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QLD: Q&A Levy Increases – As Lot Owners, Can We Refuse?

The LookUpStrata Team
Surplus funds refunded

Qld lot owners have many questions about the collection of levies. How much can a levy increase be. Can levies be raised in other ways?

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Question: Our body corporate is raising a special levy now for repairs to my roof in mid 2025. Can they demand this payment if the work is not due to commence for another eight months?

Our strata scheme is under the CTS/standard format plan. The body corporate (BC) is raising a one-off special levy of $19,000 for repairs to my roof. The work will not commence until June 2025. The BC requests full payment within 60 days of the notice, which they will send next week. Can they demand this payment if the work is not due to commence for eight months? Most building contract payments are due as the work progresses.

Answer: You are asked to pay the levy a few months before you need to, but at least you know the works will be done if the motion is approved.

From the information provided, it sounds like there is nothing technically wrong with the process.

Yes, you might usually expect the time periods for the raising of the money and the initiation of the works to be closer, but this is not a requirement and perhaps there were other considerations in play when the timelines were set.

Have you raised the issue with the committee? It might be worth asking them about the rationale behind the process. Perhaps, from the committee’s perspective, they might want to send out a communication about this to clarify matters for owners. This might be in the meeting notes.

Maybe the committee is ensuring everything is in place early to prevent delays. There may be concerns that owners will not pay on time if they wait until closer to the work’s start date.

Otherwise, all owners have the option of voting against the motions presented. Perhaps you could advise you would vote yes if the money were to be raised in March rather than November.

Alternatively, if you couldn’t pay straight away, you might be able to negotiate to pay the levy in the new year. Contact the committee and see if they agree.

From your perspective, the levy is for presumably necessary works on your lot. It sounds like the committee is taking action to rectify these and ensure sufficient funds are available. You’ve been asked to pay the levy a few months before you absolutely need to, but at least you know the works will be done if the motion is approved.

William Marquand Tower Body Corporate E: willmarquand@towerbodycorporate.com.au P: 07 5609 4924

This post appears in the November 2024 edition of The QLD Strata Magazine.

Question: Our body corporate has changed levy payment due dates. Should the committee provide an explanation and consider the potential impact for owners?

Our body corporate mentioned the following in the budget and AGM minutes: “All levy payment due dates will align with period dates as of October 2024 onwards for all levies struck”. The note did not explain that levy payments would be brought forward by 30 days. Should the committee have provided an explanatory note including the consequences of the change? Is a change of levy due date legal?

Answer: It may be best if there was a clear communication to explain the change, the impact, and why.

The levy due dates are set as per the relevant motions. If these are approved, I don’t see an issue with a change of dates.

If you are being asked to approve the motions, I suppose you could vote no and perhaps provide the body corporate with a reason why.

Most commonly, you might see a change in dates like this when a scheme changes to a new management agency. Different companies have different processes and will present motions to reflect their internal systems. If you haven’t changed agencies for a long time or changed to agencies that use the same schedule, it is not surprising that the collection dates have remained constant for a long time. However, there is no particular reason for this to be the case. The levy motions are year to year, and the due dates can vary based on the scheme’s and organisation’s needs. A simple example is that while most schemes have quarterly due dates, others only collect levies twice or three times a year.

Still, I can understand that it may be confusing from an owners perspective and making changes like this could easily cause some upset and problems with payments if people are used to a fixed schedule. It may be best if there was a clear communication to explain the change, the impact, and why. If that is not forthcoming, you could consult with the committee about the matter.

William Marquand Tower Body Corporate E: willmarquand@towerbodycorporate.com.au P: 07 5609 4924

This post appears in Strata News #716.

Question: I purchased a unit off the plan. On settlement, levies increase by 50%. Is a levy increase of this nature legal?

I signed the contract to purchase a unit off the plan in May 2023 and was told the levy prices. On Dec 23, I received a redisclosure document stating the levies had increased. On settlement, the strata fees increased again to 50% more than the levy quoted when I signed the contract. No notice was given. Is a levy increase of this nature legal?

Answer: If the seller has breached an implied warranty, you may be able to seek damages.

It would depend on the specific circumstances of the matter. Generally speaking:

The seller can vary the disclosure statement (which states the amount of annual contributions reasonably expected to be payable). However, this can only be done by a further statement and is only applicable if settlement has not occurred. This is because the only remedy for an inaccurate disclosure statement is terminating the contract.

However, as settlement has occurred, you may be able to rely on the implied warranties in Section 223 of the Body Corporate and Community Management Act 1997, particularly the warranty by the seller that, as at the completion of the contract, to the seller’s knowledge, there are no circumstances (other than circumstances disclosed in the contract) in relation to the affairs of the body corporate likely to materially prejudice the buyer.

