Purchasing your first home is a monumental moment in your life and one that deserves celebrating. While it’s certainly a relief to officially be a home-owner, there are still a lot of things you need to know to keep things running smoothly, particularly things like owners corporation fees.
If you have purchased an apartment, unit, or townhouse as opposed to a house, you will likely become a part of an owner’s corporation for the building. This means that you’ll be subjected to paying owners corporation fees (formerly known as body corporate fees), a payment that is essential in maintaining and preserving the building and its amenities. So that you’re not shocked by any surprise costs, you must be aware of your owner’s corporation fees, as well as what they cover and how much they will cost you each year.
What is an owner’s corporation?
The phrase ‘owners corporation’ may sound intimidating to you as a first homeowner, but it’s actually an essential service dedicated to keeping your building running as smoothly as possible. To summarise it succinctly, an owner’s corporation sets the boundaries and rules of the building, and also maintains and manages the common property.
The owner’s corporation is in charge of creating and implementing rules and by-laws to do with what residents can and can’t do on the property. They must also maintain any common property so that it’s preserved in a reasonable state for its residents. Common property can include ‘gardens, passages, walls, stairwells, pathways, driveways, lifts, foyers and fences’.
Owners corporations are also responsible for drafting and implementing owners corporations fees, as well as the payment schedule for residents. They may also establish a maintenance fund that is guided by a maintenance plan. A maintenance fund is a financial pool that exists to cover any future issues that the building may encounter like damages, re-painting of the building’s exterior, replacement of driveways or lifts, and roofing.
What are owners’ corporation fees?
Owner’s corporation fees are fees that you, as the owner, pay to the owner’s corporation to keep the building running. They are a shared fund between you and any other owners within the building and cover any and all costs of running and maintaining the building and its common areas. While they may seem frustrating to you as a new property owner, they are essential in keeping your new investment from drastically decreasing in value.
The fees will cover regular maintenance and upkeep as well as any shared utilities in the buildings and any structural damage that may occur over time. On top of this, the owner’s corporation will likely arrange an owner’s corporation insurance that will ensure the building from any damages that aren’t covered by the regular fees. The insurance isn’t for regular wear and tear, rather it exists to cover any major damages to the building and fixtures as well as reinstatement of the building structure.
Types of body corporate fees
Owners corporation fees can typically be summarized into three categories:
The most commonly used cost, the administration fee covers the day-to-day running of the building. This includes water, insurance, building maintenance, management of the owner’s corporation, as well as any additional maintenance fees to maintain the building itself and the building’s common areas.
General-purpose sinking fund levy
This fee is generally a funds pool that money goes into over time. It’s used to cover larger costs that aren’t regularly needed, like any replacements or major works. This pool exists so that you aren’t stung by a large cost for one-off expenses, and are covered for any surprises that may occur when damages or unlikely incidents happen.
Special purpose levy
Occasionally there will be fees that aren’t covered by the general-purpose sinking fund, or administration funds. In this situation, the owner’s corporation may ask you to contribute to a special purpose levy, which is a one-off payment typically used for major works or major expenses.
How are owner’s corporation fees calculated?
Each year, your owner’s corporation will prepare an annual budget. This budget is usually prepared by the managers of the owner’s corp, before being shared with the rest of the members. When drafting the budget, the owner’s corporation will consider previous expenses as well as any legislative changes or planned maintenance for the upcoming future.
After estimating the costs of maintenance, administration, and your contributions, the owner’s corporation will finalize their budget and call an annual general meeting for the owners to meet and discuss. This means that any issues or queries you may have about the costs are to be discussed upon learning of the annual budget and its contents each year. Once a budget is agreed upon by the majority of the owners, it will be implemented for the following year.