What Strata Levies Cover in Australian Apartment Buildings

Owners of Australian property who hold a unit in an apartment building or a townhouse will find a strata levy on their bill, even though a strata manager may not be visibly present day to day. This article looks in detail at what an Australian building’s strata levy covers, and how the strata manager helps owners manage the building day to day.

The Strata Manager’s Responsibilities

Australian law regulates the conduct and standards of strata management companies, and requires that strata be run by a licensed management company. Their responsibilities mainly cover the common area and common property — typically things such as the lobby, stairwells and lifts. Owners can find out exactly which common areas and facilities a residential project includes by checking its strata plan. Ownership of these common areas and common property belongs jointly to all the owners in the project, and owners engage a strata management company to manage them and to set relevant standards and rules. Australian buildings don’t necessarily have an on-site manager, so residents may not actually see strata staff in person. The strata management company sets the building’s by-laws in line with Australian strata management law. These by-laws typically cover matters such as noise, rubbish, car parking and keeping pets, and also constrain tenants’ conduct. The content of the by-laws is also open to negotiation — owners can propose additions, removals or changes at the building’s Annual General Meeting (AGM) each year.

The Annual General Meeting (AGM)

Every year, all owners in a building and the appointed management company hold an owners’ meeting. At the meeting, the management company presents a report on the past year’s management, covering the building’s overall day-to-day consumables and the maintenance condition of each facility. Owners will also vote on next year’s various budgets, such as the management budget and works budget. Owners can attend in person or appoint a proxy to attend on their behalf, but we recommend that even overseas owners try to make time to attend, or at least look closely into what was discussed, given how directly it affects their own interests.

What a Strata Levy Covers

An Australian building’s strata levy is made up of two parts: the Administration Fund and the Capital Fund. The Administration Fund covers the building’s day-to-day expenses, such as water and electricity, cleaning and maintenance, insurance and the strata management company’s own management fee — these are all short-term, routine expenses. The Capital Fund covers longer-term expenses, used for future long-term maintenance, and typically makes up only about 15%-20% of the Administration Fund’s size. So the more functions or facilities an apartment building has, the higher its strata levy is likely to be, because both day-to-day consumables and maintenance will cost more. Each unit’s actual levy is calculated from that unit’s Unit of Entitlement, which depends on factors such as the unit’s value and its share of the land. A unit’s Unit of Entitlement can be found directly on the building’s strata plan.

In Summary

Property management in Australia is regulated by law, with a licensed management company helping owners manage their building; the management company’s performance and fees are reported to owners each year at the AGM and are open to owners’ questions. If owners are unhappy with their management company’s fees or service, they can raise it at an owners’ meeting, and can even vote on whether to change the strata management company.

Have a question about this guide? Leave a comment below, or ask Zagdim directly.