Body corporate fees

Purchasing a strata title can come with many benefits, such as secure living and shared facilities, but these come at a cost known as body corporate fees or a strata levy. We look at what these cover, how much they are and what you generally get for your fees.

An owners corporation (formerly known as a body corporate) can set both annual and special fees for lot owners.

How much do body corporate or strata fees typically cost?

Body corporate or strata fees vary by property, and can cost $2,000 a year or more. Buildings with elevators and large facilities, for example, will cost more to maintain than a small complex of townhouses with nothing more than a communal car park.

The cost of your body corporate fees are presented in the budget at your owners corporations annual general meeting. Lot owners must vote on the budget, after which the fees are calculated for each strata title.

Fees vary quite a lot between buildings, and are usually charged on a quarterly or per annum basis. Prior to purchasing, you can request a copy of the previous strata report to see the previous year's body corporate fees. Fees for future years may be higher, but it's a useful benchmark.

What do body corporate fees cover?

Body corporate fees cover all upcoming expenses for the financial year. The owners corporation must prepare a budget that estimates expenses like administration, maintenance, repairs and insurance. Generally speaking, the budget is split between an administrative fund to cover the day-to-day expenses and a sinking fund (or capital works fund) which covers common expenses like major repair works.

The sinking fund grows over time. It isn't necessarily spent every year because most strata properties don't require constant large scale repair works.

Strata insurance is a policy that covers the building and functions in a similar way to home insurance on a freestanding house.

A special fee sometimes known as a special purpose fund is an extra fee to cover any unexpected spend, such as an urgent building repair or legal action.

It's important to note that council fees, content insurance and utilities are not covered by your body corporate fees, so it's important to weigh this up in your budget when considering purchasing a strata title property.

What affects strata fee costs?

There are many factors that impact on strata fee costs. The cost of body corporate or strata fees varies depending on a number of factors such as:

• The number of facilities on site that require ongoing maintenance such as a gym, pool or gardens.
• The consideration of the cost of repairs, for example a remote control gate or security swipe entrance can be costly to fix and may result in higher body corporate fees.
• The size and scale of the building, as well as the size of your property.
• The fees charged by the body corporate for their management of the building.

To calculate body corporate fees, the owners corporation estimates future costs and divides this cost over time by the number of units in the strata complex.

According to NSW Fair Trading, an owners corporation could determine that it needs $100,000 over 5 years to cover projected capital works costs, such as maintenance and structural repairs should accidental damage occur. This works out to $20,000 a year over 5 years. If the strata property has 8 units on the title, then this cost would be divided by 8, resulting in a levy of $2,500 per unit per year.

Do renters pay body corporate fees?

No. Renters do not pay body corporate fees. Body corporate fees must be paid for by the owner of the strata title. This means that owner occupiers and property investors who own strata properties have to pay body corporate fees.

A landlord may factor some of these costs into the monthly rent charged on the property.

Can the owners of strata properties change their strata management company?

It is possible. As an individual owner, you cannot change your strata management company. You would need to propose switching to the owners corporation committee to consider changing companies.

You need to carefully check any existing strata management agreements prior to getting approval from the owners corporation committee. Typically a prospective company submits a tender or proposal, to which the owners corporation committee must review and vote on it prior to onboarding a new strata management company.