At each body corporate annual general meeting the owners decide and agree on (by resolution) the amount of the budget for the next year. Even more importantly they agree on how many instalments of the levy will be raised and sent to owners each year. When considering how many instalments of the levy there will be. (Which is based on the total figure of the budget agreed to at the AGM).
The owners will consider the following:
- What the cashflow needs are for the body corporate throughout the year
- How many debts there are outstanding by owners to the body corporate at the start of the financial year
- How many owners regularly pay their levy instalments when they fall due, and how many the body corporate has to carry as debts throughout the year
- How many creditors invoices are outstanding at each month throughout the year
- When larger costs, such as insurance fall due
- How many instalments are included in the total cost of their body corporate administration fee. (For most bodies corporate this is two or three, and additional levies increase the cost to the body corporate in administration fees)
- Whether or not there are likely to be special projects requiring special levies to be raised throughout the year.
The body corporate account manager will have provided a detailed budget to owners well before the meeting, showing where and in which month the expenses fall throughout the year. This assists the owners to see at a glance where they are likely to need the greatest amount of cash injection into the operational account.
Often, because the insurance is due for renewal in the earlier part of the financial year, a larger percentage of the funds are needed in the first levy instalment. So 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% of the total levy and the remaining one or two instalments being either 40% or 20% of the total levy for the year.
This provides the body corporate with the funds necessary to meet their greatest obligation at the time when they most need them. Bodies corporate with quarterly ground lease rental to meet may wish to time their levy instalments so that they fall due for payment prior to each quarterly ground rent payment.
Your body corporate manager is experienced in managing cash flow and will be able to assist owners with this process.
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 out to owners after the general meeting. This will include the months that the levy instalment invoices will be sent so that if owners are planning on taking a vacation throughout the year, they are able to make prior arrangements to have the levy instalments paid by the due dates.