If the seller has breached an implied warranty, you may be able to seek damages. We encourage you to seek specific legal advice.

Katya Prideaux Mahoneys E: kprideaux@mahoneys.com.au P: 07 3007 3753

This post appears in Strata News #707.

Question: Our committee overspent on legal fees by $8000, and now next year’s levies have increased to cover the overspend. How do I challenge this financial mismanagement?

My body corporate committee unapologetically overspent last year’s budget for legal matters by $8000. The coming year’s budget has allocated funds to cover that overspend and increased our quarterly levy by $300 to about $1200 per quarter. I feel this is a ridiculous levy for a small 8-lot complex without a pool! The committee holds the majority vote regarding any whole-of-body-corporate action. The body corporate manager supports the actions of the committee. Is there any way to challenge this financial mismanagement?

Answer: You may want to think about what you want to have happen next.

Budgets can never be an exact projection of the future, so it is not uncommon or incorrect that some body corporate expenditure will exceed planned amounts.

However, there is some debate about how body corporates should deal with this, and you may get different answers from different people.

In theory, if the body corporate faces an unbudgeted area of expense, this should be dealt with by raising a special levy to cover the cost. However, this may be unworkable at a practical level. Organising meetings takes time and money, and even if required, owners may be reluctant to vote for extra costs outside the budget, resulting in wonky decisions that can lead to negative outcomes. Then you have to face questions as to whether schemes should artificially inflate budgets (and therefore levies) to accommodate potential costs at budget time or situations where if a plumbing job costs $3100 and the budget only allows for $3000 in plumbing costs, whether there be a special levy for the remaining $100? Most people would agree that answering yes to these types of questions doesn’t result in effective body corporate management, but it is where you might end up if you take a literal reading of the legislation.

More practically, most schemes will be prepared to undertake the costs of unbudgeted items provided they have the funds in the bank, and they are within the relevant spending limits. Adjustments to budgets can then be made after the fact as required. Following this path allows works to proceed as necessary and for committees to make the decisions required to keep the body corporate operating without being bogged down with too much red tape. However, it also gives a degree of leeway to committees, resulting in overstepping the boundaries from time to time. As you indicate, once the money is spent, there may not be much you can do about it. You can go to the commissioner’s office or seek to have the committee members changed, but neither of these things will reverse the initial action.

As your complex is an 8-lot scheme, it is not a surprise that the legal expenses may be unbudgeted. Most buildings of that size won’t have ongoing legal disputes. Whether it was reasonable for the body corporate to undertake the expense in this issue depends on the context – what the dispute was and how urgent it was. We don’t know those details from the question, but if you challenged the decision, that framing would have to be considered.

Your committee does at least seem to have acknowledged the issue by budgeting for the expense after the fact, and it seems like you have been able to have some dialogue with your body corporate manager on the matter. You may disagree with them, but at least they have been available and open to discussion.

As such, you may want to think about what you want to have happen next. If your point is that the system of body corporate management is imperfect, I think you will find most people will agree with you. A couple of imperfect areas relevant to this topic are why the legislation doesn’t allow body corporates to budget for contingencies and why spending limits are stuck at levels established in 1999 when, by inflation alone, they should be doubled?

If you want to take action further, you may have some cause for complaint. You can go to the commissioner’s office and see what they say. On the face of it, the costs here may have exceeded the committee’s spending authority.

Otherwise, you may have to accept that the situation is imperfect and move on. I understand this isn’t always easy, but it is often a good choice. Perhaps you could join the committee to have a greater influence on future decisions.

Lastly, you state that the costs of your levies are ‘ridiculous’. It’s always interesting to hear comments like this as they imply there is a right amount for levies or that levies are being spent on unnecessary expenses. If you feel your levies are high, that’s fine, but I recommend you look through the budget and find areas to cut back. More often than not, most body corporate expenses are non-discretionary costs that the body corporate is obligated to pay. Then, the discretionary costs will contribute to the quality of your scheme’s environment and, therefore, the property’s value. Good husbandry of a site can ensure that funds are spent efficiently, and not all schemes do this. Usually, it is much easier to complain about high costs than to bring them down.

There is an excellent article on expenditure outside budgets from Grace Lawyers that I often send out to people with this type of question, but it is well worth a read. It’s a clear-headed analysis for anyone with an interest in body corporate affairs: If it’s not budgeted for, can the committee spend on it? – Grace Lawyers

William Marquand Tower Body Corporate E: willmarquand@towerbodycorporate.com.au P: 07 5609 4924

This post appears in Strata News #705.

Question: In our small block of townhouses with limited amenities, our levies have doubled over the past three years. How do we bring the levies back to a reasonable amount?

