A key consideration when you buy any property is going to be whether or not you can afford the holding costs. And for units that means body corporate fees. It’s such an important issue, for both owners and body corporates, that legislation requires the current levies payable be disclosed to lot owners at time of contract.
But what about those unexpected body corporate fees? How do you budget for them?
The good news is that unexpected body corporate fees are very unusual.
The bad news is the reason the fees are not unexpected is they’re planned and discussed in advance but, if you don’t know what that entails, or you’re new to the scheme, you may still be caught unaware.
This article discusses how levies are issued, “extra” payments and under what circumstances the body corporate may hit you with a charge out of the blue.
Unexpected body corporate levies
It is reasonably rare to look at a lot owner statement and see a charge that doesn’t belong and that’s because there are very specific ways in which costs are distributed to lot owners. In a word, levies.
Administrative fund, sinking fund, insurance levies, special levies or costs for exclusive use allocations, all are issued via ordinary motion passed by the lot owners at a general meeting, in most cases the Annual General Meeting.
At most body corporate general meetings a 50% voter turnout is considered excellent. Most motions are passed with far less votes than that.
An ordinary motion is passed if a 50% majority of those who vote is achieved. So if a building has 20 lot owners and only five lot owners vote, and three of those five vote to pass a special levy, that motion is valid and the levy will be issued.
Which is not to suggest that once a motion is passed that’s it, too late to do anything. I found two occasions this year alone, here and here, where a special levy issued has been challenged by a lot owner in adjudication.
There are clear guidelines that schemes must follow in issuing levies, and if they don’t then it’s well within a lot owner’s rights to object.
However, that rather presupposes you have a good understanding of body corporate legislation and can spot the instances when the scheme have overstepped their bounds, which doesn’t describe the majority of lot owners.
You must keep yourself informed
If only 25% of the lot owners voted, it rather indicates the other 75% might find themselves slugged with an unexpected body corporate fee.
But it is not truly unexpected.
Quite the contrary in fact. Body corporate legislation is aimed at transparency and accountability to protect everyone’s rights, and the vehicle for achieving that is minutes.
Committee and general meeting minutes must be circulated to all owners within 21 days of the meeting.
Committee minutes particularly contain the business of the body corporate. If an increase in levy or special levy is being considered it will be discussed by the Committee and written up in the minutes. Remember, Committee’s want lot owners to know what’s happening.
And the bigger the levy, the more the issue will be discussed, usually over a period of time as the problem and its solution are explored.
To keep informed you must read the minutes. It’d be a good idea to vote on the motions as well.
Truly unexpected body corporate fees
If you read the minutes you’ll know in advance when, and at what level, levies are going to be issues. But, there are circumstances where fees may be charged without prior discussion.
The distinction is between levies and lot owners costs.
Levies are body corporate costs apportioned to lot owners.
Lot Owner Costs are exactly what they say they are; specific costs, paid by the body corporate, that relate to one lot in particular.
It is a great big no-no for body corporates to meet the costs of a single lot. Body corporate funds are joint funds held in trust for the maintenance of common property and that is what they must be used for.
So if expenditure is paid by the body corporate, which relates to a specific lot, then it must be on charged to that lot.
There is no meetings or discussion on this matter, it simply happens creating an unexpected body corporate fee. That said, it’s quite unusual for a lot owner cost to arise without a lot owner knowing about it, if that lot owner takes the time to understand strata schemes and how they work, that is.
Lot Owner Costs
The most common lot owner costs are:
- Levy collection costs
- Costs for maintenance and repair of a lot
- Costs under by laws
I should note for the purposes of this discussion I’m assuming there is no dispute about whether or not the circumstance that created the cost are valid.
Levy Collection Costs
The most common unexpected cost on your levy statement is interest on overdue levies. That’s likely to be followed rather quickly with a fee for a “late payment letter”.
This is an actual fee, charged by the body corporate manager to the body corporate, if the manager has to write to a lot owner to ask for payment of levies. At the time of writing most managers charge around $20 – $25 for this service.
These are both examples of levy collection costs.
Collection costs, up to and including solicitors’ costs and court fees have been designated as a body corporate debt.
A body corporate debt means an amount owed by an owner of a lot to the body corporate for — (a) a contribution or instalment of a contribution; (b) a penalty for not paying a contribution or instalment of a contribution by the date for payment; (c) another amount associated with the ownership of a lot.
Body corporate debts attach to the lot and transfer to new owners when apartments are sold.
Levy collection costs relate to one lot and they are therefore billed to the one lot, usually without any prior discussion, although many schemes vote on and publish their levy collection policies for all the lot owners to be aware. Further, as the collection procedure progresses the matter will be discussed at Committee meeting.
Although there doesn’t need to be any prior discussion before triggering these cost charges it is a transparent process and if lot owners are late with their levy payments then these fees should be expected.
Costs for maintenance and repair of a lot
You are responsible for maintaining your lot.
The body corporate is responsible for maintaining common property.
On the surface that seems a simple, clear delineation but in practice it can all get fairly murky when property abuts.
