated by Treasury NSW that this will amount to a saving for homeowners. However we pay $85 per unit. The average cost to individual ratepayers from July 1st is being quoted as anything from $180 to $450.
“Either way, it seems to me that if you live in a strata scheme you are going to be paying a lot more. Has anyone got further information on this?”
Well, yes, we have but let’s take it back to basics.
The Fire and Emergency Services Levy is currently attached to a number of insurance premiums, from home and contents to car and motorbike policies.
The idea is if you have something worth insuring, you’d probably rather it didn’t go up in flames in the first place, rather than claiming for it afterwards.
“Hang on,” thought one pointy head in the government. “Doesn’t that mean that people who take the trouble to insure their goods and chattels are paying for the fire brigade and SES people to attend the homes of slackers who don’t?”
A better way to share the load was to add the levy to your rates rather than your insurance because more people pay the former than the latter.
So, from July 1, the load will be spread more evenly across a broader slice of the populace, being roughly defined as “home owners who would quite like the fireys to turn up when there’s a fire.”
It seems much fairer but, as in everything, there will be winners and losers. The winners will be renters who will no longer have to pay the levy on their insurance and won’t have to pay the increased rates (because that goes to the landlord).
And those of us who own our homes and are insured to our eyeballs will also benefit from a lower levy on our rates than we pay on our insurance.
The losers will be the great uninsured home owners as well as landlords who will take at least one rent rise cycle before they can shift the load to their tenants.
As for strata residents, a nice young man from Treasury assures me that some unit owners will pay a little more and some a little less but it won’t be anything too dramatic, either way.
We shall see. There’s more official information on this here. And you can tell us which way your charges go on the flatchat.com.au/forum.
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With a high proportion of under insurance or no insurance within NSW, the burden has fallen on Owners Corporations to carry a disproportionate amount of ESL.
OC’s have a legal requirement to insure their buildings under a damage policy with an approved insurer for full repair and replacement cost, a definition which includes the costs of removal of debris, professional fees, and an escalation factor to take into account the time it takes for planning and rebuilding.
Other forms of property insurance are voluntary, with owners choosing whether to insure and to what level. The compulsory nature of strata insurance therefore results in OC’s paying a disproportionate share under the old system.”
From 1 July 2017, any new or renewing insurance policy in NSW will not include a charge for ESL. The NSW Government expects that the cost of insurance may fall as a result, on average, by up to 20% for residential property and up to 30% for commercial property. Savings for compulsory owners corporation insurance should be significant.
OC’s will be the ultimate winners with these changes, as a broader property-based levy will extend the funding base and lower costs for strata owners.
Paul Keating, Managing Director, Strata Community Insurance
Just wondering re our duplex:
The VG’s UCV for our land is, say, $280,000.
If the new levy is based on our land valuation, does that mean that BOTH Units 1 & 2 will be assessed each on $280k – or each on $140k – or pro rata for unit entitlements for Unit 1 (larger) and Unit 2?