Our block of 8 townhouses on the Sunshine Coast has no lifts, no pool and only a very small common area. When I purchased the townhouse 3 years ago, the body corporate levies were $3,200 per annum. Levies have now risen to $6,400 per year, which I think is outrageous. I feel that the committee didn’t do a very good job of forecasting expenses in the 10 year plan. How do we bringing the levies back to a reasonable amount?

Answer: Get involved with the body corporate process by joining the committee.

At the AGM, there are motions to approve the admin and sinking fund levies for the next twelve months. Owners can vote yes, no or abstain to those motions, so you are not obliged to accept what has been proposed. However, the budget has usually been established by the committee and the body corporate manager to reflect the needs of the body corporate.

So, if you are voting no, my question to owners is always what do they think would be a suitable budget that the body corporate could pass to ensure it meets all of its obligations. This isn’t an easy question to answer as the obligations are hard to ignore and must be accounted for.

As such, my suggestion to owners who think the levies are too high is to get involved with the body corporate process by joining the committee. From there, you can help review costs and if you find that they can be cut back, institute policies to do this. The review can be line item by line item – get a copy of the budget and expenditure for last year and ask whether the service attributed to each cost is required or optional. Could the service be done by owners instead of paying a professional? Are you paying for contracts that have risen above market value over time? Could these be renegotiated?

Most body corporates are able to make some cuts for items that haven’t been changed for a while simply because no one has asked the question. However, don’t be surprised if it is difficult to significantly reduce the total. You say your costs have risen substantially, but presumably, there must be a reason for this. Perhaps your insurance has increased or works are required around the property. If that’s the case, the higher fees may be needed and possibly mandatory. Talk to the current committee members and see what they say but if there is a rationale for why costs have increased, it may not be a bad thing.

William Marquand Tower Body Corporate E: willmarquand@towerbodycorporate.com.au P: 07 5609 4924

This post appears in Strata News #697.

Question: Our body corporate administration fund contributions for a year exceed actual outgoings. Is the excess refunded to the owners or carried forward?

Answer: The money is carried forward.

The money is carried forward, then if you have surplus funds you can take that into account in your next budgeting period. The funds could be saved for future expenditure or they could be used for payments in that period allowing the budget to be lowered. This effectively returns the funds to the owners in the form of lower levies.

William Marquand Tower Body Corporate E: willmarquand@towerbodycorporate.com.au P: 07 5609 4924

This post appears in Strata News #666.

Question: Can the body corporate committee ask for a special levy for multiple urgent water ingress building repairs without obtaining a firm quote?

Can the body corporate committee ask for a special levy for multiple urgent water ingress building repairs without obtaining a firm quote?

Background: Can we ask for $500k at our AGM to repair windows, guttering, roofing, waterproofing membranes etc which we’ve found have not been built to standard initially? Total works will be more, but we need this asap to get started prior to the wet season and getting quotes and going to EGM will lose valuable time.

Answer: A special levy doesn’t have to be linked to a specific invoice or expense.

A special levy doesn’t have to be linked to a specific invoice or expense. Indeed, it’s fairly common to have levies raised to restore liquidity if there is a deficit in the admin or sinking funds or to help set aside money for a future major project.

However, urgent levies do tend to be linked to specific expenses or at least issues – that’s why they are urgent as the money is needed for something now. If you are just asking for a general increase in liquidity – and $500k is quite a bit of liquidity – you can reasonably expect a lot of questions back about why the money is required and how it will be spent. If that is not clear it is quite possible that the proposal to raise funds will be rejected. People like to know what they are paying for.

In that context then, I would recommend that any proposals you do put to owners are supported with a clear plan and some evidence that you have sought costings and advice to see where you stand. If you can demonstrate what is required and why owners are more likely to provide a positive response.

William Marquand Tower Body Corporate E: willmarquand@towerbodycorporate.com.au P: 07 5609 4924

This post appears in the November 2022 edition of The QLD Strata Magazine.

Question: We have a large common property expense of $1-1.5 million coming up within 12 months. If we hold an event and fundraise for some of the funds, how do we distribute this money to lot owners?

We have a large common property expense of $1-1.5 million coming up within 12 months.

We are actively looking at ways to save money and generate revenue to offset this cost for owners. If we raise money by holding an event that generates $100K+, what’s the most effective way to use the money e.g. give grants to owners, pay the supplier directly etc and what type of legal entity should we use to accept and hold the revenue?

Answer: A Body Corporate can try to minimise the cost of expenditure for owners, for example by good process including tendering and negotiation, but what it cannot do is engage in ‘fundraising’ to pay for a Body Corporate expense.

Given the money involved, this is a question that deserves legal advice. The Body Corporate should obtain that advice. In general terms, the Body Corporate and Community Management Act 1997 has one way, and only one way, for Body Corporate expenses to be paid, by Bodies Corporate – through contributions levied on lot owners.

