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Understanding residential apartment strata levies and the variation in levies between lots

Cassie Plemic : July 20, 2018 5:45 am : Blog / ESM Strata

Looking to purchase an apartment in a strata scheme? There must be a few questions running through your mind. Like who sets the strata levies and why is there such a variation between lots? It’s important to answer these questions before making an inquiry into purchasing a unit. Watch our video below for a quick explanation, or read on to find out what you need to know first.

What is a strata levy?

A strata levy is an amount determined by the owners at an Annual General Meeting (AGM), which is then paid by the owner of a unit to the Strata Company. Strata levies are paid to maintain the common areas in the strata scheme and as every building has different boundaries between the lot and the common property this amount can vary dramatically.

In Western Australia, there are officially two types of levies which are described under Section 36 of the Strata Titles Act 1985:

  • Administrative: A levy used to fund the day-to-day operations of the Strata Company (e.g. garden maintenance).
  • Reserve: A levy used to fund non-routine and major Strata Company expenses (e.g. replacement of lift).

There is also a third type of levy commonly used in WA that is not described in the Strata Titles Act called a special levy. Special levies are generally used to raise money to fund major non-routine expenses where there are insufficient reserve funds available.

Who sets the strata levies in a block of units?

Ultimately, it is you and all the other owners that make this very important decision by majority vote at the Strata Company AGM. However, there is a reasonable amount of preparation that goes into calculating the value and the frequency of the levies before being put it to a vote at the AGM.

In the case of a Strata Company that is managed by a Strata Manager, he or she will generally work with the Council of Owners to prepare the budget and present this at the AGM for approval. The process will normally go as follows:

  1.  An expenditure budget is drafted
  2.  The current financial position of the Strata Company is reviewed
  3.  A basic cash flow analysis is carried out
  4.  The total amount of money that is needed to be raised to cover the costs and leave sufficient funds for working capital is calculated
  5.  The amount each owner needs to pay based on their Unit of Entitlement (U/E) is calculated
  6.  The Strata Manager liaises with the Council of Owners before drafting and issuing a notice and agenda for the AGM that will review and approve the budget expenditure and levies
  7.  The owners attend the AGM and determine the budget before discussing the levy amount needed to fund the budget
  8.  The minutes are distributed to all owners advising the levy amount and dates that they are due
  9.  A reminder notice is sent to all owners 21 days prior to the levy being due

Why are there variations in levies between lots?

Looking at Steps 4 and 5 listed above, it’s important to understand why there are variations in levies between lots. To answer this question, we must first look at the budget. In regards to budgets set by the owners, there are two main types: administration and sinking.

A typical administration budget may include, but is not limited to:

  • Insurance premium for the building structure and Public Liability cover
  • Strata Management fees
  • Electricity
  • Lift maintenance (if applicable)
  • Pool maintenance (if applicable)
  • Common water supply (if not metered individually)
  • Sewerage charges (usually covered in other states in the council rates but not in the NT)
  • Gardening
  • Cleaning
  • Maintenance of common property, e.g. painting, repairs, etc.
  • Audit fees (in the NT all accounts have an annual audit)
  • Fence and gate maintenance
  • Fire protection (if applicable)
  • Waste management

Or in other words, any common property maintenance / administration fees. Once the administration budget is agreed, the owners then agree on the amount of levies that need to be raised. A small buffer, also known as a sinking budget, to cover unexpected expenses is also recommended.

A sinking fund is a means of collecting extra funds for specific costs that occur occasionally. For example, a sinking fund for periodic maintenance such as painting programs or roof repairs that are needed every 5 or 10 years.

Sinking budgets can vary enormously from building to building dependent on the owner’s views towards long term maintenance. For example, some Strata Companies have sinking funds in the thousands and some have zero – it is entirely up to the owners to make the final decision. However, as Strata Managers, ESM recommend that something is in place for long term maintenance.

Lastly, when the budget has been approved, it is then divided up the U/E. For example, in a block of 50 units, some may be bigger (two bedrooms versus one bedroom) and therefore will vary. This is set by the surveyor when the original plan is submitted for development and the Strata Titles Act states that this is the method that must be used to share expenditure. However, this article is not intended to be personal advice and you should not rely on its as a substitute for any form of advice.

Need more advice? As the state’s largest specialist Strata Manager, ESM have been providing professional and practical strata management services to Strata Companies in WA since 1986. Contact us today.

 

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Video – Levies “What you should know”

Exclusive Strata Management : March 22, 2018 7:10 am : Education / Video Library

Levies – like them or loathe them if you live in a Strata Titled Property unfortunately “in most cases” you have to pay them.

But Why?

