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SA: Q&A Strata Fee Increases and Unit Entitlements

The LookUpStrata Team
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SA lot owners are wondering why their levies have increased. Tony Johnson, Stratarama answers their queries.

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Question: Is it compulsory for a SA community corporation to have a 10 year sinking fund plan?

Answer: There is no legislative requirement for a 10-15 year type sinking fund plan in South Australia.

For this one, my understanding is as follows:

The Community Titles Act 1996 (SA), under section 116 states the community corporation must establish an administrative fund and a sinking fund. However, there is no legislative requirement for a 10-15 year type sinking fund plan in South Australia.

It’s worth mentioning in many other states it is mandatory and should be a serious consideration for the community to engage a suitably qualified professional to ensure the future capital expenditure needs of the community are met.

Zac Gleeson GQS E: zac@gqs.com.au P: 0419 755 896

This post appears in Strata News #644.

Question: Is it mandatory for Strata in SA for 2 units or more to have a sinking fund?

Answer: The requirement is for a 3 year Sinking Fund Budget for strata corporations of 7-20 lots and a 5 year sinking fund budget for corporations with more than 20.

Dakota Panetta Solutions in Engineering E: dakotap@solutionsinengineering.com P: 1300 136 036

This post appears in Strata News #600.

Question: When should a special levy be raised? Only in urgent circumstances?

Answer: If you have accounts and no money, you need to raise a special levy.

The strata corporations and community corporations are responsible for paying their accounts. So basically, if you have accounts and no money, you need to raise a special levy. Obviously, budgeting for your corporation is the best way to do it. If you know that you’ve got to do large maintenance in the future, I would definitely be suggesting raising a sinking fund or increasing a sinking fund to help cover those sorts of fees. Raising levies unfortunately, at times it is necessary, and a corporation has the power to raise the money to cover their accounts. The committee has the power to authorise those levies.

In some cases, if your strata managers gets a bill and it’s for your insurance or your water and there’s no money, there’s just no way around it. A levy needs to be raised.

I wouldn’t set up your corporation just to permanently agree to pay special levies for any unbudgeted items because plumbing issues happen all the time, electrical issues happen all the time, insurance claims can happen, and you might have a large excess that hasn’t been budgeted for. I’m sure, unit owners would prefer to know what’s coming every year as opposed to just getting letters and emails from the strata manager say three times a year with an extra levy due. It’s really important to spend time with your strata manager on your budget.

Keeping the common property in a good state of repair

Neglecting your common property will only cost you more. I’ve had groups in the past where I’ve taken over management and they’ve advised me they need to do major works. In this group the major works were estimated to costs about $100,000. They agreed to raise the money over the next three years. We just carried out the work for $185,000. So they didn’t call a special levy because they wanted to save for it, but in the end they ended up spending so much more money three years later due to deterioration and increased costs. You have to weigh this up as well.

The best time I find to set up a sinking fund for unit owners who have been reluctant over the years is just after you’ve carried out large maintenance and had to pay a special levy for your sinking fund for maintenance or painting. I try and break it down over a 10 year period, then per quarter. If the amount is still too large, I would at least try and get 50% of that paid every quarter, then each year you can just add 5 or 10 dollars to it. Owners don’t really notice or feel that extra $5 a quarter when you introduce it each year. That’s the best way to do it once they have been hit with a special levy and they realised that they should pre plan.

What happens to the sinking fund?

A lot of unit owners are worried that if they’re going to sell what happens to the sinking fund. Unfortunately, it stays in the account, you can’t get it back. However, I would be a highlighting to your sales agent that in so many years we need to do this much work and the money’s there. The new unit owner isn’t going to have to pay for it. So try and use it as a selling tactic as well.

There’s no reference in the STA that levies can only be raised in urgent circumstances. The corporation may raise funds as it thinks necessary, including reserved funds for future expenditure. It’s just a simple ordinary resolution. That’s section 27 of the strata titles act.

Carrie McInerney Horner Management E: carrie@hornermanagement.com.au P: 08 8234 5777

This post appears in Strata News #505.

Question: I have a larger unit entitlement and therefore I pay higher strata fees. Recently it was voted that all units need a new roof. Apparently I have to pay extra for the roof due to my lot entitlement. Is this correct?

My unit is one of 17. My unit entitlement is more and thus I pay higher strata fees than the other units. 

Recently it was voted that all units need a new roof. I have to pay extra for the roof due to my lot entitlement. 

From what I have read the entitlement is for annual fees not for special levies. It was voted at the AGM that I would pay more. Can you please help me?

Answer: All Levies/all funds raised for a Strata Corporation are raised based on unit entitlement.

All Levies/all funds raised for a Strata Corporation are raised based on unit entitlement. This is because there is a real or perceived higher value to this unit.

All expenditure will always be paid out from the pool of funds, raised in accordance to this entitlement basis.

Tony Johnson Stratarama SCA (SA) Strata Community Manager of the Year 2018, 2017 & 2016 E: Tony@stratarama.com.au

This post appears in Strata News #392.

Question: Why did my strata levies go up over the last two months by over $50 per quarter?

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Answer: Presumably at the last AGM the group determined that there were not enough funds being raised and chose to raise more.

The short answer is we don’t know why. It depends on what the group agreed to but presumably at the last AGM the group determined that there were not enough funds being raised and chose to raise more funds, whether that be for future projects, a shortage of funds, or simply rising costs. The minutes of the AGM will point you in the right direction.

Is your building self managed, professionally managed, when was the AGM, do they have the minutes/ did you attend?

Tony Johnson Stratarama SCA (SA) Strata Community Manager of the Year 2018, 2017 & 2016 E: Tony@stratarama.com.au

This post appears in Strata News #392.

Have a question about why your levies have increased or something to add to the article? Leave a comment below.

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This article is not intended to be personal advice and you should not rely on it as a substitute for any form of advice.

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