Why are my strata levies so high?
Strata levies are a common feature of multi-unit residential properties. When you are new to a strata scheme, the questions often asked are what are they and why are my strata levies so high?
They are payments made by individual unit owners to cover the costs of maintaining and managing shared areas and services such as common areas, lifts, landscaping and swimming pools. The fees can vary significantly depending on the size and complexity of the property, the level of amenities and services provided, and the quality of the building and facilities.
Many strata schemes and associations also engage a professional strata management firm to oversee the administrative functions of the scheme. In higher volume and more complex strata schemes, employing a reputable strata management firm is recommended.
Strata fees are an essential part of successful strata management
Maintenance and repairs are generally the biggest expenses and take up the largest portion of strata fees within a residential, community, commercial or industrial scheme. Investment in remedial maintenance such as plumbing, electrical, painting, external repairs, cleaning and gardening is an ongoing expense and a quality scheme needs to budget for more significant repairs such as roofing, replacing lifts and gates, and security upgrades where required.
Depending on the age and condition of the building, some schemes will require a substantial capital expenditure over a period of time to ensure the building remains code compliant and safe for residents and visitors. Older buildings will require more maintenance and repairs, which may result in higher strata fees.
Insurance covering the building and common property, including public liability, is required by law for all strata schemes. Depending on the building type and location, insurance premiums can be a significant cost to the strata scheme. Along with the organisation of repairs and maintenance, a professional strata management company will have qualified recommendations on the best insurance policy for a particular strata scheme and will oversee the ongoing administration of the insurance portfolio.
Amenities and services contribute to higher strata fees
Many strata schemes offer a range of communal amenities: playgrounds, swimming pools, gyms, lifts and underground car parking, for example. These types of strata schemes are generally larger and more complex. Strata schemes without these types of communal amenities tend to be less expensive.
Larger schemes with more communal amenities, although more expensive to maintain, do have a valuable selling proposition and attract higher rental returns.
Other factors contribute to a schedule of strata fees. Compliance and regulatory requirements including building codes, fire safety and environmental standards require consistent and professional oversight and may require regular inspections and upgrades.
A capital works fund, similar to a forced saving fund, is a fixed cost set by the scheme members for forecasted project expenses such as larger capital works that the scheme does not consider year on year. This may include replacing an elevator, resealing a pool or replacing a roof.
Management fees charged by a professional strata management firm
Well-run and maintained strata schemes, whether residential, community, commercial or industrial, generally rely on a qualified and professional strata management firm. The fees charged by the management firm make up a relatively small percentage of the entire strata fee incurred on individual members. Professional strata managers are responsible for the day-to-day management of the property and assist with cumbersome administrative tasks, facilitating AGMs and dispute resolution.
A quality strata manager is across all the legislative, regulatory, financial and insurance requirements. They assist an owner corporation or association with administering necessary repairs and maintenance and assist with financial management and reporting, deliver debt recovery services and maintain the reputational value of the scheme.
Ultimately, a professional strata manager can save the scheme money and headaches over the long term by ensuring the property is well maintained and that issues are dealt with promptly.
There are many factors that can contribute to the high cost of strata levies. The ongoing maintenance and repair of the building and its facilities, the cost of insurance premiums, the fees of professional strata managers, the amenities and services provided, the compliance and regulatory requirements and the demographics of the residents can all impact the cost of strata levies. While strata levies can be expensive, they are necessary to ensure that the property is well-maintained, safe and enjoyable for all residents.
It is our job at ASSM to ensure your strata scheme runs as smoothly as possible. When you are thinking of buying into a strata scheme or are looking to engage a professional and qualified team, contact ASSM today and experience the difference that 40 years of successful strata management will make.
