Understanding Strata Levies:
What Impacts Costs?

Strata levies are essential to property ownership in multi-unit complexes, funding everything from routine maintenance to major repairs. But what exactly determines how much you’ll pay?

Contrary to common misunderstanding, strata managers often have limited control over levy amounts. Two significant factors that heavily impact levies are building design; the architectural and engineering choices made during construction can greatly affect ongoing maintenance costs and, consequently, levy amounts.

Secondly a building’s history such as past maintenance practices, and financial decisions can influence current and future levy requirements.

Below are some of the key factors that influence your strata levies.

Building Design & Complexity

The architectural design of a strata property significantly influences levy costs, often in ways that prospective buyers might not immediately consider. Modern architectural trends frequently incorporate expensive materials and complex features that, while visually striking, can lead to substantially higher maintenance expenses.

For example, a building that has been designed in a way that prevents the ability for Council to access garbage, may have to pay for a private waste removal service, which will increase strata levies. Louvers, fins, and panels may help improve a building’s energy efficiency and provide a distinctive look. However, buildings with these features may require more frequent window cleaning to remove bird droppings, increasing maintenance costs.

Other design elements can also contribute to higher expenses:

• Extensive use of glass or other materials requiring specialised cleaning methods.
• Complex rooflines or facade designs that make access for maintenance more difficult.
• High-end finishes that need careful and costly upkeep.
• Intricate landscaping, green walls, rooftop gardens, or water features demanding regular attention.

Furthermore, apartment buildings typically adhere to minimum design and construction standards, resulting in structures that may require more frequent maintenance and higher operational costs over time. When developers choose to exceed these baseline requirements, and considers the life cycle costs of building systems and components during the design phase, opting for high-performance glazing and building facades, and energy-efficient plant and equipment, the resulting buildings have greater efficiency in day-to-day operations, leading to reduced long-term expenses for property owners and occupants.

Onsite Amenities

The presence of luxury amenities significantly affects your levies. Swimming pools, gyms, cinema rooms, and barbecue areas require ongoing maintenance and periodic upgrades. While these features enhance lifestyle and property value, they come at a cost – especially in smaller or medium-sized properties with limited economies of scale.

In larger complexes, additional staff, such as building managers, may be necessary to oversee these facilities. While this adds to overall costs, it can also contribute to better upkeep, enhanced safety, and improved compliance with regulations—factors that can positively impact property values in the long run.

Plant & Equipment

The machinery and systems within a strata property can significantly impact levies in ways not immediately apparent to residents. These essential components require regular maintenance and occasional expensive repairs or replacements. Car park turntables, car park ventilation systems, communication systems, air conditioning systems, and thermal energy plants are examples of equipment demanding specialised, and often costly maintenance.

Garbage chutes require consistent attention, typically needing quarterly maintenance and monthly cleaning. Resident misuse, such as disposing of furniture down the chute, can lead to expensive blockage repairs. The management of waste bins also adds to costs, especially in buildings where waste trucks cannot directly access the bins, requiring cleaners to transport them to accessible areas.

These behind-the-scenes operations contribute significantly to both the smooth running of a strata property and its maintenance costs. Educating residents about proper facility use can help minimise unnecessary repair costs, while regular preventative maintenance can help avoid costly breakdowns and extend equipment lifespan, potentially reducing long-term costs for owners.

The greatest opportunities for effective upgrades often lie in shared mechanical services. Cooling towers, car park ventilation systems, pool heating equipment, and air conditioning systems for common areas present significant potential for improvement in energy efficiency and operational cost savings.

Insurance

Building insurance often represents a substantial portion of annual strata levies. The more valuable the building, the higher the premium. However, it’s not just about the replacement value – your building’s claim history plays a crucial role, too. Multiple claims over the years can lead to higher premiums than properties with few or no claims.

Other factors influencing insurance costs include the breadth of coverage (e.g., machinery breakdown, loss of market value), unresolved defects, cladding, and any outstanding safety or compliance issues such as fire orders. Addressing these proactively can help keep premiums – and thus levies – in check.

Building Age

The age of your building may be a factor in determining levy costs, as older buildings may require expensive repairs such as balcony replacements, but it’s not as straightforward as “older equals more expensive.” While it’s true that aging buildings typically require more frequent repairs and may face major infrastructure replacements, a well-maintained older building can sometimes have lower levies than a poorly maintained newer one.

Building Condition

Buildings that have been consistently well-cared for throughout their lifespan, with regular upkeep and timely repairs, often avoid the sudden, large expenses that can send levies skyrocketing. The key is proactive maintenance which allows for better budget planning. Major expenses can be anticipated and budgeted for in advance, avoiding sudden levy increases that can strain residents’ finances.

Property Size

While larger properties inevitably have more common areas to maintain, they also benefit from economies of scale. With more unit owners to share the costs, individual contributions can sometimes be lower than in smaller complexes.

As an example: A swimming pool in a 100-unit complex might only cost each owner $5 per week. In contrast, a lift in an 18-unit building could cost each owner $300 annually for maintenance. This disparity explains why smaller complexes often forgo specific amenities – the per-unit cost becomes prohibitively expensive.

