WHY OUR LEVIES ARE HIGHER THAN THE COMPLEX NEXT DOOR?
This is a question I hear frequently from our clients. But before we can answer this question, let us take a step back and look at the following….
As a Sectional Title Owner, you will receive your monthly levy statement at the end of the month. On your Statement you will find administrative and reserve levy charges, although various Managing Agents may label it slightly different. The difference between the two is:
- The administrative fund levies cover the day-to-day maintenance and running costs of the building in respect of an approved budget; these will include, management and administration of common property, paying utility bills, insurance premium, audit fees, etc.
- We suggest that Administrative levies are calculated to provide sufficient income to meet its expenses with break-even position at the end of the year, or else a small surplus. Having higher surplus at the end of the year , will trigger higher levy increases.
- The reserve levies cover the long-term repair/replacement and maintenance requirements of the building, in reference to 10-year Maintenance, Repair and Replacement Plan;
- Although most bodies corporate now seem to have a good understanding of what a 10 Year Maintenance Plan is, what information should be included in this plan and how the annual contribution to the reserve fund must be calculated;
- We find often that many bodies corporate do not understand how to interpret the Act and determining the reserve fund levy contribution.
How much is required as a reserve fund?
- The trustees only need to cater for the expenses they agree should be implemented in the ten-year maintenance plan, equal to 15% of the annual budget as a minimum requirement.
This brings us to the last question:
How many Units are in your Scheme?
- It goes without saying, that the prescribed expense-sharing formula between the units, effect the contribution for each unit based on the number & participation quota of the Units in the Scheme sharing the expense.
- Thus, if your Complex has 10 Units and the Complex next door has 20 Units, with the size of the units more or less the same, it is logical that levy contribution per unit for the Scheme with 20 Units will be less.
- This means that levy contribution for larger Schemes will be less than those with fewer Units. In conclusion, there are many aspects affects the calculation of contribution levied on members, which plays an essential role in the efficient running of sectional title schemes. What is important is that formula in calculating those levies applied correctly.