Do Body Corporate Fees Include Council Rates in Australia?

April 12, 2024

Key takeaways:

  • Council rates and body corporate fees are separate, with rates funding local services and fees covering common property upkeep.
  • Body corporate fees consist of administration, sinking funds, and occasionally special levies for unexpected expenses.
  • Property owners must budget for both body corporate fees and council rates to fully cover the costs associated with their property.

Do body corporate fees include council rates? The straightforward answer is no; council rates are not included in body corporate fees.

While body corporate fees cover the costs associated with the common property and its upkeep within the strata scheme, council rates cover services provided by the local government external to the property. Property owners need to budget for both expenses separately.

Body corporate fees are regular payments made by owners within a strata scheme to cover the cost of maintaining and managing the common property and shared services. These fees are vital for the upkeep of the property and contribute to ensuring that communal areas are insured and maintained.

Council rates, on the other hand, are a separate charge levied by local councils to fund infrastructure and community services within the local municipality. These rates are mandatory for all homeowners in the given council area and are not included in body corporate fees.

Property owners and tenants within a strata scheme must recognize these differences as they budget for the costs of owning or living in such properties.

Understanding Body Corporate Fees

When you own a property within a strata scheme in Australia, understanding body corporate fees is crucial.

These fees are collected to cover the shared expenses of property maintenance and to ensure the smooth operation of the owners corporation.

Composition of Body Corporate Fees

Body corporate fees are comprised of several components:

  • Administration Fund: Covers day-to-day expenses such as garden upkeep and utility bills for common areas.
  • Sinking Fund: Also known as a capital works fund, it’s used for long-term projects like major repairs or renovations.
  • Special Levies: Occasionally imposed for unexpected expenses not covered by the regular budget.

Body Corporate Financial Management

Financial management within a body corporate involves careful planning and budgeting of funds to cover:

  • Annual Budget: A projection of the yearly expenses and income.
  • Expenses: All costs related to the maintenance, insurance, and administration of common property.

Services Covered by Body Corporate Fees

Typically, body corporate fees finance:

  • Maintenance of common areas including gardens and facilities.
  • Cleaning of shared spaces.
  • Upkeep and repair of the structure.
  • Insurance to protect common property.

Body Corporate Fees vs Council Rates

Body corporate fees and council rates are distinct entities where:

  • Council rates are levied by local government for services like waste collection and infrastructure.
  • Body corporate fees are collected by the strata management to maintain the strata scheme’s premises.

Strata Title and Ownership Responsibilities

Holding a strata title means you:

  • Own your individual lot and share ownership of common property.
  • Are responsible for your own lot while body corporate manages common areas.

Legal Framework and Compliance

Body corporate is governed by:

  • Laws and Regulations: Ensuring the strata scheme operates within state-specific legislation.
  • By-laws: Rules specific to each strata scheme that all residents must follow.

Meeting Records and Decision-making

The owners corporation must keep records of:

  • Meetings: Including the AGM, where budgets are set and decisions made.
  • Minutes of Meetings: To ensure transparency and accountability in body corp management.

How Can Property Owners Find Out Exactly What Their Body Corporate Fees Cover?

to understand precisely what your body corporate fees cover, you can:

  1. Review the Body Corporate’s Budget: This document outlines the anticipated expenses for the year and how much each property owner needs to contribute.
  2. Attend Body Corporate Meetings: These meetings provide an opportunity to ask questions and gain insights into how fees are allocated.
  3. Consult the Management Agreement: This will detail the services provided by the body corporate manager, if applicable.

Tips for Managing Expenses Related to Body Corporate Fees and Council Rates

  1. Budget Accordingly: Factor both body corporate fees and council rates into your annual budgeting to avoid surprises.
  2. Understand What You’re Paying For: Familiarise yourself with the services and maintenance your fees cover. This knowledge can help you appreciate the value they bring to your property investment.
  3. Query Increases: If fees increase significantly, don’t hesitate to ask why. You have a right to a transparent explanation of how your money is being spent.
  4. Consider Payment Plans: If large annual or quarterly payments are challenging, see if the council or body corporate offers payment plans.
  5. Engage in the Community: Active participation in body corporate meetings can help you influence decisions, especially those related to budgeting and expenditures.

Fees Calculation and Payment

When considering the financial responsibilities of owning strata property in Australia, it is essential to understand how body corporate fees are calculated and managed.

These fees are pivotal to the smooth operation and maintenance of common property areas within an apartment complex or townhouse development.

