BODY CORPORATE LEVY INCREASES LETTER FROM AN OWNER

I receive many emails from owners who are shocked at Body Corporate Levy increases at their buildings. The common theme is that they wonder whether they will be able to continue to live in their homes if the fees keep rising.

The latest Letter to the Editor from Jenny states ....
"As a result of the BC increase approved by the Attorney General last Sept our weekly BC fees increased from $110 p.wk to $140 p.wk. When talking to other unit owners in Surfers Paradise there seems to be a general opinion of not having an increase at all. Our BC has recently approved another increase of $10 p. wk to increase the Administration fees due to a works project underway in the building. That increase I can accept but an extra $30 oer week has certainly changed things financially for us. We have been owners here for just over 2 yrs & have seen our BC fees increase by approx $2000 per year. Do you have any advice regarding this? I did contact the Body Corporate Manager about it but was sent an email of totally confusing figures as to how the amounts were worked out. I'm not an accountant so this was useless. Do you know of any other buildings on the Coast that have incurred this sort of increase? Any advice would be hugely appreciated. I am going to visit other owners & get their opinions on this also. Regards Jenny"

In a further email she wrote ....
"....we have reached the opinion now that as much as we enjoy the lifestyle of high rise living it seems it's not going to be sustainable if BC fees can just continue to increase as they do. When we bought this apartment it was after many hrs of doing our  figures & at the time was affordable. However $2000 increase in just 2 years worries us as we now don't know what to expect in the future. We will probably consider selling & moving back into a more affordable life style which was not the plan but needs must."

The fact is that Body Corporate Levy increases in various communities is forcing many owners to reconsider their position in owning units. A combination of factors have resulted in the increases. Some owners are affected by the Levy Equalisation legislation. There is not much that can be done about that now apart from lobbying the Government to change the legislation yet again.

The original concept of setting levies was loosely based on the value and size of the units. The higher you go in an apartment building, the value of the apartment theoretically increased. Therefore, the developers felt that the levies should increase for higher floors. This particularly affected Penthouse owners who, in some cases, paid levies that were double those of owners of smaller ground or lower floor units.

The Penthouse owners argued that levies were purely for maintenance of the Common Property and should be the same for everyone. The recent legislation supports that argument.

Irrespective of whether the legislation is fair or not, owners like Jenny are coming to the conclusion that it is just not viable to continue to pay out crippling Body Corporate Levies. Add the levies to the spiralling Council and Water Rates and owners are wondering how they can afford to live in their homes. See my recent article.

The second factor in Body Corporate Levy increases is something that owners do have some control over. Committees, who represent owners, control spending and the budget. Committees are nearly always unpaid volunteers, many of whom have limited experience in managing substantial budgets. They are usually guided by their Body Corporate Manager and the time the Committee members are prepared to spend is often insufficient to what is needed to be able to monitor and manage a budget.

There are often areas in which cuts can be made in the budget but Committees are very reluctant to propose decreases in Body Corporate Levies. You rarely, if ever, hear of a Body Corporate that has proposed decreases to the Sinking and/or Administration fund. It is particularly difficult to curtail Body Corporate Levy increases in older buildings because maintenance costs usually increase as the buildings start to age. However, if units in Body Corporate Communities are going to continue to be a viable investment for owners, then Committees will have to do everything possible to put a hold on increases to levies.

The problem with that is that it takes time and some skill to be constantly monitoring the financial statements, obtaining quotes for alternative contractors, etc. Many Committee members are simply not prepared to be involved to that extent. I would love to see Committee members starting out the year with a goal of reducing the Body Corporate Levies by, say 5%, but the reality is that levies in Body Corporate communities seem to increase rather than decrease.

Meanwhile, other charges like Council and Water Rates and Electricity continue to rise. For investors who place their apartments in holiday letting this is a recipe for disaster. Their investments become not much more than hefty tax deductions.

As far as Jenny is concerned, my only advice would be to keep appraised of the spending at her building, particularly by looking closely at the financial statements that are provided to all owners prior to AGM's. She should also talk to the Committee members and other owners and explain how the increases are affecting her position and the value of her investment.

Ultimately, owners are fairly apathetic about their investments and many don't get involved. They usually hoped for capital gain when they eventually sold their units but that is something that you can no longer rely on. If owners took the time to analyse the costs of owning their units against the actual value of the unit, many would realise that they have made a very poor investment and that it is better to move on.