In the second of our informational videos we hope to demistify “Strata Levies”.

https://youtu.be/i4W3071B2kU

 

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Thank you for the positive feedback

Exclusive Strata Management : December 12, 2017 8:37 am : News / ESM Strata

As 2017 draws to a close I thought I might share a cross section of some of the positive feedback that our Team received throughout the year.

For those working in the Strata industry and in fact for anyone who provides consumer based services I am sure you would appreciate that receiving positive feedback is like that “magic” golf shot that motivates you to “come back for more”.

Before you read on, I would like to take this opportunity to thank all of our customers, suppliers and partners who have supported us throughout 2017 and a very special thank-you to all of those who took time out of their valuable schedules to provide us with such positive feedback.

From the team at ESM we hope you have a safe and happy festive season and we look forward to working with all of you in 2018.

Please note, for privacy reasons I have removed the actual names of the person who provided the compliment and any direct reference to their property or business.

1 Council Member – 16 Lot Scheme South Perth

Hi Narelle
Just wanted to touch base and thank you personally for your extraordinary help and support , despite the many difficulties that have been put in front of you in regard to our Strata Complex.
I feel quite fortunate to be able to work with a Strata Manager who shows “real ” human qualities and absolutely no pretentious traits.
In all my dealings with you, you have always been polite, very efficient and always attended to any emails promptly. It obviously comes from your management, so well done!
Thank you very much for your excellent attention to detail and despite it being quite a handful at times you have been there to support the owners of our Strata Complex.
You are actually like “peas in a pod” and your assistance has been invaluable to me during recent times.
I know it is your job but you really do it so well.
I genuinely look forward to working with you on Council and getting our Strata Complex back on track.

Kind regards

Council Member

2 Asset Manager  – Property Group Leederville

I am a real estate agent of 20 years, I work in both sales and property management so my experience with a variety of Strata Managers is broad. I wanted to let you know that I have been so delighted to deal with your company in the sale of a unit in West Perth. The process from sign approval to information retrieval has been second to none. This in turn has made my job so much easier and has made what is usually a laborious and drawn out experience into a pleasant one.
The website is great and next time anyone asks me who I recommend in Strata management it will be you and your team!

Thanks Again

Best Wishes

Asset Manager

3 Owner – 19 Lot Scheme Canning Vale

Hello there

I would like to provide some feedback to you on a member of your team. I recently needed some guidance on my Investment property that ESM manages.
Rhea is the Strata manager for our complex so it was her I was dealing with.
I cannot give Rhea enough praise for the manner in which she dealt with my request, she was nothing but obliging, helpful, supportive and cheerful every time we spoke on the phone.
My request was handled so efficiently I could not believe it especially after the last 5 years of the property being managed by another company. To say I am delighted we changed is an understatement and I would be grateful if you could pass on my thanks to Rhea.
Customer service should be at the top of your game and Rhea has that nailed!!
You are very lucky to have her and in this day and age people of her calibre should be acknowledged for all their hard work – she is a GEM!!

Regards
Owner – 19 Lot Scheme Canning Vale

4 Supplier and Owner – 32 Lot Scheme Victoria Park

Supplier/Owner rang and asked some questions regarding invoicing, GST and using new suppliers and said Peta from Accounts Payable was very helpful.

5 Treasurer – 18 Lot Scheme Maylands

Rhea is a very knowledgeable, diligent and helpful Strata Manager who obviously presented our case well to her General Manager and I look forward to continuing working with her in the future for the benefit of our Strata.

Regards
Treasurer

6 Secretary/Treasurer – 7 Lot Scheme South Perth

Tie her to her desk and to never let her go – well done Eve.

Regards
Secretary/Treasurer

7 Council member – 9 Lot Scheme Tuart Hill

Hi Narelle

I just wanted to express my thanks for what you are doing and what you have done for our little Tuart Hill complex, particularly after our recent AGM.  You seem very in touch with what’s going on, both in our strata and in terms of all things strata-related and you are exactly what I’d hoped we would find in a manager when we came to ESM.
Thanks again and I look forward to seeing some of the works progressing in the coming months!!

Council member

8 Chairperson – 34 Lot Scheme Wannanup

Thanks David , ESM can be applauded for training their Staff – have noticed you are Level 2 now…… your excellent skills were reflected in the way you chaired the AGM – many thanks for that and we are looking for a long business relationship with ESM.
May I ask you, to pass our appreciation on to your Manager please.
Kind Regards

Chairperson

9 Treasurer – 197 Lot Scheme Mosman Park

Thank you Jake for the shortest ever AGM our Strata Company has ever had.
Please convey my thanks to your team especially Theresa Nolan who surely must be in line for Manager of the year.

Regards

Treasurer

10 Owner – 21 Lot Scheme East Fremantle

Hi Theressa

Thanks very much. Exclusive Strata Management has provided excellent service to us as landlords since 2006 and we will be happy to strongly recommend your company to others looking forward.

