Understanding Levies and Building Maintenance

If you own an apartment, you will almost certainly be familiar with the word levies.

You receive a notice telling you how much you need to pay, when it is due and perhaps how it compares with previous years.

It can be tempting to look at your levy simply as another cost of owning an apartment.

But there is a much more important way to think about it.

Your strata levies are your contribution towards running, maintaining and protecting the shared property that you own collectively with your fellow apartment owners.

Understanding where that money goes – and why adequate funding matters – is an important part of being an informed apartment owner.

What Are Strata Levies?

Under South Australia’s strata legislation, a strata corporation can raise contributions from unit holders to fund the corporation’s responsibilities. These contributions are normally calculated according to the unit entitlement shown on the strata plan, unless the corporation determines another basis by unanimous resolution.

In everyday apartment language, these contributions are generally referred to as strata levies.

The money is used to meet the costs of operating and maintaining the strata scheme.

This can include things such as:

• Building insurance
• Cleaning
• Gardening
• Common electricity
• Lift maintenance
• Repairs
• Building maintenance
• Professional services
• Strata management
• Fire safety systems
• Common-area services
• Planned capital works
• Other expenses associated with the corporation

The exact expenses will vary from building to building.

Why Do Apartment Owners Have to Pay Levies?

The simple answer is that shared property has shared costs.

If you owned a standalone house, you would be responsible for maintaining your roof, gutters, external areas, driveway, gardens and other parts of your property.

In an apartment building, many of those responsibilities are shared.

The strata corporation has responsibility for administering and maintaining the common property for the benefit of unit holders.

Owners therefore contribute towards those costs collectively.

Your levy is not simply paying for something that belongs to somebody else.

You are contributing towards the management and maintenance of property in which you have a collective interest.

What Do Levies Actually Pay For?

Every building is different.

A small apartment building with limited common property may have very different expenses from a large high-rise development with lifts, extensive common areas, gardens, car parking, security systems and other facilities.

Your levies may help pay for:

Building Insurance

Insurance can be one of the largest expenses for an apartment corporation.

The corporation needs appropriate insurance for the building and common property in accordance with the applicable requirements.

Cleaning

Common areas such as foyers, corridors, stairways, lifts and other shared areas need regular cleaning.

Gardening and Grounds Maintenance

Where a building has gardens, lawns or landscaped common property, these areas require ongoing care.

Lift Maintenance

For buildings with lifts, regular servicing and maintenance are essential.

Lift repairs and major refurbishment can also represent significant future expenditure.

Repairs and Maintenance

Roofs, gutters, waterproofing, external surfaces, plumbing infrastructure, electrical systems and other common property all require maintenance over time.

Professional Services

A corporation may incur costs for accounting, legal advice, building inspections, engineering advice, insurance services and other professional assistance.

Strata Management

Where a professional strata manager is appointed, the corporation will incur management fees for the services provided.

Major Building Works

Some expenditure is relatively predictable.

Other expenditure can be substantial and occur only periodically.

External painting, roof replacement, waterproofing, concrete repairs, lift refurbishment and other major projects can require significant funding.

This is why responsible financial planning is so important.

Are High Levies Bad?

Not necessarily.

A higher levy does not automatically mean a building is poorly managed.

A building with lifts, extensive common property, older infrastructure and significant maintenance requirements will naturally have different costs from a small, newer building.

Similarly, a very low levy does not automatically mean a building is being managed efficiently.

The more useful question is:

Are the levies appropriate for the building’s actual needs?

A building needs enough money to pay its bills today while also preparing for the expenditure it is likely to face in the future.

The Danger of Keeping Levies Too Low

Nobody likes paying more than necessary.

However, keeping levies artificially low can simply postpone expenditure rather than eliminate it.

Imagine a building where the roof is approaching the end of its useful life.

If owners decide to keep levies as low as possible and no money is set aside for the eventual work, the building may eventually face a substantial financial problem.

The work will still need to be done.

The money will still need to be found.

