"special levy".....???

A

adzkay

Hi Guys,
perchased my first IP about a month ago and just received a letter from Body Corp re: Water expenses and having insufficient funds to meet financial commitments. Now in a block of 8 they are asking me to pay $1044 for a "water charges and fund shortage levy".......Does that mean that there will be $8000 in the levy that will cover usage and charges for the years to come or i'm a stooge and these "special levies" are going to make me broke??
 
Maybe you've just worked out why the previous owner wanted out.

A some stage the strata has spent more than what was in the bank, so now all current owners have to kick in money to balance the books.

$8000 seems a fair bit of cash so you need to find out what the money was spent on and assess if these expenses are going to be reoccuring.

Did you do a strata search prior to purchase?
 
I know they gave the place a bit of a face lift and the previous owner did owe monies (proffecional planning fees 18/2/10) which was paid out at time of settlement....

Gave the Body Corp a call yesterday but the Manager of the property was not in so waiting for a call next week...

Did not do a strata search prior. Being a first timer i think i focused too much on Capital Growth and rental yield and only skimming across the other fundamentals.. Could be an expensive lesson....
 
A one off fee of $1K each isn't much in the scheme of things.
I bet your strata is low and has been like this for a long time.

I faced a similar issue before where the strata had no money so I went along to the meeting and managed to put the fee up by $200pq.

Some owners were annoyed but as they couldn't be bothered to get out of bed and vote on the issue they can only blame themselves for this.
Now we have sufficient funds to pay for any emergencies and any ongoing repairs.
 
Did you read the minutes of the body corp meetings before you bought the unit? Did you check the balance of the sinking fund? Not much help now, but something to keep in mind if you ever buy another unit.

Special levies are notified and voted for by unit owners. If you are at the point of receiving an account for the money then the levy has been approved by a BC meeting.

Special levies are usually raised for an expense that cannot be covered by sufficient funds in the sinking fund, usually a "one-off" expense or an improvement.

So long as the BC levies are adequate special levies are rare. Sometimes unit owners vote down BC levy increases, which causes funds to deplete and leave insufficient reserves for a big expense.
Marg
 
Yes you should have done a strata search. That would have told you how much money was in the fund.
No-one likes special levies so they usually are rare. Except in the case where BC are inept and don't raise sufficient funds ort where owners won't vote to raise fees.
Ask for a copy of the last financial statement. You'll get one just before the next AGM. Look at expenses and fees. Work out whether they will cover the costs. Go to the next AGM and suggest fee rise (if needed). See if there is a sinking fund analysis. If not suggest getting one. This will outline future costs and fees can be set to take this into account.

I'm not one for leaving huge amounts of money in sinking funds but there needs to be enough so you don't need to incur special levies. It's a balancing act.

I don't think the previous owner would sell because there was a $1044 levy. Maybe there's more coming? maybe not. For $33 you can go and look over all the strata paperwork.
 
Like everyone's mentioned - reading through the strata minutes is an important part of the due diligence process.

At least it's only $1k though - I was reading through some minutes the other day for a prospective IP and there was a special levy a few months back that amounted to around $6k per unit holder - the complex needed a new roof!

It's great for the new owner - (they're getting a new roof that the last owner chipped in for). There's also the ability to use the "low/no sinking funds" argument when negotiating price.

Cheers

Jamie
 
We owned units for over 15 years and only ever had one special levy.

It was $500 and in a complex of 80 units it was raised to pay for electronic keypad gates. The complex was used as a short cut by locals who walked along the canal (Gold Coast) and through the complex to the shops. As car parking was under the buildings and not secure, petty theft was a problem.

A very pro-active centre manager did the homework, got evidence from local agents that secure entry would add around $5K to the value of the units, then managed to get all 80 owners to agree to the expense. As it was considered an improvement, it required 100% acceptance.

Just before we bought this unit there was a special levy to replace all the paved driveways with aggregate concrete and the pavers were becoming very uneven.
Marg
 
BC had gone up an extra $80 a Qtr as of 1/12/10..

Going back throught the minutes there is nothing that really stands out except a dispute with the previous owner oweing $2500 for renovations done last financial yr (paid out at settlement)

Paperwork i do have says at 17/3/11 balance sheet
Total assets $4783

Total Liabilities $2499

Total owners fund $2283

Just hoping due to the 8 units being on the one water meter, this is a levy that will fund the coming years.....

Fingers crossed...
 
I rang them on Friday but the person in charge of my property was not in the office..

Just lucky to have the SOMERSOFT FORUM to put my problem forward and having the long weekend to go through the replies..

If it wasn't for this Forum and the good people who respond, i think Investors would be a lot worse off....
 
adzkay said:
Total owners fund $2283

Just hoping due to the 8 units being on the one water meter, this is a levy that will fund the coming years.....

Fingers crossed...
Click to expand...

Over 8 units that's only $285 in reserve per unit. That is a very low amount and it's likely there will be more special levies to come. What are the quarterly fees?
 
Adz,

That's bad news mate, hope it works out for you. I know I checked my sinking fund before buying which was at $300,000 so a bot of peace of mind. A valuable lesson that doesn't help you now but will in the future.

Harro
 
I had a $3400.00 bill recently, to contribute to a one off cost, being a revetment wall (riverside) replacement. Ouch! You just have to bite the bullet and pay if that's what the majority want.

Another unit i have, had a very large BC account balance ($600K) when I purchased it. But repair/replacement works brought fwd (lifts refurbished, building exterior high rise painting/general common area repairs/refurbishment soon saw this gone). We are now paying and extra $1000 per qtr (for this year only) to make up the shortfall.

I knew this before purchase, and was happy to do this, as the building is being maintained/upgraded in immaculate condition.

The alternative is to have a bunch of tight**** owners who don't want to spend. Been there before, I know which I prefer.
 
Paying $434 a Qtr......

Ok just found out that the current BC took over the property about a year ago.... Now the previous chairperson was "lazy". Since 2009 the water usage has been in arrears due to bills going to another address and water usage not getting paid at all....With investigation from current BC water usage was over $6000......Unfortunately City West Water gave details of monies oweing to BC 3 weeks after my settlement.....With me disputing that i shouldnt pay due to not being on board at this time, they seem to think that because they only found out 2 weeks ago, i was the new owner and it "had to be paid"......Now the $1044 was was part of monies oweing, plus added extra for a water levy fund...

Also had clarification that there is only one water meter, so that the OC must fund the water usage bill...

In the scheme of things there's no point fighting the BC on the "water levy" would cost me $1k in legal costs anyway so i guess just bite the bullet and wear it...
Live and learn.....
 
adzkay
If an amount is arrears perhaps you can get the previous owner to pay for it.
Speak to the solicitor who did the conveyancing for you
 
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