Bodies Corporate are specifically prohibited from conducting business. A Body Corporate can ‘engage in business activities to the extent necessary for properly carrying out its functions’ and it can also invest funds not immediately required in the same ways that a trustee may invest funds.

What is deeply concerning about this question is that those fundamentals are being ignored. Yes, a Body Corporate can try to minimise the cost of expenditure for owners, for example by good process including tendering and negotiation, but what it cannot do is engage in ‘fundraising’ to pay for a Body Corporate expense, other than through the method the Act mandates; i.e. raising contributions.  

An example of a Body Corporate engaging in business activity, to properly carry out its functions is costs recovery for an LPG charge, for LPG resupplied by a Body Corporate; for example for gas hot water heaters in each lot. In that instance, the Body Corporate can work out its supply costs and even amortised costs to replace the supply network so that those charges can be ‘user pays’. That ‘business function’ is however circumscribed by the restriction in section 210(3) of the Standard Module, that the Body Corporate’s administrative costs cannot be passed on to the user.

Finally, there is a long line of Adjudicators’ decisions which deal with windfall gains and surpluses. Typically excess funds received as contributions have to be paid back. Unscheduled, but necessary expenditures can also soak those funds up. Actively trying to generate a surplus is a big ‘no-no’. Using an alter ego for the Body Corporate is fraught. There are active cases in Queensland where such alter egos have, for example, been used to get around the restriction in the Act that a Body Corporate cannot own a lot in its own Community Titles Scheme. The best answer to this question then is ‘get expert legal advice’!

Michael Kleinschmidt Bugden Allen Graham Lawyers E: michael.kleinschmidt@bagl.com.au P: 07 5406 1280

This post appears in Strata News #592.

Question: Our body corporate needs to carry out remedial works and additional funds from owners are needed. Is the total amount divided by number or size of lots?

Our body corporate is authorising remedial works and maintenance and requires additional funds from owners due to not enough funds in the sinking fund. Is the amount required divided equally between the number of units OR should the amount be divided by the size of the units eg 1 bedroom and 2 bedroom etc?

Answer: The total should be divided by the unit entitlements ascribed to each lot.

The total should be divided by the unit entitlements ascribed to each lot. Effectively this is the second method you are suggesting. You can check the entitlements on your CMS and if you have any questions on the split you should check with your body corporate manager.

William Marquand Tower Body Corporate E: willmarquand@towerbodycorporate.com.au P: 07 5609 4924

This post appears in Strata News #516.

Question: Our levies have been increased substantially to cover a deficit from a few years ago. Can the body corporate increase the levies by a large amount?

Our AGM was in February 2020. 4 out of the 10 owners agreed to increase our Body Corporate fees. From December 2019 to June 2020 they decided to increase our fees by $500. We now pay $2044 every 6 months. They say the increase was to recover a deficit of $2000 from 2-3 years ago. The other owners are angry at this. We have no lifts, no pool, no tennis court just 10 townhouses.

Can the body corporate increase the levies this much?

Answer: There is no cap or limit on what the body corporate can approve but the levies are based on a forecasted budget.

The body corporate (through the owners) sets its own levies at general meeting. There is no cap or limit on what the body corporate can approve but the levies are based on a forecasted budget.

It may well be that only 4 owners approved the levy, but what also matters is how many owners voted against the levy. There would need to be at least 4 votes against the levy otherwise it is properly approved.

Bodies corporate aren’t run to make a surplus – so it is rare that things are over-budgeted for. They are normally run on fairly slim margins.

Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753 W: https://www.mahoneys.com.au/

This post appears in Strata News #375.

Question: Can strata lot owners refuse a levy increase proposed by new body corporate managers if we do not feel the increase is warranted?

Can strata lot owners object to a body corporate fee increase if we do not feel the increase is warranted? Our body corporate changed body corporate managers and the new strata managers are now intending to increase the strata fees.

Answer: If an owner disputes the levies then they have rights to do so by voting against the budget and levy at the general meeting.

I think the first thing to remember is that the strata manager is not increasing their fees – the levies are proposed by the committee and approved by owners at the general meeting. The strata manager will normally provide a recommendation to the committee based on the anticipated expenditure. With increases like this, it normally indicates that the prior years were under-budgeted and now that needs to be made up for.

If an owner disputes the levies then they have rights to do so by voting against the budget and levy at the general meeting. It can then be challenged in the Commissioner’s Office but you would need to show that the budgeted expenditure is not a reasonable estimate of the costs to be incurred by the body corporate as opposed to simply arguing about them being increased.

Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753 W: https://www.mahoneys.com.au/

This post appears in Strata News #252.

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