If you own a property in a strata scheme, you are generally required to pay regular strata levies to the owners corporation (sometimes referred to as a body corporate).
These levies help pay for essential costs such as building insurance, repairs, maintenance and the ongoing management of the property.
When strata levies are not collected properly, it can be a warning sign that the strata scheme is not being effectively managed. Without enough funds, important repairs may be delayed, bills may remain unpaid and the value of the property may be affected.
This article explains why strata levies are important, what can happen when they are not collected and what owners can do if they have concerns about their strata scheme.
What Is a Strata Scheme?
A strata scheme is a type of property ownership where a building or development is divided into individual lots and common property.
When you purchase a strata property, you own your individual lot and automatically become a member of the owners corporation. The owners corporation is responsible for managing and maintaining the common property shared by all owners.
Common property may include:
- External walls and the building structure;
- Roofs and foundations;
- Hallways, lifts and stairways;
- Gardens and shared outdoor areas;
- Swimming pools and recreational facilities; and
- Other shared areas within the development.
In NSW, strata schemes are regulated under the Strata Schemes Management Act 2015 (NSW).
The Act sets out the responsibilities of owners corporations and lot owners, including obligations relating to maintenance, finances and decision-making.
Why Are Strata Levies Important?
Strata levies are contributions paid by owners to cover the costs of running and maintaining the strata scheme.
They ensure the owners corporation has enough money to pay expenses and complete necessary repairs.
Strata levies are generally paid into two main funds:
Administrative Fund
The administrative fund covers the everyday costs of managing the property, including:
- Building insurance;
- Cleaning and gardening;
- Strata management fees;
- Utilities for common areas;
- Routine repairs; and
- Other ongoing expenses.
Capital Works Fund
The capital works fund is used for larger repairs and long-term maintenance projects.
This may include:
- Replacing a roof;
- Major building repairs;
- Lift upgrades;
- External painting; and
- Other significant works.
If these funds are not properly planned and maintained, owners may face unexpected special levies to cover major expenses.
What Happens If Strata Levies Are Not Collected?
Strata schemes rely on all owners paying their levies. When levies are not collected, the owners corporation may not have enough money to meet its financial responsibilities.
This can lead to problems such as:
- Unpaid invoices from contractors and suppliers;
- Delays in completing repairs and maintenance;
- Difficulty paying insurance and other essential expenses;
- A need for additional special levies; and
- A decline in the condition and value of the property.
When some owners fail to pay their levies, other owners may be forced to carry a greater share of the financial burden.
Signs of Poor Strata Management
A well-managed strata scheme should have clear financial records, regular communication and proper planning for future expenses.
Warning signs that a strata scheme may not be managed properly include:
- Strata levies not being issued or collected on time;
- Large amounts of unpaid levy debt;
- Contractors not being paid;
- Repairs being repeatedly delayed;
- No clear maintenance plan; or
- A lack of communication from the owners corporation or strata manager.
What Are the Responsibilities of the Owners Corporation?
The owners corporation is responsible for making decisions about the management and maintenance of the strata scheme.
This includes:
- Preparing budgets;
- Collecting strata levies;
- Maintaining common property;
- Arranging repairs and maintenance;
- Managing insurance requirements; and
- Keeping accurate financial and administrative records.
Many owners corporations appoint a strata manager to assist with administrative tasks. However, the owners corporation remains responsible for ensuring the scheme is properly managed.
What Can Owners Do If Strata Levies Are Not Being Managed Properly?
If you are concerned that strata levies are not being collected or the strata scheme is being poorly managed, you should first raise the issue with the owners corporation committee or strata manager.
You may wish to review:
- Financial statements;
- Meeting minutes;
- Levy records;
- Budgets; and
- Maintenance plans.
If your concerns cannot be resolved, obtaining advice from an experienced strata lawyer can help you understand your rights and available options.
Protecting Your Strata Property Investment
Effective strata management is essential to protecting the condition and value of your property.
Strata levies provide the funds needed to maintain common property, manage expenses and plan for future repairs. When levies are not properly collected, issues can quickly affect everyone in the strata scheme.
If you have concerns about strata management, levy disputes or owners corporation responsibilities, contact Somerville Laundry Lomax for advice tailored to your circumstances.
This article provides general information only and should not be relied upon as legal advice. You should obtain professional advice relevant to your circumstances.