What are Special Levies?
Special Levies are charged over and above normal Strata Levies and are raised when a major unexpected repair needs urgent action of or if something needs to be factored into the maintenance of a property for a future date.
Apartment owners pay Strata Levies which are based on their proportionate Unit share in the building. These are split into Sinking Funds (to cover Maintenance Issues) and Admin Funds (to cover Strata Management, correspondence etc).
A special Levy is generally struck when the cost of the required repair exceeds the funds available or so severely depletes the Sinking Fund that an increased contribution is required from all owners to cover the additional expense.
How are they approved?
Normally the Strata covering the building will convene an EGM (Extraordinary General Meeting ) where costs for the intended repairs will be discussed. Quotes for repairs will be presented and hopefully agreement reached on the best option.
Are Special Levies common?
Given the spate of defective buildings we have seen in Sydney recently (Opal Tower and Mascot Tower being classic examples), they are becoming more common. Generally with new Buildings there is Building Insurance for a total of 7 years, but many developers, upon completion of a building, wind up their company and ‘phoenix ‘somewhere else under a new name to avoid having to cover issues which eventuate during this and subsequent periods.
A Building Commissioner has been appointed by the NSW Govt to police building standards for both old and new buildings and ensure that properties live up to expectation but this role is in its infancy and we are yet to see how far-reaching or effective the Commissioner’s powers will be. Prosecutions may yet come.
Sometimes they cannot be avoided. Buildings age and major remedial or just modernising works might be necessary. What is most important is being aware early.
I’m an investor, I live overseas, how do I hear about these levies?
Your Property Manager should be sending you all correspondence regarding the property and issues being considered. It is recommended if you live overseas that you have a Proxy to vote on your behalf should issues of consequence be considered so your vote matters and you have a say in proceedings. Generally there are processes which are followed: problem identified, owners advised of the issue, EGM arranged, Levy struck and all advised thereafter.
Your Property Manager deals with correspondence from Strata daily for all the apartments he or she manages. They are not in a position to advise you on specific building issues other than how they might impact your apartment and the amenity of your tenant. Their responsibility on receipt is to forward any correspondence to their owners and it is the owners who need to check what if there are issues for discussion, problems identified or levy increases planned.
New Purchasers in Existing Buildings
It is imperative that for all intending to purchase in existing, or second hand buildings, that the most recent Strata Minutes are checked as any intended Special Levies or issues of consequence which have been identified will be shown here. Your solicitor will normally request a Strata Report prior to committing you to sign a contract or pay any deposits or at least during any cooling off period. If you are unaware or have not a been advised of outstanding financial issues relating to your apartment you may find yourself committing to large expenditure over and above the purchase price, stamp duty and standard levies you originally anticipated paying.
If the Sales Agent is aware of an issue, must they disclose it?
Caveat Emptor, or Buyer Beware, is no longer on the statutes. If an agent is aware of any issues which may impact on a potential purchaser going through with a purchase (second hand house or apartment) they are by law obliged to advise this to the interested party. This may include a Development Application for an adjoining property, a violent crime which may have been previously committed in the premises, any structural damage, intended major works with relevant Special Levies, etc.
