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Good morning, firstly I very new to strata living and I’ve only done it for three months, my first AGM is coming up and I just have a couple of questions. I hope I word this right but please excuse me if I don’t
1. What is considered a reasonable increase in fees? From the strata report I purchased before buying into the units there is 54 lots and 34 units. There are no extra facilities like pool, gym or anything like that.
[There was a second part to this post which I have split off to HERE – JT]
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1. What is considered a reasonable increase in fees?
The real question is, what is a reasonable increase in spending, which is what determines the levies. If the OC is suddenly having to come up with money for neglected maintenance, for instance, that would be a valid reason for an increase that might seem unreasonable if you have budgetted for less. Excessive amounts being paid to lawyers to pursue pointless cases at the tribunal would not be reasonable – but would still be enforceable. Increasing by the level of CPI is a good guide but there are so many moving parts in strata it would be hard to pin it down to that.
If there is an increase in excess of the CPI, your strata treasurer or strata manager should explain it in the notes accompanying the AGM agenda.
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Perhaps the increase is in the contribution to the capital works (sinking) fund in anticipation of future works. Send your treasurer or strata manager a polite note asking for more information.
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Perhaps there has been a change of gardening contractor or some substantial work planned for the coming year. If I were the treasurer, I would have accompanied the proposed budget in the meeting papers with a short statement that ‘1) most expenses carry on much the same as the previous year with only small adjustments, and 2) the only substantial change is a doubling of the garden budget because …’
Strata insurance, and insurance more generally, have been increasing well above CPI for the last few years. Climate change has reached the suburban hip pocket.
GailD
to understand where the money is spent you do need to examine the accounts.
Ive been a treasurer of a number of strata, and get lots of “ advice “ from owners that this or that expense is too high. I ask these owners to find cheaper services, which inevitably they decline to do.
It takes a lot of time to send out requests for tender, receive them and then examine them. Most strata managers and committees don’t have the time to do this.
The other item you need to look at is the capital works fund. Maybe the strata manager or the committee considered the fund to be under capitalised and decided to have catch up levies.
The second part of the increase is maintain gardens, there really is very little gardens to maintain and they have increased the budget from $11k to 25k…
If there are 34 units that means gardening has gone from $323/year per unit to $735/year per unit (assuming an equal split which probably isn’t the case). That alone isn’t a big change.
The budget should show last year actual, this year actual and next year budget – if you compare the columns it should be possible to see if there are any big increases.
I found this guide:-
How are strata fees calculated?
As a guide, expect to pay between 0.3 per cent to 1.2 per cent of a property’s value in strata fees. Those with more amenities will be in the upper end of this range.
Always do your homework on strata fees by looking at what is being charged by comparable buildings. Low levies can correlate with poor maintenance. This can not only be expensive to fix but can impact the long-term value of your property.
[ https://www.ljhooker.com.au/blog/ultimate-guide-strata-fees ]As a strata manager I am often getting emails from owners “why did the levies go up so much!”
The Strata Manager does not set the budget which results in the levies. The Owners Corporation, made up by Owners that attend the AGM are the ones that set the budget and have influence over what the levies are.
If you want to know more about what’s driving these changes being on the committee and/or being at the AGM is the best thing to do.
I wish owners would read the financial papers and other correspondence about their strata plan.
When people ask me why they have to pay levies, I explain that there are ongoing costs which are shared by all owners. e.g. building insurance, water, electricity, gardening, bank fees, stationery and Strata Hub. Then there are the costs which don’t repeat: repairs, maintenance, improvements. We have to set aside money for both these purposes. They’ll respond by saying “I didn’t know that”. Two weeks later, they ask the same question again.
Some owners think they have to gouge as much repair work from the owners corp as they can in order to recoup their levy payments. They have no idea about common property and think it is reasonable to “take a chance” and ask strata to fix something in their home. If they don’t get what they want, they scream “why am I paying levies?”. Rinse and repeat.
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