This Q&A about Owners Corporation levy increases in Victoria has been supplied by Jane Giacobbe, Strata Reports Victoria.
Question: Our Owners Corporation levies have been increased substantially to pay for necessary maintenance. Is there a limit to how much levies can be increased by?
How much can Owners Corporation levy fees be increased by?
At our AGM at the end of 2018, the owners voted to increase the Owners Corporation levies by $125 per quarter / $500 per year. I didn’t vote for this increase because I felt it was unreasonable.
The understand the unit complex is getting old and needs maintenance and repair more than previously. However, is there a cap on the amount fees can be increased by?
The large increase has caused financial stress for some lot owners. Some lot owners have suggested they would rather be invoiced for repairs as they occur rather than pay the levy increase. Is this an option our Committee could consider?
Answer: The short answer is no …. there is no cap on the amount that your fees can be increased by.
This is a good question and one that a lot of people wonder about.
The short answer is no …. there is no cap on the amount that your fees can be increased by at a budget that is adopted at an annual general meeting.
There should, however, be an opportunity for all owners to have some input and discussion around the proposed increase before it is adopted.
Prior to the AGM, each owner should receive the proposed budget with the meeting agenda which should also provide an opportunity to review the proposed increase and reflect back on the previous year’s financial statements which include the expenses.
You have mentioned that your building is getting older and requiring more maintenance and repairs and this is where I feel obliged to put my “due diligence/duty of care” hat on and refer back to the responsibility that the owners corporation holds. The members of an owners corporation have the responsibility to repair and maintain the building including all common property. This is not only to retain the value of the building but also because neglect or poor maintenance can lead to serious damage or even safety issues.
If it is a prescribed owners corporation then, under the Owners Corporation Act 2006, they are required to have a maintenance plan prepared. However, if this is not a prescribed owners corporation then there is still a duty of care to think longterm about the ongoing maintenance and capital works for the building and should start to consider allowing for sufficient funds to be allocated in the sinking fund to prepare for those works.
By allowing for this in an annual budget and making sure that the appropriate increases are made once each year instead of unexpectantly adhoc through the year, this means that all owners can budget accordingly as they have a clear understanding of what is coming up and when it will be due and payable. It also means that value is being added to the building and each individual owner’s investment. This is because when prospective purchasers are looking at buying into an owners corporation they are more inclined to invest into one that has a healthy sinking fund and has placed importance on maintaining the building, not only now but into the future.
It is not attractive to a purchaser if an Owners Corporation is unable to demonstrate that a maintenance plan has been prepared or that there is a healthy sinking fund.
There is a risk that the new purchaser may have to pay unexpected special fees to cover repairs (or maintenance) that should have been allowed for at an earlier date or are due to lack of maintenance by the previous owners.
In summary, it does sound like your owners corporation are being very proactive. They seem to have recognised that the fees have not been sufficient for some time are finding that more repairs and maintenance are required. It is a very wise idea to address and allow for that now in the budget so that everyone is aware and can allow for it within their own financial circumstances.
I hope this has been helpful but I would be happy to elaborate further if required. Please note that this is just my interpretation and if you would like to obtain actual advice it would be a good idea to seek that from a specialised owners corporation lawyer.
Have a question about owners corporation levy increases in Victoria or something to add to the article? Leave a comment below.
This article is for reference purposes only and is not intended to be a comprehensive review of the developments in the law and practice or to cover all aspect of the subject matter. It does not constitute legal or other advice and should not be relied upon this way. Readers should take legal or other advice before applying the information containing in this publication.
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This post appears in Strata News #293