Regards

Owner

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Video – Strata Title for Beginners

Exclusive Strata Management : August 15, 2017 7:10 am : Education / Video Library

Welcome to the first in a series of videos that we hope will help you to understand

“Strata Title in Western Australia”

 

https://www.youtube.com/watch?v=3zHIqQPp1sg&feature=youtu.be

 

 

 

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Strata Title for “Beginners”

Exclusive Strata Management : July 26, 2017 12:37 am : Blog / ESM Strata
  • Just bought or thinking of buying a Strata Title property?
  • Don’t know what Strata Title is all about?
  • Want to learn what you could be in for?

Welcome to the first in a series of short blogs that will hopefully help you understand Strata Title

It’s a form of ownership that enables people to buy a “lot” within a “Strata Community”.

You own the lot as well as a share in the “common property”.

Strata Title properties can be:

  • Apartments
  • Units
  • Townhouses
  • Commercial Offices
  • Factory Units
  • Retirement Villages
  • Caravan Parks

And many others

If we look at a typical apartment complex in its simplest form you own the inside of your apartment and a share of the common property which can include:

  • The swimming pool
  • The gym
  • The sauna
  • The foyer
  • The lift
  • The actual building structure itself
  • The basement car park
  • The gardens
  • The vehicle access gates

And much more

Anything inside the boundary of your lot is yours to maintain and upkeep.

The common property on the other hand is maintained by the “Strata Company” which consists of you and all of the other owners in the Strata Community.

Sound complicated?

Well it isn’t really let me try to explain

When you buy a strata lot you will be required pay a fee to your Strata Company commonly called a “levy” which is generally issued each quarter.

These levies are to raise funds to pay for things like:

  • Building Insurance
  • Maintenance and upkeep of the common property
  • Electricity used for the common areas
  • Rubbish Removal
  • Gardening

And other Strata Company expenses

The value of the levy has to be agreed by the majority of the owners at a general meeting and is calculated based on your unit of entitlement as a proportion of the total unit of entitlement for the Strata Company.

As a Strata Title owner you will also be required to abide by the Strata Company by-laws and Strata Company rules which are in place to ensure every owner and occupant experiences peaceful enjoyment of their lot and the common property.

If you want to have a say in how the Strata Company is managed you should always attend the general meetings and if inclined become a Council member as they are delegated the authority to carry out the functions of the Strata Company.

Need to know what constitutes your lot and what constitutes the common property?

You will need a copy of the Strata Plan and maybe some help from an expert.

If you do need some help why not call and talk to one of our friendly staff on 08 93621166

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Short-Stay Letting – What You Need To Know

Exclusive Strata Management : June 28, 2017 6:50 am : Blog / ESM Strata

For those wanting to offer short-stay letting the emergence of online marketplace and hospitality service providers such as Airbnb and Stayz, whilst opening a new market for property investors and owners, has created chaos not only within the Strata Community but also throughout the greater WA property market.

The first obstacle to be overcome by any owner who may want to offer their property for short-stay letting is to determine if the local council allow short-stay.

Currently there are some local councils who actively support short-stay letting, some which require an application to be made by the owner and an approval to be granted by the local council prior to commencing short-stay and some local council’s that have completely banned the practice.

For owners of Strata Titled properties there may also be strata company by-laws that need to be considered prior to commencing short-stay letting.

Many Strata Titled properties throughout WA have introduced by-laws which encourage “residential” over “short-stay” occupancy.

Whilst these by-laws may not specifically state that owners are unable to engage in short-stay letting a recent case heard initially by the State Administrative Tribunal, later appealed to the Supreme Court and then to the Court of Appeal indicated that if the by-law states that a lot is to be used as a “residence” or by “residential tenants” then short-stay letting is not allowed.

The determination was made on the basis that the words “residence” and “resident” refer to an occupant who demonstrates the intention to reside at the lot for a substantial period or makes the lot a permanent place of abode.

So what if a Strata Company wants to allow short-stay letting?

  1. Determine if the local council currently allows short-stay letting or if owners need to make an application to their local council to gain approval.  Note each individual owner may have to make an application for their respective lot.
  2. If the local council allow short-stay, conduct a general meeting to ensure that no owners object to short-stay letting and approve the engagement and expenditure of a suitably qualified legal firm to draft a new Schedule 1 by-law.
  3. Once the by-law has been drafted conduct a second general meeting to approve the new by-law.  Note as it is a Schedule 1 by-law it must be approved by resolution without dissent.
  4. Once the new by-law becomes unconditional, lodge the by-law at Landgate.
  5. Once the by-law is approved by Landgate the Owners will be able to commence short-stay letting ensuring that their tenants comply with all Strata Company by-laws, rules and regulations that apply to all other occupants of the Strata complex.

