Understanding Body Corporate Fees in Apartments
For many Australians, owning an apartment or unit is an attractive option for entering the property market or downsizing. However, one aspect of apartment ownership that often catches new buyers off guard is the concept of body corporate fees. These fees, also known as strata fees or levies, are an essential part of maintaining and managing shared spaces in apartment complexes. This article aims to provide a comprehensive understanding of body corporate fees in Australia, their purpose, and how to manage them effectively.
What Are Body Corporate Fees?
Body corporate fees are regular payments made by apartment owners to cover the costs of maintaining and managing common areas within a strata-titled property. These fees are collected and managed by the body corporate, which is the legal entity comprising all individual lot owners in a strata scheme.
The fees typically cover expenses such as:
- Building insurance
- Maintenance and repairs of common areas
- Cleaning and gardening of shared spaces
- Utilities for common areas (e.g., lighting in hallways)
- Administrative costs
- Contributions to a sinking fund for future major repairs or improvements
Types of Body Corporate Fees
There are generally three main types of body corporate fees in Australia:
- Administration Fund Levies: These cover day-to-day running costs such as cleaning, gardening, and insurance.
- Sinking Fund Levies: These are set aside for long-term maintenance and major repairs, such as painting the building exterior or replacing the roof.
- Special Levies: These are one-off payments for unexpected expenses or major projects not covered by the sinking fund.
How Are Body Corporate Fees Calculated?
Body corporate fees are typically calculated based on the lot entitlement of each unit, which is usually determined by the size and value of the property. Factors that influence the amount of fees include:
- Age and condition of the building
- Number and type of amenities (e.g., lifts, pools, gyms)
- Size of the complex
- Location
- Insurance costs
- Planned maintenance and improvements
Fees can vary significantly between properties. For instance, a modern high-rise with extensive facilities might have annual fees ranging from $5,000 to $25,000, while an older, low-rise building with fewer amenities might have fees between $1,500 and $5,000 per year.
Managing Body Corporate Fees
For many apartment owners, body corporate fees can be a significant ongoing expense. Here are some strategies to help manage and potentially reduce these costs:
1. Choose Your Property Wisely
When purchasing an apartment, consider the potential body corporate fees. Newer buildings with extensive amenities often have higher fees. If you’re unlikely to use facilities like pools or gyms regularly, you might be better off choosing a property without these features to save on fees.
2. Engage with Your Body Corporate
Attend annual general meetings and consider joining the committee. This allows you to have a say in decision-making processes and ensures you’re aware of how funds are being spent.
3. Review Expenses Regularly
Scrutinise the body corporate’s financial statements and budget. Look for areas where costs could be reduced, such as:
- Reviewing insurance policies to ensure they’re competitive
- Assessing the necessity and frequency of certain services
- Exploring energy-efficient options for common areas
4. Contribute to Maintenance
Some bodies corporate organise working bees for minor maintenance tasks. Participating in these can help reduce overall costs.
5. Build Up the Sinking Fund
While it might seem counterintuitive, ensuring adequate contributions to the sinking fund can prevent the need for large special levies in the future.
6. Seek Competitive Quotes
Encourage your body corporate to regularly review service contracts and seek competitive quotes for major works.
Tax Implications
It’s worth noting that body corporate fees may be tax-deductible for investment properties. However, special levies for capital improvements are generally not immediately deductible and may need to be depreciated over time. Always consult with a tax professional for advice specific to your situation.
Body corporate fees are an unavoidable aspect of apartment ownership in Australia. While they can be a significant expense, understanding how they work and actively engaging in their management can help ensure you’re getting value for money. By choosing your property wisely, participating in body corporate decisions, and staying informed about expenses, you can effectively manage these costs while enjoying the benefits of apartment living.
Remember, every strata scheme is unique, and rules can vary between states and territories. Always seek professional advice when making significant decisions about property purchases or management.