Determining Fees and Levies

The owners corporation, which includes all lot owners, collaboratively sets the annual budget during the Annual General Meeting (AGM).

This budget determines the funds required for regular maintenance, future repairs, and a sinking fund for any capital expenses.

Fees may also include special levies for unforeseen events or structural damage.

Calculation of fees typically considers the size and type of individual unit, with townhouse owners potentially paying different rates than apartment owners.

Impact on Property Owners and Investors

Both property owners and investors need to account for these fees in their financial planning, as body corporate fees impact overall investment property costs.

Regular and special levies are a fundamental aspect of owning real estate within a strata scheme, affecting the rental yield, property value, and return on investment.

Special Fees and Charges

Occasionally, special fees may be levied for reasons such as emergency repair to a blocked toilet in a common area or structural repairs.

The treasurer of the owners corporation is generally responsible for managing these capital expenses.

These expenses are over and above regular levies and may catch some lot owners by surprise if they haven’t planned for them.

Dealing with Late Payments and Arrears

In cases where owners fall behind on their fees, the owners corporation can charge late payment penalties.

These penalties are typically a set interest rate, not exceeding 2.5% per month, to encourage prompt payment.

Legal costs incurred while recovering arrears might also be passed on to the delinquent owner.

Tax Deduction and Financial Implications for Owners

For investment properties, some body corporate fees and charges may be tax-deductible.

The Australian Taxation Office allows deductions for costs associated with renting out a property, which can include body corporate fees, depending on the nature of the charges.

Maintenance and Repairs Funding

Regular levies fund everyday expenses associated with the maintenance of the property, which might include gardening, cleaning of common areas, and minor repairs.

A portion of the fees is often allocated to a sinking fund destined for future significant capital works or repairs, such as fixing structural damage or replacing the roof of the complex.

Additional Considerations for Owners and Tenants

Owners and tenants discussing body corporate fees and council rates in Australia

When living in or owning a property within a body corporate, there are specific aspects you need to be aware of. These considerations impact both your financial planning and your day-to-day life.

Insurance Specifics for Body Corporate

The body corporate manager typically arranges building insurance which covers the structure, common property, and fixtures such as light fittings and stairways.

Owners should take out their own contents insurance, and landlords will require insurance specific to tenancies.

It’s crucial to ensure that policies address public liability within communal areas.

Utilities and Services Managed by Body Corporate

Utilities and services such as water and power often come from shared infrastructure.

Body corporate fees may cover the cost of water meters in communal areas, but individual tenants and owners are generally responsible for their unit’s utilities.

Maintenance roles like gardener and cleaner for shared facilities are also managed by the body corporate, ensuring that areas like the parking area are well-maintained.

Amenities and Facilities Maintenance

A proportion of your body corporate fees is allocated to the upkeep of amenities and facilities. This can include air conditioning systems in shared spaces. It can also include remote-controlled gates and general repairs.

The goal is to ensure that shared utilities and services are always in good working order for all residents’ enjoyment.

Specialised Roles within Body Corporate

The strata manager or managing body oversees the complex operations. They also ensure that the body corporate complies with legal and financial responsibilities.

These roles are integral in managing the intricate details of property maintenance. They liaise with contractors for repairs and facilitate meetings with owners to discuss body corporate issues.

Suggested reading: Make your home experience seamless in Australia by reading our expert guide on how to buy a house in Australia.

FAQ Section

What do body corp fees cover?

Body corporate fees, also known as levies, are payments made by unit owners for the upkeep of common areas within a strata-titled building or community. These fees cover expenses such as insurance, cleaning, gardening, fees for contracted professionals, and ongoing maintenance of shared spaces.

What are body corporate fees in Australia?

In Australia, body corporate fees, sometimes referred to as strata fees or strata levies, are determined based on the lot entitlement of each unit within a strata-titled building or community. These regular payments by property owners are allocated for the maintenance and management of communal property and services.

What does body corporate cover in Victoria?

The body corporate in Victoria is tasked with the maintenance, repair, and management of common property. Responsibilities include ensuring adequate strata insurance is in place, covering building damage and public liability, among other administrative and maintenance duties for common areas.

How to avoid body corporate fees?

Avoiding body corporate fees isn’t entirely possible, but managing them efficiently is. Know the details of your fees, assess the common facilities critically, participate proactively in meetings, budget wisely, undertake DIY maintenance when feasible, negotiate service contracts effectively, understand legal implications, and contribute to building a reserve fund to mitigate unexpected costs.

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