What is a Special Levy in a Strata Scheme?

admin |  Posted on Tuesday, July 18th, 2017

Has your strata scheme proposed a special levy? If you’re unsure of what that means or why it’s necessary, read on for an explanation.

What is a special levy?

As an owner within the strata scheme you will be contributing towards an administrative fund and a capital works fund (formerly known as the sinking fund). The first covers regular maintenance, insurance and building services such as gardening and cleaning, while the second covers planned and urgent major works on the property such as roof replacements or repainting walls in common areas.

If a capital work cost or compliance cost arises that is too large for the capital works fund to cover, then the strata scheme may raise what is called a special levy. This is a one-off cost spread between the owners within the scheme. To go ahead, it must be drafted as a motion and placed on the agenda of an annual general meeting or other general meeting then voted in by an ordinary resolution – that is, approval by 50% or more of owners.

How are special levies calculated?

Special levies are generally calculated across an appropriate timeframe and according to the lot entitlement of each lot owner. Any one specific owner’s payments may be more or less than others depending on their lot entitlement. If the cost is set to be a large amount, this may be divided by regular instalments over a set timeframe to make it easier for payments to be made.

Do I need to pay special levies?

If the special levies have been voted in by your strata scheme, you will be responsible for your share of the costs. There may be payment options or plans available, so if you are having trouble making payments speak to your strata committee or manager.

Are there any alternative options?

Although it’s likely that a special levy is being proposed because there’s no alternative option, it is worth first considering whether the works could be claimable under strata insurance.

The repairs could also possibly be eligible for government rebates. NSW does have some incentives available for lighting and energy efficient projects which can be viewed at the Smart Blocks website.

The other option if some owners will struggle to make the payment is that the owners corporation could apply for a loan from a bank or financial institution to cover some or all of the cost. Obviously, interest payments need to be taken into account when considering this option.

Have more questions about special levies? Call us on (02) 9960 4713 for advice for strata schemes within the lower north shore extending to western Sydney.

CATEGORIES strata insurance