All About Body Corporate Fees
Body Corporate Fees and Levies | Read Time: 5 Minutes | July 2021
All about body corporate fees
If you’ve recently bought a unit or apartment you may be wondering why you have to pay body corporate levies, how the levies are set and what the money will be used for. In this article we’ll look at what your body corporate levies actually cover, and your options for payment.
What are body corporate management fees?
Body corporate fees or levies may seem expensive, but they cover all the regular costs of managing and maintaining the common areas of your property. Your levies help cover everything from insurance through to shared utilities, building works, repairs and maintenance. The money you pay is definitely well spent.
The body corporate fee, or levy, is the annual contribution which each unit owner is required to pay in respect of their unit to enable the body corporate to meet its commitments. A body corporate might also raise a special levy for a special project.
How are levies set?
Each year, your body corporate manager (with assistance and input from your building manager and body corporate committee, if you have one) will prepare a draft budget for your body corporate for the coming year. This will be a judgement based exercise which considers:
- the expenses your body corporate incurs every year (like insurance, compliance, common area water and power, administration fees etc, building wash, common area cleaning, etc);
- how much you spent on those items this year, plus allowances for inflation;
- expected costs for any work you might be planning to do in the coming year;
- any one off or non-recurring costs this year which might reduce next year’s costs.
Your body corporate levies or fees are the only source of income your body corporate has – which means it can only afford to pay for the things it includes in its budget. If you don’t include a budget for gardening, for example, then the gardens won’t get done. Deciding on your budget sets the standard for your complex now and into the future, so it’s a really important decision each year.
The budget is then considered and approved at your Annual General Meeting (AGM). The approved budget becomes the basis of your levies / fees – that is, the total budget is agreed upon, and then shared out amongst all the unit owners on the basis of their “ownership interest”.
The owners also agree at the AGM on how many instalments the levy will be raised in during the budget year.
How many instalments are there?
When considering how many instalments of the levy there will be the owners will consider:
- the cash flow needs of the body corporate throughout the year (your body corporate’s only income comes from body corporate levies or fees, and it needs to be able to pay its debts when they fall due – such as insurance);
- any outstanding debts – that is, has the body corporate been able to collect all the levies due from last year, or is there a balance outstanding leaving the body corporate short on cash at year end?;
- whether owners generally pay their levy instalments when they fall due;
- creditors’ invoices that may be outstanding at the end of the year;
- whether or not there are likely to be special projects requiring special levies to be raised throughout the year;
- The administration cost of higher numbers of levy instalments – the more instalments there are to issue and collect, the higher the administration costs your body corporate will have to pay.
Any more than four instalments becomes very difficult to administer, and leaves your body corporate at risk of running out of cash during the year. One or two instalments are the most common.
As we have talked about a few times in this article, levies / fees are the only source of income for most bodies corporate – it needs to collect the fees / levies in order to be able to pay its costs. Often, because the insurance is due for payment early in the financial year, a larger percentage of the funds are needed in the first levy instalment. In this case, the body corporate may resolve to raise the levies in two or three instalments spaced throughout the year, but with the first instalment being 60 percent of the total levy and the remaining one or two instalments being either 40 percent or 20 percent of the total levy for the year.
Weighting the instalments in this way provides the body corporate with the funds necessary to meet their obligations at the time when they most need them.
Bodies corporate with quarterly ground lease rental fees may choose to time their levy instalments so that they fall due for payment prior to each quarterly ground rent payment – again, so the body corporate has the money to pay the bills as they fall due.
Let Crockers help
If this process sounds complicated, don’t worry - your Crockers body corporate Account Manager is here to help. We are experienced in managing cash flow and are able to assist your body corporate with planning.
Once resolved at the AGM, the details of when each levy instalment will be raised and sent to owners are detailed in the minutes sent to the owners after the general meeting. This includes the months that the levy instalment invoices will be sent so that if owners are planning on taking a holiday throughout the year, they are able to make prior arrangements to have their levy instalments paid by the due dates. Uniquely, Crockers also offer the option to pay by direct debit – so you need never worry about getting your levies paid in time! Talk to your Account Manager, you can find their details here.
Although payments by cheque are no longer able to be accepted (our bank, like most in NZ, have phased out cheques as a method of payment), Crockers’ clients have several other easy payment methods available to them.
Payment by Direct Debit, online banking transfer, bank deposit, credit card (surcharge applies) or in person via EFTPOS at Crockers main Auckland office are all available. If you’d like further information on payment methods or have any general enquiries regarding your body corporate levies, contact our Body Corp Community Living experts on 09 968 3311 or email email@example.com.