For instance, you may develop a water leak in your property, and when it comes time to fix that leak you find the origin of the leak is your neighbour’s property. They then are responsible for fixing that leak, and then indemnifying you for any damage caused.
And the same is true of common property.
If a reported problem on common property is found to originate in a lot, then that lot is responsible for fixing and indemnifying damage caused on common property.
And if the body corporate goes ahead and repairs that problem they will on charge that cost to the particular lot owner.
Which doesn’t necessarily mean that the bill will show up on your levy statement. Fees only need to be charged on a levy statement when the body corporate itself has paid the funds.
In most cases, if the body corporate has had the works done, they will simply hand the lot owner the bill.
However, if the owner drags his or her feet in paying the bill the body corporate will maintain relationships with their workmen by paying and on charging the cost.
Costs under bylaws
The most hated job in body corporate environment is the enforcement of by laws. It is difficult to “police” your neighbours especially when many people react badly when confronted. But it’s a job that has to be done, and in reality when bylaws are administered with an even hand community harmony will be higher.
Most bylaw breaches are not going to generate any sort of cost and fine can only be issued by the Magistrates Court (interestingly giving schemes the power to issue fines is being discussed in the current round of legislation reviews).
But, all schemes have bylaws regarding damage to common property. Specifically, if you do, you pay for it.
So if you accidentally drive your car into the gate as it’s opening, damaging the mechanism, you’ll be responsible for paying for the repairs. Lot owners are responsible for enforcing reimbursement for damage caused by tenants as well.
Again these costs will pop up on your bill if the body corporate pays them on your behalf, or, if a body corporate contractor repairs the damage along with their usual tasks.
One of the most common costs under bylaws is for mowing lawns. If the bylaws say a certain standard of appearance is required of lots, which most do, then the lot owner will be required to maintain the lot to that standard.
If they do not then the body corporate will request the issue be rectified.
If the matter is still not resolved then the body corporate will go ahead and address the issue themselves and on charge the cost to the owner. And that’s fair. All the lot owners are paying a premium to live in community with a high standard of appearance, and one lot owner should not be able to disrupt that.
Again however, these things seldom happen without notice.
Other lot owner costs
Occasionally there will be charges on statements for other costs incurred by a lot owner, such as ordering a section 206 disclosure statement. In those cases the fee is not unexpected since the service is usually something ordered by the lot owner.
What if I am completely taken by surprise?
I’ve assumed in writing this article that there is no dispute with a charge, and as always I’m talking about the mythical body corporate who gets it right 100% of the time.
The body corporate world is a people intensive industry lead by laypeople. Mistakes happen, quite often in fact.
When unexpected body corporate fees show up on your levy account you are under no obligation to suck it up without a murmur. Personally I encourage you to question everything.
You might want to do it respectfully though because the chances are fairly high that you may have missed something, and there’s nothing quite as embarrassing as having a meltdown only to find out it is you in the wrong.
Unless stated otherwise all the information on this website relates to Queensland legislation.
Thank you for your article. I have had an ongoing situation with the Body Corporate Committee for the past 4 years. I initially started incurring overdue fees on my payments as the invoices were not always being received in the mail. Over 12 months later after requesting them to be sent by email numerous times, it began to happen and I have paid my body corporate fees on time every quarter. Overdue fees have still been accumulating which I didn’t feel I had to pay. On top of that I find regularly extra costs such as locksmith fees, and the most expensive is a water leak that was in the yard. I had a plumber inspect the leak and he said it wasn’t linked to my property. After back and forth with the committee (which comprises 3 owner residents that seem committed to charging the owner investors for everything they can to keep the owner resident fees at the minimum) I suggested conciliation, to which they agreed. The following week I received a letter from a solicitor that they had engaged legal proceedings and the debt was demanded by the next day, the 23rd December, 2016. I advised them that I was unable to come up with a couple of thousand dollars in one day, and out of respect for everyone involved we should wait til after the Christmas period to resolve it. Two weeks later I was served by the magistrates court. I got legal advice and they said I was probably in the right but it would be far cheaper to pay the debt rather than fight it. I organised finance and paid the amount only to be sent another bill for a further $2000 in legal fees. I was also told I was not welcome at meetings nor was I able to vote until my fees were paid in full. I feel this is highly unjust and now am $4000 out of pocket. The lady who is the secretary of the committee harasses myself, my real estate agent and my tenants on often a daily basis, going through the tenants letter box and garbage. As a result my tenants left and I have now missed out on 4 months in rental income. I just don’t know what to do.
Hi Lynelle
That seems like such a disappointing experience. Unfortunately, when it comes to body corporate levies, it’s always better to pay then seek reimbursement because of exactly the scenario you’re describing here. Its all the additional costs that get added that turns it into something bigger than Ben Hur.
I’m not sure what you can do about the harassment either, particularly now the tenant is gone. Depending on the reason why the lot has sat empty maybe you could make a claim for Loss of Rent? Or on your Landlord insurance.
If harassment is happening it’s a good idea to make a record with specific dates, times and encounters. If you seek legal action against the Secretary then you have a written record to back you up. Otherwise it’s largely your word against theirs.
I hope things settle down for your now.
