Before you even think about buying a unit or an apartment in a complex, it’s important to understand your obligations surrounding body corporate fees. 

If you’ve been debating the purchase of a unit, townhouse or apartment, you’ve probably come across the term ‘strata title’. Unlike the individual land title that new home owners take possession of when they purchase a house on its own block of land, when you buy a property that is part of a strata title, not only do you own your unit or apartment, but you also get a share in the ownership of the common property and land the complex sits on. 

Shared ownership over the ‘common property’ includes things like the driveway, foyer and garden that everyone in the complex uses on a day to day basis. In turn, the common property is then managed by a legal entity. Depending on which state or territory the property is in and the type of scheme that property is organised under, this legal entity may be known as the owners corporation, body corporate, strata company or community corporation.

If you’re now – or soon to be – the proud owner of a property that is a part of a strata title, one of your obligations will be to pay regular body corporate fees. These fees are payable to the body corporate or strata company managing the property, which in turn enables them to take care of things such as insurance and maintenance of these mentioned common areas. If you are considering buying such a property, it’s important to know how these fees are calculated, and how much you’re obligated to front up. 

An Introduction To Body Corporate Fees

While the types of body corporate fees and rules surrounding them vary depending on your state or territory, in Victoria the types of body corporate fees usually apply depending on your type of unit, apartment or townhouse complex. 

Similar to rates, annual administration fund fees are the yearly charges that need to be paid to your owners corporation so that they are able to carry out general management and maintenance of common property. This includes shared utilities, repairing shared areas, insurance and general administration. Fees are based on each lot’s units of liability, such as each property owner’s share of the common property is usually determined by the size of their unit, or lot, in comparison to the size of all other units. Each year, the owners corporation manager will prepare a budget to cover all expected administration expenses, and the budget is then agreed to and adopted by owners at each Annual General Meeting.

In comparison, maintenance fund fees, or sinking fund levies, are used for longer-term maintenance.  Collecting an annual maintenance levy allows the owners corporation to accumulate funds for major works to be done at a predetermined time in the future. One such example of this is the replacement of the lifts in a building, which generally have an approximate lifespan of twenty to twenty five years. Replacement of the lifts in even a medium size tower complex, will cost several hundred thousand dollars. In larger buildings, the cost could add up to millions of dollars, which is why the fund is necessary for the longevity of the building. 

Other than the above annual fees, there is also a special fees provision that allows funding for unplanned or emergency costs, such as sudden repair work, legal costs, and even unforeseen improvement maintenance such as installing or replacing security intercom systems. While less common than the above, they may also be raised if there are insufficient funds in the administration or maintenance fund to cover unforeseen events and costs. 

Body corporate fees typically do not cover things like contents insurance, council rates, private maintenance or repairs on things like air conditioning installation, or any personal utility charges. 

If you’re weighing up the long term costs of purchasing a flat, unit, apartment or townhouse in a complex, then there are a number of factors that will determine how much you can expect to pay in body corporate fees. While these can include the size, structure and overall condition of the strata scheme, other variables used to calculate the fees include:

• Older buildings or complexes often require more types of maintenance and repair work, which can result in higher fees.
• The types of common areas offered by your body corporate will influence the price of your fees, as buildings with a pool or a gym tend to cost more in maintenance. 
• Remote controlled gates can be expensive to fix, so a property with this feature may attract higher body corporate fees. 
• The size of your property often reflects how much you pay. If you’re the owner of a three bedroom penthouse, expect to pay more than the owner of a studio in the same building. 
• The administration or management fees that the strata company or body corporate may charge in order to provide its services.

While the demand for inner city apartments close to universities in Melbourne has slumped thanks to restrictions on international students and tourists, it may also provide a golden opportunity for first home buyers or investors to think outside of the box. The latest Victorian State Government Budget has introduced a 50% reduction in stamp duty for new homes within Melbourne city, rising to a 100% waiver of duty for homes that have spent a year or more on the market. 

However, it’s still important to do your due diligence and check how much you can expect to pay for annual body corporate fees to ensure that your potential bargain really is a worthy investment in the long term.

Taking The Stress Out Of Property 

A completely free service, Emergency Services Property Advisors provide property advisor services to Police, Fire, Ambulance and S.E.S personnel and their families right across Victoria.

Luke and the team at ESPA are passionate about providing support to some of Australia’s most valued public servants, and aim to provide tangible real estate advice to those in stressful positions with crazy hours at no extra cost to them. Along with key industry insights, ESPA also works with a broad range of service providers linked to the real estate industry such as conveyancers, trades, legal practitioners and mortgage brokers.

If you are an emergency services worker looking to potentially buy or sell property now or in the future, please get in touch with Emergency Services Property Advisors today to discuss how we can turn your real estate dreams into reality, or call Luke directly on 0414 757 705.