The PROPERTY DOCTORS, Sydney Australia Novak Properties
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The PROPERTY DOCTORS, Sydney Australia Novak Properties
EP. 1362 “Special levies aren’t so special—why strata costs rise for big repairs.”
Unlock the secrets behind the often-dreaded special strata levies and discover why they're more crucial than you might think. Join us as we sit down with expert property manager Cleo, who sheds light on these essential financial tools used to fund major property upgrades and repairs. Whether it's significant construction projects or essential fire safety improvements, Cleo guides us through understanding the necessity and impact of these levies. We'll also clear up common misconceptions about strata funds and offer insights into financial options and potential reforms for owners struggling with these payments.
Maintaining the value of strata buildings as they age is no easy feat, but it's one that cannot be ignored. In this episode, we unpack the challenges faced by the real estate industry in keeping these properties in top shape. With Cleo's expertise, we emphasize the importance of timely maintenance for preserving property value and ensuring a healthy strata plan, particularly for those looking to sell in the future. Plus, learn about upcoming initiatives aimed at addressing industry pain points and receive practical advice for weathering difficult strata situations. Don't miss this opportunity to gain valuable guidance and support designed to ease the complexities of strata management.
Special levies in strata buildings. Why are they raised? What are they raised for? We're going to talk with expert property manager Cleo. Stay tuned. I'm the ringleader.
Speaker 2:So let's get up.
Speaker 1:What do you reckon? Wonderful topic strata levies, special levies. A bit like special fried rice, special special levies. What do you reckon?
Speaker 2:Yeah, I don't know why they call them special. They should be unexpected levies or you know things you don't want to pay but they are necessary sometimes, a poke in between the eyeball levy.
Speaker 2:Yes, exactly, exactly. With special levies they are raised to pay for major works. Normally a strata plan will have enough money in the sinking fund to cover general maintenance and upkeep of the building, but if there is something that needs upgrading or there is a major repair and many times the owners corporation will vote for a special levy rather than increase the quarter with quarterly levies to help raise that money. A special levy is usually for really big work, like you know major construction needed or fire safety upgrade.
Speaker 1:Yeah, what does it look like when you open the envelope or email for the special levy?
Speaker 2:As a property manager. Whenever an account says to me the owner's got a special levy, I die a little bit inside because I have to make that phone call.
Speaker 1:And I think, as an owner, you look at it and go, ah. And then you turn around to your partner, friend, family, go, can you believe this? Can you believe this owner you're looking again like, and then you turn around to your partner, friend, family, girl, can you believe this? Can you believe this? It's so true, it's just uh. It's just uh. It's the opposite to a love letter. It is like, yeah, and these, these amounts aren't small or conclusive either, are they? So what do you see strata levy like? Because, just to get everyone, so everyone knows, if you're not in a strata building, you'll get a levy once a quarter. You know which you know and you expect and which is calculated. But when you get a special levy or a unexpected levy, I'm going to call it or a poke between the eyeball levy, what sort of money are they are they using? Is it like in a two hundred dollars? Is it two thousand dollars? Is it twenty?
Speaker 2:it depends on your unit entitlement. So if you have a two-bedder or one better, a three-bedder, the levy um is raised according to that unit entitlement. So if, say, it's a hundred thousand dollars for the work needing to be done um and there's nine units, it's divided accordingly um with those entitlements per lot owner um. It's usually about 40 50 grand um. I've seen some levies per owner and go as much as 150 000 um.
Speaker 2:If you're in a bigger building, of course that portion is divided um more, so your special levy is less. But if you're a a bigger building, of course that portion is divided more, so your special levy is less. But if you're a small boutique block, for example, it can be a lot higher depending on the nature of the work. With a special levy as well, it shouldn't come as a surprise. Special levies are decided by the owners' corporation at meetings that have been carried out throughout the year and the year before. So you have a plan or a budget of which you're going to implement things, for example, window upgrades, roof upgrades and then you say, okay, next year, january 2025, we're going to implement two special levies. So at the end of the year we can redo our garages or refix all the windows or something like that.
Speaker 1:And people I find often blame the strata blame, play the blame game and you know everyone attacks the poor strata levy.
Speaker 1:I feel bad for the little old strata levy when he comes along because he's not a liked person but he's a mean ugly thing. But I think in the defence of the poor little strata levy that comes across the special strata levy, the poor little strata levy that comes across the special strata levy, I think we've got to understand as consumers that whatever you buy is going to require not just maintenance but an upgrade, you know, no matter what you buy. So at the end of the day day, some of these assets in dy were built in the 50s and 60s, some in the 40s. You know, if you're going across to manly, some of these were built in the 20s. Some of these buildings are 100 years old and I think you just you know you just go along and go along and go along and you don't realize that just mowing the lawns and vacuuming the foyer is not going to be enough over a 20 or 30 or 40-year period. So I think you've got to have your head on your shoulders about that 100%, it's a necessity.