Hi there, I moved into my flat as a tenant in december and have just received an invoice from our real estate from the body corporate for damages to the common wall areas on the moving day. I don’t have a lot of furniture and moved in myself and do not believe I caused this damage. There were other tenants moving out the same day. I have replied stating all of this and that I don’t believe I’m responsible for the invoice, also noting the fact that I had not been approached about this at all, i had no knowledge of this damage or repairs until I was sent an invoice 4 months later telling me to pay within 30 days. What are my rights about fighting this? It seems like it’s my word against theirs, will I be obligated to pay it?
Thank you
Hi Capri
The body corporate is allowed to, and indeed should, on charge repair costs for damage caused to the resident that caused the damage. Its the same with false fire alarms. If it came from your lot then you get to pay.
The delay will be because of length of time between committee meetings – usually 3 months.
You’re correct it comes back to your word against theirs. They will need to take legal action if you don’t intend to pay and then they need to prove it was you.
Hello,
My partner has a couple of OC issues that I would like clarification on.
1. A neighbour lodged a noise breach via OC, which was forwarded on to my partner. She then rejected the breach in a timely manner. There was no further correspondence in relation to the breach until she was hit with $160 fine from the OC. Is she required to pay it??
2. There was a water leak from a planter box to the residence directly below my partners. There were plenty of emails back and forth regard the issue with lot owners and OC. The matter was sorted by my partner and the issue was resolved. Only to later be billed by OC for the time spent on the emails in excessive of 1k. Are they allowed to do so? If so it seems excessive and how is there time justified? In other words my partner doesn’t have transparency to time spent.
Hi Anthony
You’re obviously in NSW or VIC which is different legislation from here in QLD. For instance, in QLD, the body corporate cannot fine a lot owner. I think in NSW the OC can issue a fine, but I’d check with the Office Fair Trading. If you partner has disagrees then I would suggest she object to the charge. Talk to them and see what happens.
The same with the emails. There is no capacity here in QLD for emails to be charged as has happened here, particularly not in an unsubstantiated amount. It is possible for the OC to on charge any cost they’ve incurred, such as an additional charge from the strata manager. If a cost can demonstrably be incurred by one lot owner there is an argument that the cost should be on charged, as its no fault of the other owners. Again however though, show me the bill. To fight this charge I’d establish whether its a regular thing they do when these situations come up or something they’ve aimed at your partner.
Hi Lisa, we’ve recently moved into a brand new building with Owners Corporation in Victoria. I have a question regarding general levying of fees. Can the Manager issue fee invoices to owners when there is no approved budget? Ie we are in the situation where the developer appointed the manager and agreed a budget for the first 3 months. These fees were then paid as part of owners settlement on the property. No further budgets have been approved but the next 3 quarters fee invoices have been levied. The owners believe the fees being levied add up to way more than an annual budget. We are concerned because we’ve been told Owners Corporations can’t refund over payments, rather they sit on the surplus.
Hi Elizabeth
You’re quite right. A body corporate, or Owners Corporation, must agree a budget and contributions via ordinary resolution of general meeting. Owners have the opportunity to vote.
It is the only way levies may be validly issued. That said committees can raise an interim levy, say for the first period of the new financial year, however, that interim levy should be confirmed by the owners via ordinary resolution passed at a general meeting.
I have been a member of the Owners corporation of an apartment block in Melbourne that is made up of 75 units for the past 4 years. The committee reluctantly agreed to a levy increase at the end of last year. A new committee was elected at the AGM shortly after. Within 2 months the new committee agreed to a further levy charge. Our fees have gone up by 40% in one year. As a lot owner do I have any avenues of recourse or do I just have to lump it.
Hi Mel
Things may be different here in QLD but if owners approve the levy increase in general meeting, no, you cannot do anything about it unless you can establish there was something contrary to legislation in the passing of the motion. And in that case, you’re more likely to delay than change the course.
Presumably your body corporate has need of the additional funds which is why they’ve been raised.
Hi Lisa,
I received my first invoice from the new strata company(transferred from a previous strata company), with an arrears fee already on it saying i had not paid the last 2 invoices , even though this was their first invoice to me(from either company), and i never received any invoices in the post. I sent them an email saying that this is the first invoice, could they remove the fee, since it was never sent to me. They strongly refused and said they had sent the original invoice so i have to pay. I paid this invoice immediately, minus the fee component.
I really dont want to pay for fee, when i am not at fault.
The strata company person responsible would not even take a call or return a call , even to just discuss the matter.(only email)
What are my options (apart from paying an unfair Fee) to resolve this matter ..?
Should i contact Owners Corp? Fair Trading ?
note that i have always paid my prior invoices on time.
Hi Don
If you have any sort of dispute in QLD you need to contact the Office Commissioner Body Corporate. You would need to seek conciliation or Adjudication, though first you must try and self-resolve the matter. Do note in the past Adjudicators have found that it is the responsibility of the lot owner to pay their body corporate levies whether they receive a notice of contributions or not. Despite that, if you want to dispute the issue then you need to follow dispute resolution procedures.
If you’re in NSW, then yes, do talk to Fair Trading, or post your question on the flat-chat forum as they will be able to give you information relevant to your legislation.