The difference is that owners may then have to deal with a large additional contribution or other funding arrangement at short notice.

Good financial management means planning for the future rather than simply minimising today’s costs.

What Is a Sinking Fund?

Apartment owners will often hear the term sinking fund.

A sinking fund is commonly associated with money set aside for longer-term maintenance and major expenditure.

South Australian guidance distinguishes between recurrent costs that occur on an ongoing basis and costs associated with longer-term maintenance of the scheme, often referred to as a sinking fund.

The purpose is essentially to help a corporation prepare financially for significant future expenditure.

For example, a building may eventually require:

• External painting
• Roof work
• Waterproofing
• Concrete repairs
• Lift refurbishment
• Replacement of building infrastructure
• Major common-area improvements

These projects can cost considerably more than the routine expenses of running the building.

Planning ahead gives owners the opportunity to spread those costs over time rather than constantly reacting to major expenditure when it arises.

Preventative Maintenance Saves Money

One of the most important principles of good building management is preventative maintenance.

Small problems can become much larger problems when they are ignored.

A minor roof leak can become extensive water damage.

A small waterproofing problem can lead to deterioration of surrounding building materials.

Blocked gutters can contribute to water damage.

Deteriorating concrete can become a significant structural issue if it is not addressed.

A maintenance program should therefore not simply respond to things that have already failed.

It should identify potential problems before they become emergencies.

Why Building Inspections Matter

Regular inspections can help identify maintenance issues before they become major problems.

Depending on the building, professional inspections may be appropriate for areas such as:

• Roofs
• External walls
• Balconies
• Concrete
• Waterproofing
• Fire safety systems
• Electrical infrastructure
• Plumbing
• Lifts
• Common areas

The appropriate inspection program will depend on the age, design and condition of the building.

The important principle is that maintenance should be planned rather than purely reactive.

Who Is Responsible for Maintenance?

This is an area that can sometimes cause confusion.

The strata corporation is responsible for administering and maintaining common property.

Individual owners also have responsibilities concerning the maintenance and repair of their own units, depending on the legislation and the corporation’s articles.

The precise responsibility can depend on the particular strata plan, the location of the item and the applicable rules.

That means it is not always as simple as saying:

“It’s inside my apartment, so it’s mine.”

Or:

“It’s outside my apartment, so it’s the corporation’s responsibility.”

The strata plan and relevant documentation should be checked when responsibility is unclear.

What About Roofs and Gutters?

Roofs and gutters are a good example of why understanding common property matters.

South Australian Legal Services Commission guidance identifies roofs and gutters as common property in the strata context and explains that the corporation remains responsible for repairs even where owners may agree to undertake certain maintenance themselves to reduce costs.

A regular gutter-cleaning program, for example, can be a relatively straightforward preventative maintenance measure.

Failing to maintain gutters can contribute to more significant problems.

Sometimes relatively small maintenance expenses can help prevent much larger repair bills.

What Happens If an Owner Doesn’t Maintain Their Apartment?

The strata corporation also has powers concerning maintenance and repair of individual units.

Where the corporation’s articles impose maintenance obligations on an owner, the corporation can require necessary work to be carried out in certain circumstances.

South Australian law also provides mechanisms allowing the corporation to arrange work where an owner fails to comply with a maintenance requirement, with the owner potentially liable for the reasonable cost of work undertaken.

This is another reason owners should understand the responsibilities that come with apartment ownership.

What Happens If Levies Aren’t Paid?

Levies are not optional.

Where contributions are properly raised, an unpaid contribution can be recovered as a debt owed to the corporation. The corporation may also charge interest on overdue contributions in accordance with the legislation and regulations.

This is important because an individual owner’s failure to pay their contribution can ultimately affect the corporation’s ability to meet its financial obligations.

The building still needs its insurance.

The cleaner still needs to be paid.

The lift still needs servicing.

Repairs still need to be undertaken.

The financial obligations of the corporation don’t disappear simply because some contributions have not been paid.

Why Every Owner Should Care About the Building’s Finances

It is easy to think:

“I always pay my levies, so the finances aren’t my concern.”

