When done right, investing in property can be an effective way to build wealth and secure your financial future. With that in mind, it comes as no surprise that more and more Aussies are entering the game of property investment in a bid to diversify their portfolios and create new income streams and revenue. If you are someone who is thinking of purchasing investment property in a multi-unit development such as a townhouse, unit or apartment, chances are you’ll have heard about Body Corporate.
Body Corporate is an essential component to the smooth functioning of any strata property in which owners have joint ownership of common areas or facilities such as gyms, pools, shared driveways, car parks and more. As a property owner/investor, these benefits come at a cost known as Body Corporate fees or a strata levy. In today’s article, we dive into everything you need to know about Body Corporate fees — what the fees cover, how much you can expect to pay and everything in between. Read on to find out more.
What Is A Body Corporate?
Body Corporate is a legal entity that is created when land is subdivided and registered into apartments, townhouses, units and other multi-resident lots. Simply put, the Body Corporate is in charge of maintaining, managing and controlling common property on behalf of owners. These tasks can be handled autonomously or with the help of strata management in Melbourne. Do note that by purchasing a strata property, you (the owner) are automatically part of the Body Corporate for that complex, meaning you can have your say on any issues that may arise. On top of this, a treasurer, secretary and chairperson are usually elected, and these spots can be filled by any owner of a strata lot.
The Body Corporate is also responsible for calculating body corporate fees (strata levies) and resident payment schedule, more of which we will touch on in the next point.
What Are Body Corporate Fees?
Body Corporate fees are the costs associated with maintaining, repairing, and insuring your strata property and neighbouring lots within a shared complex. These fees are generally inclusive of building insurance, in addition to the costs of maintaining and upgrading common areas and shared facilities such as gyms, pools, garden spaces, driveways, and garage doors.
In terms of building insurance related fees, Body Corporate insurance covers damage and consequential damage to the building itself and all fixtures within the units. Do note that Body Corporate insurance does not cover normal wear and tear such as damage to carpets or paintwork within a unit — these responsibilities are solely the investor/landlord’s prerogative and should be discussed in-depth with tenants prior to leasing a property. It is also a good idea for owners renting out their properties to take out landlord insurance to cover the common risks associated with renting your property out.
What Do Body Corporate Fees Cover?
In Australia, there are three main types of body corporate fees* which cover:
Administration Levy – The administration levy is used to cover the day-to-day running of the complex (e.g. lawn maintenance, common water, common insurance etc).
General Purpose Sinking Fund Levy – The general purpose sinking fund levy is imposed to cover non-routine expenses such as major upgrades and restructuring. It usually accumulates in a separate fund and is done so that owners are not hit with any one-off large expense for major works.
Special Purpose Levy – This is a one-off levy for covering unexpected costs, such as major repairs or legal costs, if there is not enough available money from the annual fees to cover these expenses.
* Fees may vary slightly between the different states and territories.
As seen above, Body Corporate fees all upcoming expenses for the financial year, ranging from building insurance and maintaining common areas, to shared utilities, building works, and repairs. However, it is important to note that content insurance, council fees and utilities are not covered by your Body Corporate fees, so it is vital to weigh this up in your budget when considering investing in a strata title property.
What Affects/Influences Body Corporate Fees?
Body Corporate Fees differ from property to property and are influenced by a number of different factors, including:
- The size, structure and age of the building/complex;
- The number of facilities on site that require ongoing maintenance such as a pool, gym, sauna and gardens;
- The number of units you own within the complex;
- The fees charged by the body corporate for their management of the building; and
- The consideration of cost of repairs within the complex.
To calculate Body Corporate fees, the owners corporation estimates future costs and divides this cost over time by the number of units in the strata complex. The proposed budget is then presented during the Annual General Meeting, where owners have the opportunity to agree or disagree with the figure. If the majority of owners agree on the presented budget, the fees by each unit can then be calculated.
How Much Can I Expect To Pay For Body Corporate Fees?
As mentioned above, the amount you will have to pay for Body Corporate fees will differ based on a variety of different factors. On average, fees in Victoria are about $2000-$4000 per annum for apartments and around $1500 per annum for townhouses. However, these figures are subject to change, especially if major capital works are undertaken.
Depending on the rules of the Cody Corporate, fees can be due each month, each quarter or once a year. An annual fee may require a higher one-off payment, but will eliminate the stress of having to remember to make monthly payments. On the flipside, paying on a monthly basis may be a better financial decision as payments are divided into smaller chunks, but you will have to remain prudent to avoid any late payment fees.
Do Renters Pay Body Corporate Fees?
The short answer is no. Body Corporate fees must be paid for by the owner of the strata title. This means that owner occupiers and property investors who own strata properties have to pay body corporate fees. Renters do not pay body corporate fees, though property investors can factor some of these costs into the monthly rent charged on the property.
Other Costs To Consider
Lastly, it is vital to note that some Body Corporates may charge a penalty rate for late payment of fees, and in some cases, a lot owner could also lose their right to vote in the event of late payment. Additionally, owners should also be aware that there may be extra fees incurred on top of standard Body Corporate fees if:
- you request copies of registers/records from the body corporate;
- you request an owners corporation certificate or body corporate information certificate, for example, when preparing to sell your property; and
- the committee wishes to hold an additional meeting, outside of the standard AGM.
And there you have it — everything you need to know about Body Corporate fees as a property investor in Australia. If you are unsure about any Body Corporate costs associated with a strata property you are intending to purchase, always remember that records of past fees for the complex can be found in the property’s strata report for your reference.
Additionally, if you have any questions about the fees associated with your investment property, you are highly encouraged to consult with either the owners Committee or your strata management team. Have any questions? Be sure to leave them in the comments section below, and we’ll get back to you ASAP!