Strata schemes can run low on funds when they set the levy contributions at a level with the aim of just covering the budgeted expenditure. At certain points in the year, such as when the insurance premium is due, this expense may wipe out the entire balance of the Admin Fund.
Proper financial management is imperative/crucial when it comes to managing strata-titled schemes.
To do this, owners need to understand what is common property i.e. what the strata levies need to cover and any other obligations under the Strata Titles Act. Following the changes to the Act and the 10-year maintenance plan requirement, many owners will now be contributing money into a Reserve (Sinking) Fund. This money cannot be transferred to the Admin Fund should funds run low, as its purpose is to fund future maintenance projects.
The strata council should meet before the AGM to identify expected maintenance costs or other strata expenditures such as utilities, professional fees, insurance, and other projects. When they know how much it costs to run the scheme annually, appropriate levies can be set to fund those expenses plus have a little surplus to cover items that may be unexpected. With insurance claims excesses set to rise to $1,000 per claim before the end of the year, one claim could see some smaller schemes having to raise a special levy to cover a claim.
Next time you ask ‘Why are my levies so high?’, take a moment to review your budget to understand your scheme. If you want to be more involved or have ideas on how to reduce costs within your scheme, nominate yourself to become a Council member for your Strata Scheme at the next AGM or should a vacancy arise.