What your strata levies actually pay for

Part two of our series on strata levies and paperwork in Perth. Part one covered which kind of scheme you are in, which you need before this makes sense.

Levies fund two things: running the scheme day to day, and building up money for the big jobs that are coming. Those are two separate funds and it is worth knowing which is which, because they behave very differently.

The administrative fund

Every strata company must establish an administrative fund, sufficient in the strata company’s opinion for the control and management of the common property, for paying insurance premiums, and for discharging its other obligations. That comes from section 100(1)(a) of the Strata Titles Act 1985. This is the fund your quarterly levy notice mostly draws on.

On a typical Perth apartment levy notice, the administrative fund pays for things like these.

• The insurance premium for the scheme, usually the single largest item
• Water and electricity for common areas, including common lighting
• Gardening, lawns, and cleaning of common areas
• Lift servicing, where there is a lift
• Fire equipment inspection and servicing
• Gates, intercoms, and common plumbing and drainage repairs
• Pool maintenance, where there is a pool
• Strata management fees, accounting, and any audit

The reserve fund

Separately there is the reserve fund, for accumulating money to meet contingent expenses other than routine ones, and other major expenses likely to arise in the future (section 100(2)). Roofs, repainting, lifts, driveways.

Whether a scheme must have a reserve fund depends on its size and its value, and that is part four. If it does have one, the money it is saving towards is set out in a 10-year plan, which is part five and is the most useful document in the whole pack.

How your share is worked out

Contributions are levied on owners in proportion to the unit entitlements of their lots, unless the scheme by-laws set a different basis (section 100(1)(c)).

Unit entitlement, not floor area and not what you paid, is what sets your share. Two apartments of the same size in the same building can carry different unit entitlements, and therefore different levies, and that is not a mistake. The schedule of unit entitlements is registered with the plan.

What levies do not pay for

Your contents. Your own landlord insurance if you rent the property out. Anything inside your own lot, from a leaking mixer tap to a new kitchen.

There is one large exception to that last point, and it catches almost everybody: in a built strata scheme the strata company generally insures the building itself, including parts inside your apartment. That is part three.

Reading a levy notice

A well set out notice shows the administrative contribution and the reserve contribution separately. If yours shows one figure, ask the strata manager to split it, because the two tell you different things. A high administrative levy means the scheme costs a lot to run. A high reserve levy usually means somebody is planning ahead, which is generally a good sign rather than a bad one.

The whole series

• Part 1. Which kind of strata scheme is it?
• Part 2. What your strata levies actually pay for (you are here)
• Part 3. Who insures the building?
• Part 4. What changes with the size of the scheme
• Part 5. How to read a 10-year plan
• Part 6. By-laws, and what unpaid levies mean at settlement
• Part 7. What a seller must tell you before you sign

This article is general information about how strata schemes work in Western Australia. It is not legal, financial or tax advice, and it is not a substitute for reading the scheme plan and the registered by-laws for the particular scheme. Rules change and every scheme differs. If something turns on it, check the scheme documents or get advice.

By James Yeoman, Director of KPR Perth Pty Ltd T/A Key Performance Real Estate