Understanding body corporate fees

A body corporate is a legal entity made up of the owners of individual lots in a strata-titled property. Owning a strata lot automatically makes you a part of the body corporate, allowing you to attend and have a say at the body corporate or strata committee meetings that help to decide the property’s future.

Some body corporates use a professional strata manager to help handle the responsibilities of looking after the property. These managers may help to organise strata committee meetings, insurance, maintenance, repairs, and any other necessary administration. 

Body corporate fees are regular fees that help to cover a strata property’s ongoing costs. This can include:

• Maintenance and upkeep of common areas
• Repair damage to common areas
• Insurance cover for buildings and common areas
• Shared utilities (in some cases, such as when there's only one water meter for the entire property)

Additionally, part of your strata fees typically go towards the property’s “sinking fund” – a pool of emergency cash kept in reserve in case of unknown emergencies, such as urgent building repairs. Maintaining a healthy balance in a sinking fund can be reassuring for property owners, as they’re less likely to need to pay special levies if disaster was to strike.

There are two main types of body corporate fees:

• Strata levies: Ongoing fees that cover the cost of maintaining the building.
• Special levies: Charged when required to cover the cost of emergency repairs and other unexpected expenses.

Strata levies are typically charged quarterly, though in some cases the body corporate and/or strata manager may make other arrangements.

Body corporate fees and strata fees only cover costs associated with a strata property’s physical structure and common areas, such as lobbies, stairwells, hallways, shared gardens etc. Repairs or maintenance of an individual strata lot will be the responsibility of its owner, and not the body corporate. For example, a small fire inside your apartment could damage your home’s contents, but leave the shared areas and structure untouched.

As well as paying your strata fees and your mortgage, you’ll also need to pay for your local council rates and your utilities, such as electricity, gas, water, phone and internet access. 

Strata property owners may also need to pay late fees if they don’t pay their body corporate fees on time. Fees may also be charged when requesting copies of documents, such as records, registers, and certificates

Additionally, if the building is looked after by a professional strata manager, they may also charge fees for their services. While these costs are often included as part of the regular body corporate fees, in some cases they may charge extra fees for certain services. 

The cost of strata fees can vary greatly based on a wide range of factors. Generally, larger strata properties with more features and benefits have higher body corporate fees than smaller properties with just the basics. For example, the strata fees for a unit in a block of eight flats with car spaces are likely to be much more affordable than the strata fees for an apartment complex with underground parking, elevators, a pool, a gym and tennis courts on site.

Your body corporate fees may also vary depending on the decisions of the strata manager and committee. For example, some strata committees choose to put extra money into the sinking fund each year, such as when it’s looking a little lean after paying for previous expenses. Others try to run things a little leaner, minimising the fees at the risk of potentially having to charge special levies if disaster strikes.

If you own a strata property as an investment, you may be able to claim some of your body corporate fees as a tax deduction. This is similar to how you can also claim maintenance costs for the property, landlord insurance, and interest on your mortgage, which could lead to your property becoming negatively geared. 

As there are financial risks associated with negative gearing, and penalties for making inappropriate tax deductions, it’s often worth consulting a financial adviser, tax accountant, and/or the ATO before making changes to your finances or tax strategy.

Strata levies and body corporate fees can be expensive, putting a significant hole in your budget if you’re not careful. However, as these fees go toward the upkeep of the strata property’s common areas, they can provide value.

Both owner occupiers and investors can benefit from keeping a strata property well-maintained, as both homeowners and tenants may appreciate access to the available facilities. Plus, maintaining the building can help to better preserve and potentially grow its value, which could be important if you plan to sell or refinance in the future.

It's also important to note that new buyers conducting their due diligence before buying a strata property will often request a strata report, which includes details of the property’s finances. This could give some buyers second thoughts about buying a lot in the property if they discover potential risks, such as a low sinking fund balance or inadequate insurance. First home buyers may be especially vulnerable to financial stress if they are hit with a special levy shortly after their purchase is complete.