 

For those Strata Companies that have by-laws in place that encourage “residential” over “short-stay occupancy the case referenced above may be further appealed to the High Court.

The strata managers at ESM keep up to data with the emerging trends in WA strata. If you’re looking for strata management services in Perth, please contact us today.

 

 

 

 

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Flying the Flag

Exclusive Strata Management : May 23, 2016 1:24 am : News / ESM Strata

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Australia Day 2015 at ESM.

It was difficult to say who enjoyed it the most, the staff who posed as the flag bearers or the artists. Not quite sure there are any budding Picasso’s amongst the team but everyone had a lot of fun and I am happy to say no person was injured in the making of the Flag!

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What is a Strata Plan?

Brad Kneebone : December 5, 2013 2:25 am : Blog / ESM Strata

A Strata Plan is a registered document comprised of several pages of written descriptions, sketches and critical information about the lots.

The Strata scheme comes about when a parcel of land or a building on a property is legally divided into a number of separate lots(at least 2) which can include common property(in the case of a survey strata plan) laid out in a strata plan. Upon successful registration of a strata scheme each lot is issued with a separate title. Each lot can be made-up of more than one lot – in this case each part is called a part lot.

A Strata Plan consists of a location plan and a floor plan.  The location plan shows the strata scheme with respect to the parcel of land and neighboring properties.  The floor plan displays the boundaries of the buildings forming part of the strata plan for each of the individual lots and their respective boundaries within the strata plan. All other areas outside the boundaries of the lots as shown on the floor plan are defined as common property.

The first page of the strata plan includes the name of the scheme, the registered address of the scheme, the strata plan number in the top left hand corner, the date of the strata scheme when it was lodged for registration, the date it was examined, the date of registration,and confirmation that a management statement (by-laws) was/wasn’t put in place.  Also included are the lot number of the strata plan and volume/folio from the certificate of title, local government details and a signed and dated approval from the chairman of the Western Australian Planning Commission.

Understanding and interpreting your strata plan can be very difficult, so please remember to contact your trained strata company manager at ESM for any assistance you require.

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Units of Entitlement

Exclusive Strata Management : October 7, 2013 4:27 am : Blog / ESM Strata

Unit entitlement

 

Unit entitlement is the relative proportion of each proprietor’s share of ownership in the whole of the strata or survey strata scheme.  The unit entitlement determines three important rights and obligations of proprietors:

a)      Voting rights of the proprietor

b)      The proportion of the undivided share of the common property

c)       And the proportion of the levy of contributions

Unit entitlement is determined by capital value in a strata scheme and by site value in a survey strata scheme.  The units of entitlement are established by a licensed valuer whose valuation certificate is registered at Landgate with the strata plan.

As an owner you are obliged to contribute to levies, based on units of entitlement, for an administrative fund to adequately fund expenses such as insurance and maintenance of the common property.

Additionally, you may be required to pay another levy, based on units of entitlement, if the owners of the strata company decide to establish a reserve fund. The purpose of the reserve fund is to accumulate funds for future significant expenses such as a lift or roof replacement

 

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Disputes within Strata Companies

Exclusive Strata Management : August 21, 2013 5:38 am : Blog / ESM Strata

 

At ESM, we assist many strata companies with disputes between residents commonly arising over issues including unauthorised parking of vehicles on common property or in another resident’s car bay, general maintenance issues, unauthorised pets which are causing a nuisance, loud noise complaints (including construction noise), and other issues. Some people tend to go into battle at the first sign of trouble rather than approaching the person or people concerned with the matter and putting forward their case. Some individuals are and will always remain difficult and treat other individuals in an unpleasant way. How they may act to get their point across and to be heard is beyond your control.  However, at ESM we believe you can choose how you respond to them.

It is important to realise that the situation is in most circumstances not personal and that it is vital to have good communication with your neighbours.  The best avenue to take is to sit down together at a mutual location and both sides discuss the matter calmly and come to an amicable solution that would suit you both. Try to reach a resolution before the problem escalates into something it should not.

Schedule 1 and Schedule 2 by-laws are in place to minimise these issues, and it is a requirement of each proprietor and resident to adhere to these by-laws. The elected Council of Owners of each strata company manage and enforce the by-laws. If you believe that a by-law is being breached, you should contact your Council of Owners to discuss the matter further.  If necessary, the Council of Owners can send a letter to the party in breach, outlining the breach, seeking compliance with the relevant by-law(s). In most cases the party in breach is not aware that the by-law existed and that they were in breach of it. If they continue to breach the by-law then the Council of Owners can act to send a formal breach notice.

If the parties can still not come to an amicable solution or they simply refuse to comply or agree, the common courses of action would be to employ a third party representative to assist with mediation.

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