Demystifying body corporate fees
If you’re just venturing into the property ownership market, or if you’ve never purchased in a complex before, you may never have dealt with a body corporate. Even if you’ve heard of them, chances are you’ve never thought too hard about body corporate fees, or what they cover. While they can make a big difference to how much you pay, they’re a crucial part of making sure your property is maintained. But why do you pay those fees, and what do they provide for you?
What do they cover?
Rest assured that they do more than keep the lights on in the lobby. First and foremost, body corporate fees cover not only the building insurance for the managed properties (which means that you know everyone’s insurance will be up to date if something goes wrong!). They can also cover shared utilities (in some cases this can include internet and phones) as well as arranging building maintenance, works and repairs as necessary.
There can be a wide range in body corporate fees (from a few hundred dollars to tens of thousands), and how your fees are calculated (and how high they might be) will depend on a number of things. Some of the factors that might impact how much you pay are:
– The facilities or common areas. If there are large shared facilities (such as a gym or pool) or features that require a lot of maintenance (such as large or high maintenance grounds), chances are the fees will be higher. This can also include services such as having the gutters, the smoke alarms checked etc.
– The size of your part of the property. As fees are calculated for the entire complex sometimes, the footprint of the part you own will be factored into calculations. Someone with a three-bedroom apartment might pay higher fees than someone with a one-bedroom apartment. This also means that if you own more than one property in the complex, you’ll be paying higher fees.
– The structure and age of the building. A brand new building will cost less to maintain than an older one, and there may be uncommon features of your building that are more expensive to maintain. This can be anywhere from an expensive lobby, to timber floors, even down to the taps and brand of paint that needs to be used. Usually this money will be kept in a ‘sinking cost fund’ to pay for future repairs.
– The management fees the body corporate charges. Nobody wants to work for free, so your management body also charge for their time.
How are they calculated?
Ultimately, all of these maintenance, insurance, utility and management fees costs are added up and divided amongst the property owners, and whether this is done evenly between owners or linked to individual property size will depend on the group managing the fees.
Remember that sinking cost fund we mentioned above? Another major factor to consider is the sinking cost fund, the amount of money gathered to fix repairs. If your body corporate wants to keep a sizeable fund, that means that your fees will be higher. They might also be higher if they collect funds to help pay for dispute resolution (i.e. mediation fees), or if they have any other administrative stipulations.
What will they cost?
With so many moving parts and variables, there’s no real way to estimate a body corporate fee. It is important that you know what your obligations are, and how often you’re expecting to pay the fees (often annually or quarterly), so it’s worth asking for numbers before buying a property with a body corporate or strata title. Not only is it good to be informed, but it also means you can plan your finances better for the future, while bearing in mind that it’s possible fees will go up as time goes by.
While there’s’ no definitive answer for what your body corporate fees include, hopefully that gives you some idea as to how they’re calculated and why they can vary so much between developments. Before you move or buy, ask to have a look at the breakdown of any fees and don’t be afraid to ask for clarification on anything you don’t understand. Remember that those fees help maintain the property, which in turn helps to keep your property value up. No one likes a poorly maintained building.