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  • #9289
    newlsie
    Flatchatter

      Hello All,

      I wonder if there is someone out there that can explain to me what a differential levy is?

      thanks :)

    Viewing 6 replies - 1 through 6 (of 6 total)
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    • #20547
      Whale
      Flatchatter

        The permitted Administrative and Sinking Fund levies raised by Owners Corporations (in NSW) are both differential because the units of entitlement for each lot, upon which they’re based, differ from one (lot) to another.

        I’m aware of some Owners Corporations who have attempted to raise different levies and to apportion those on some other basis in circumstances such as where some Owners don’t have access to common facilities such as an elevator and do not want to contribute to its maintenance, but so far as I’m aware those types of additional levies are illegal.

        If you could provide some additional information on the type of differential levy you’re referring to, for what purpose it’s raised, to which Fund it’s paid, and upon what basis it’s been authorised by the Owners Corporation, then I’m sure you’ll receive some more complete responses. 

        #20554
        newlsie
        Flatchatter
        Chat-starter

          Thanks Whale,  In our case a special resolution was agreed at an AGM a couple of years ago to have the owners ‘subscribe’ to the common property laundries.  This was because a) the laundries are very badly designed and when they flood, which they often do the water does not go down the very tiny drain but rather out onto the landing and into the two adjacent flats.  b) they are extremely expensive to maintain.  The EC and most of the owners want to close down most of these laundries over time as owners renovate and include laundry facilities into their flat.  No one wants a coin operated system.  At the moment approximately 50% of the owners do not subscribe. The price of the subscription is calculated each 6 months and the owners who subscribe are charged accordingly.  Is this a differential levy?  thanks

          #20556
          Whale
          Flatchatter

            Newlsie –  you haven’t said how the “subscription” is raised, on what basis, or where it’s held, but in an attempt to respond I’ll work on the assumptions that your Plan is in NSW, that the equipment in the common laundries is owned by the Owners Corporation (O/C), and that what it was trying to achieve via the “subscription” was a user-pays approach to the necessary repairs and maintenance of all that.

            If that’s correct, then whilst I understand the rationale the “subscription” is in my opinion a differential levy and is therefore illegal as the special by-law is trumped by the Strata Schemes Management Act (a “superior law”), and in particular by Part 3 where the detail of what monies an O/C can raise, how it must be calculated, to which of the two (2) permissible Funds it can be deposited, and for what types of expenditures it can be withdrawn and used is prescribed.

            It sounds to me that as only 50% of the Owners currently subscribe, the system’s not working too well!

            What should be happening is that as with all expenses, the O/C calculates the amount of money needed to properly maintain its Common Laundries and the equipment therein, collects that together with amounts for all other budgeted items via its normal Levy Contributions, appropriately deposits those monies, and then expends it against accounts such as “maintenance of plant and equipment” and “replacement of plant and equipment” within the Administrative and Sinking Funds respectively.

            In that way the O/C is able to track the amount of expenditure necessary to properly maintain the laundries, to share that deferentially amongst all Owners in accordance with the units of entitlement for their Lots, and to possibly convince the majority of those to have the drainage repaired and to accept a compliant pay-for-use system by coin or token operation of the machines, and with the monies collected being shown as income from “use of plant and equipment”.

            All that said, nothing’s out-of-bounds with matters Strata until the proverbial hits the fan and/or until someone complains, but in my opinion the little extra effort necessary to do things the right way is almost always justified by the benefits.

            #20559
            DaveB
            Flatchatter

              There is provision in the NSW Strata Schemes Management Act which may legitimise the practice adopted by your OC.  Of course that would depend on agreements being drawn up and being acceptable to both owners and the OC.  I’ve never heard of the term differential levy.  See below:

               

              111 Can an owners corporation provide amenities and services to a lot?

              An owners corporation may enter into an agreement with an owner or occupier of a lot for the provision of amenities or services by it to the lot or to the owner or occupier of the lot.

               

               

               

               

               

               

              #20561
              newlsie
              Flatchatter
              Chat-starter

                Thanks you for your comments. In answer to your questions;

                * yes we are in NSW

                *  The money is raised retrospectively based on the cost of running the laundries the previous 6 months

                *  Yes the OC owns the equipment

                * The aim is to reduce and ultimately remove the common property laundries which by the way have a fabulous view of the city and the owners who are adjacent to them would be interested in purchasing this view which is a way of raising much needed capital funds

                *  The system is working fantastically well.  18 months ago we had 90% subscribers so we are achieving our goal of making owners independent of them.  Subscribers now down to 50%

                *  The drainage cannot be fixed without spending enormous amounts of money and don’t forget, ultimately the majority of owners do not want them and we definitely do not want a coin operated system

                *  Doing this the right way is our goal.  Our lawyer has put in place a license agreement but others have suggested we switch to a differential levy.

                Thanks DaveB for your advice.  I wonder what those people in the Eastern Suburbs do with their car stacker for only 3 then.  🙂 Newlsie

                #20562
                Jimmy-T
                Keymaster

                  I don’t see this as being very different from my current building, where we put storage cages in unused common areas and then rented them out to owners. The collective benefit to the owners corp was the income from an otherwise unused common area.  It was all mostly legal until our popinjay chairman decided arbitrarily that when they voted on raising the rental of the storage spaces, people who were renting them  were excluded from the vote while those who were on the waiting list for storage were allowed to vote – all of this in the interest of “fairness”.

                  I think ‘differential levies” is a minefield that you really don’t need to enter. It may not be legal (or at least legally tested) but I wouldn’t fix it until someone complains that it’s broke.

                  The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
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