Utilities

Water and energy costs for common areas can significantly impact strata levies. If you’re building is older, the strata committee should consider sustainability upgrades such as replacing basement lighting with LEDs or investing in solar panels. As an example, a building with 32 units cut their electricity bills from over a thousand a quarter, to a couple of hundred a quarter, after replacing all their basement parking lights with sensor LEDs, their $7000 investment in a lighting upgrade paid itself off in only a few months.

There are plenty of grants and tools available on both local and federal levels to assist owners corporations with funding and assessments such as NABERS for Apartments and NSW Energy Savings Scheme. Fixing water leaks is another cost saving avenue. Look into Sydney Water’s Waterfix Strata.

Onsite Services

The staff required to keep your complex running smoothly contributes significantly to annual budgets. This can include landscapers, building managers, concierges, cleaners, security guards, and even loading dock managers in larger developments. In larger complexes, these costs are distributed among many owners, minimising individual impact. However, striking the right balance between necessary services and cost control becomes crucial for smaller properties.

Landscaping

While green spaces enhance property aesthetics and resident well-being, they also require ongoing maintenance that directly affects costs. For properties with lush lawns and elaborate gardens, regular upkeep is essential. This includes frequent mowing, pruning, fertilising, and often professional landscaping services. These recurring expenses can significantly contribute to overall strata levies, especially in smaller complexes where costs aren’t distributed across many units. Rooftop gardens and elevated green spaces, while attractive, introduce additional complexities and expenses.

Maintaining these areas requires specialised skills and equipment. Contractors must have working at heights qualifications and use safety gear such as harnesses. The use of boom lifts or other elevated work platforms further increases costs. These safety requirements and specialised equipment needs can substantially raise maintenance expenses compared to ground-level landscaping.

To manage these costs, some strata schemes opt for more budget-friendly landscaping solutions. Low-maintenance native plants, which are often better adapted to local climate conditions, can reduce the frequency and intensity of required care. Incorporating more paved areas or artificial turf in appropriate spaces can also help control ongoing maintenance expenses.

Financial Management

How your property is managed financially can have a profound impact on strata levies. Poor budgeting or careless spending can create financial ripples that owners feel for years. Before purchasing a strata property, it’s wise to review the financial records, examining past spending patterns, any strata loans and their terms and the current state of the owners corporation funds. This due diligence can provide valuable insights into the financial health of the complex and help you anticipate future levy trends.

Unpaid Contributions

If some owners fail to pay their strata levies on time, the entire strata scheme can create cash flow problems. This might lead to delayed maintenance, strata loans, or increasing levies for paying owners to cover the shortfall.

Contracts & Supplier

Effective management of contracts and supplier relationships is crucial for controlling strata levies. Poor negotiation or oversight can lead to overpaying for services or receiving substandard work requiring costly rectification. These inefficiencies directly increase costs for owners.

However, strategic approaches can optimise contract management and reduce expenses. Carefully thought-through service level agreements and long-term maintenance programs can provide significant cost savings by setting clear expectations and planning for future needs. Long-term service level agreements can particularly benefit owners corporations, with cost savings passed on in exchange for repetitive business.

Mixed-use schemes with Building Management Committees (BMCs) or multiple strata plans can benefit from using the same contractors across all buildings, potentially lowering strata levies through economies of scale.

Legal Costs

Poorly managed strata schemes often involve disputes between owners or external parties. These conflicts can result in hefty legal fees. Whether resolving internal disagreements, dealing with contractual issues, or defending against claims, legal expenses can quickly escalate. These costs are typically passed on to owners through increased levies, sometimes as special levies if the expense is substantial.

Compliance Issues

Maintaining building safety and compliance is a critical aspect of strata management that can significantly impact strata levies. Neglecting these responsibilities can lead to severe consequences, including fire orders or compliance notices from local authorities. These often require immediate, costly action to address safety concerns.

Fire safety measures are particularly stringent, with testing, maintenance, and replacement frequencies legislated as part of the Annual Fire Safety Statement (AFSS). Compliance with these mandated schedules is non-negotiable, creating ongoing costs that owners must bear. Unlike visible services such as cleaning, fire safety work occurs behind the scenes, making it challenging for owners to appreciate its value and necessity.

Complicating matters further, fire safety requirements can vary significantly between buildings, even those that appear identical. For instance, buildings in the same development can have different fire safety measures compared to other buildings in the same development, despite being built just months apart and having identical designs. This variation in requirements leads to substantial differences in fire safety costs between seemingly similar properties.

If a building has been poorly maintained over time, bringing it up to current code standards can require significant expenditure. This often results in higher regular levies or special levies to cover these unexpected costs. The evolving nature of fire safety regulations means that even well-maintained buildings may face periodic upgrades to meet new standards.

Conclusion

Strata levies are influenced by complex factors, from tangible elements like building design and amenities to less visible aspects such as financial management. Understanding these contributors can help current and prospective owners make informed decisions about their property investments and better anticipate their ongoing financial commitments in strata living. Proactive maintenance and compliance can help avoid costly interventions in the future, while also ensuring the safety and legal standing of the property.

Its also important to note that the strata committee signs off on budgets and levies, not strata managers. The role of the strata manager is to use their experience and data from similar projects to help project costs.

If you want to discuss how your strata levies are apportioned, please contact your Strata + manager.