In the event of a capital work cost surpassing the capabilities of the capital works fund, strata schemes may resort to a Special Levy. This financial mechanism involves distributing a one-off cost among the property owners within the scheme.
Why Special Levies arise?
Special levies are a financial recourse that strata schemes resort to when facing exceptional financial demands that the standard capital works fund cannot cover. These demands can emerge due to two primary scenarios:
- Inadequate Fund Accumulation: One reason behind the imposition of a special levy is the improper accumulation of funds by the Owner’s Corporation. If levies are not paid regularly or in full or are set too low by the owners, the capital works fund might not amass sufficient funds to address unforeseen or extensive maintenance needs.
- Deferred Maintenance: Neglecting proper maintenance can lead to further complications. When maintenance is delayed, the common property assets can deteriorate prematurely, necessitating significant replacements or repairs. In such cases, a special levy might be the only solution to rectify the situation.
How are special levies calculated?
Special levies are generally calculated across an appropriate timeframe and according to the lot entitlement of each lot owner. In cases where the expense is substantial, it might be distributed through periodic installments over a predetermined timeframe, facilitating more manageable payment arrangements.
How to avoid Special Levies?
The most effective strategy to prevent the need for special levies is conscientious adherence to your Capital Works Plan and its regular review. This document provides essential recommendations for suitable levies to accumulate adequate funds for ongoing maintenance and future projects. By following this plan diligently, strata schemes can mitigate the risk of financial surprises and maintain the building’s structural integrity.
Our team of registered quantity surveyors possesses the expertise to determine the most appropriate levies for your property, thereby enhancing the quality of life for the building’s residents and avoiding the need for special levies.