But the financial health of the corporation is every owner’s concern.

Owners collectively have responsibility for the corporation’s liabilities, and the financial position of the corporation can affect future levies, maintenance decisions and major projects. South Australian guidance notes that unit holders are guarantors of their corporation’s liabilities.

That makes financial transparency and responsible budgeting extremely important.

What Should Owners Look At?

Apartment owners should take an interest in their corporation’s financial information.

Look at:

• Current income and expenditure
• Outstanding contributions
• Insurance costs
• Maintenance expenditure
• Major upcoming projects
• Contracts
• Professional fees
• Available funds
• Planned future expenditure

Ask questions when something doesn’t make sense.

Good financial management is not about questioning every dollar spent.

It is about understanding why money is being spent and whether the building is adequately prepared for the future.

What Should You Ask at Your AGM?

The Annual General Meeting is an excellent opportunity to ask questions about levies and maintenance.

For example:

What major maintenance is expected over the next five years?

Do we have sufficient funds to meet that expenditure?

Are there any significant building issues currently being investigated?

When was the roof last inspected?

Are the gutters being maintained regularly?

Are there any major insurance claims or issues?

Are our current levies sufficient for the building’s needs?

Are there contracts coming up for renewal?

Are any major works being considered?

These aren’t difficult questions.

They are sensible questions for anyone with a significant financial investment in a building.

A Well-Maintained Building Benefits Everyone

Good maintenance isn’t simply about keeping the building looking attractive.

It can contribute to:

• Safety
• Building longevity
• Financial stability
• Resident satisfaction
• Reduced emergency repairs
• Better planning
• Protection of owners’ investments

A well-maintained building is also generally a more attractive place to live.

And when owners eventually decide to sell, the condition and reputation of the wider building can be relevant to prospective purchasers.

Maintenance Should Be Planned, Not Just Reactive

One of the strongest indicators of good building management is forward planning.

Instead of waiting until something fails, responsible corporations should consider:

What will this building need next year?

What will it need in five years?

What will it need in ten years?

No one can predict every future expense.

But a corporation can identify many predictable maintenance requirements and plan accordingly.

That is where good budgeting, regular inspections and appropriate reserve funds become so important.

Levies Are an Investment in Your Building

Perhaps the most useful way to think about strata levies is this:

Your levies help maintain the property you own collectively with your fellow owners.

They fund the insurance, maintenance, services and other responsibilities necessary to keep the building operating.

They also provide an opportunity to plan for the future.

The objective shouldn’t simply be to have the lowest possible levies.

The objective should be to have responsibly calculated levies that reflect the real needs of the building.

The Role of Apartment Owners

A strata corporation is made up of its owners.

That means owners have an important role to play.

Attend your AGM.

Read the financial reports.

Ask questions.

Understand the maintenance requirements of your building.

Take an interest in long-term planning.

If you are prepared to contribute your time, consider joining the management committee.

Good apartment buildings don’t happen by accident.

They depend on owners who are willing to take an interest in their shared property.

The Adelaide Apartment Owners Association

The Adelaide Apartment Owners Association believes that informed apartment owners are better equipped to participate in the management of their buildings and advocate for issues affecting apartment living.

AAOA provides a collective voice for apartment owners in Adelaide and encourages owners to become informed, involved and engaged in the future of apartment living.

Understanding levies and building maintenance is just one part of becoming a more informed apartment owner.

Know where your money is going. Understand your building’s needs. Ask the questions. And have your voice heard.

Join AAOA

If you are an apartment owner in Adelaide, we invite you to join the Adelaide Apartment Owners Association and become part of a growing collective voice for apartment owners.

Together, we can work towards better-informed owners, better-managed buildings and a stronger future for apartment living in Adelaide.

This article provides general information only and is not intended to constitute legal advice. Strata arrangements and individual circumstances can vary. Owners should refer to the legislation, their corporation’s rules and meeting documentation and obtain independent professional advice where appropriate.