Speaker 2:I think people because they pay a quarterly levy every quarter and they think that's a lot 1400 a quarter, most apartments, a thousand dollars a quarter and then on top of that, I know you know the sentiment is oh my god, where's all this money going? Where is this money going that I pay strata? And they think it just goes to strata and then it sits in a big fat bank account account at Strata and they just sit on it. But there's a lot of litigation involved as well. The levies that are special, that are raised. You have 14 days to pay. You also have options to seek finance for a Strata plan if they can't afford the special levies, or everyone can't afford the special levies.
Speaker 2:And I think with these new um reforms there's going to be avenues for owners who are non-financial and are struggling to get some kind of help. Maybe be because they're very new, maybe they'll extend, maybe superannuation into it. I don't know how it's going to work, but I know that if you can't afford the special levy, there are avenues. And just remember that special levies are implemented by the owner's corporation. So if you're not going to the meetings and you're not having a say, then whatever that special levy comes in, you can't control because you haven't been there to input your feedback. So and it is a majority vote so out of all the owners, they all vote on a special levy or increase quarterly levies to pay for these big works.
Speaker 1:Do you have to take a big glass of water and a gulp of air before you ring an owner to tell them about their strata levies?
Speaker 2:I do, and a lot of the time, unfortunately, when we send the EGM and AGM minutes out, it's a very thick booklet and they don't read it. And then the strata, the special levy of seven thousand dollars, comes in and they blow up and hit the roof. I wasn't told, I'm not paying it like it, it's a huge. Then, um, we have to then follow the trail of when the agm was set, when we sent the notice, um, when the motion was approved.
Speaker 2:How many you know and it's also strata's obligation, I feel as well and they must, even though we're a managing agent they also need to communicate with um, the owners of each strata plan and owners corp. When things like this they usually do like if it's, if it's a job of two hundred thousand dollars and it's being held up because three owners haven't paid their special levies, those, those strata managers are going to be on the phone calling the owner saying hey, guys, we're waiting to get these works approved. You haven't paid the levy Because they can't move forward without a 50% deposit. On whatever it is, be it scaffolding, painting, all that stuff, the builders require a deposit. So some people have to have paid the special levy to get it rolling.
Speaker 1:So yeah, it is difficult. Stupid question, you can't ignore it.
Speaker 2:You can't ignore it. You can't ignore it, you can drag it on. But if the majority of the owners are committed and are paying and it's going forward, you as one owner, or even two sometimes there's not much you can do about it. Um, there are. There is also the option the owners corporation can decide if you can pay that levy, special levy, in installments. So four installments, three installments. If, for example, some owners are more financial in the corp, they might let the owner who's non-financial pay increments because the whole bill doesn't need to be paid. So there are options. Talk to your strata manager, talk to your property manager and read, if anything I can say, read your EGMA GM minutes for things coming up so you can prepare.
Speaker 1:As a result, do you ever have the play, the long game conversation with your landlord, like I do?
Speaker 2:Not as much as you, mark. I'm a little bit more direct to the point. I've got things to do, so you know.
Speaker 1:I often, often and I've actually had the conversation with lisa a couple of times on a particular property, that old property that she owns um, we, I think it's really, really important just to remember what you got into the asset for and why you're in the asset and the intention because and how good it was to you.
Speaker 1:Because a lot of people forget that in the in the eye of the storm, when they open up that strata levy email or letter and they're like screw you. But I always, I've always said to clients and I'll give you an example with Lisa I was like if this unit you own gave you a one metre long check every year, and I presented the check to you and you know you'd sort of love this unit a bit more than what you're talking at the moment. You'd sort of love this unit a bit more than what you're talking at the moment. You sort of forget. Do you know what I mean? So if you've got a one bedroom unit worth 700,000 and say it's been going up 50 grand a year the last 10 years 30 grand, 40 grand, 50 grand if I presented you with that check last year, at the year before when the strata levy came yesterday, you would have gone. Ah, fair enough.
Speaker 2:You know, like I've got this big fat check every year, it's okay, but you sort of got to play the long game 100% and yeah, it's always usually a lot of money and some people just don't have that kind of money lying around, so you have to prepare. As an investor as well, you have to be diligent. When you are a homeowner, property owner in a strata building, these things will come up. Whether it's this year, next year, the year after, there will be work you need to do there.
Speaker 2:I can't think of anyone's got that money lying around. Yeah, I've got all the neighbours whippersnippering at the moment. I'm sorry, I'm trying to be quiet.
Speaker 1:You're mobile. You're mobile, cleo. Thank you very much for sharing your Intel IP experience and wizardry with us. That was bloody awesome and I think, yeah, keep an eye out on some of this Strata stuff we're going to be doing our next couple of weeks. It's probably the biggest pinch point we're finding in our industry at the moment.
Speaker 2:It is definitely and a lot, like you said, these buildings are starting to get to the point now where you can't ignore the maintenance it has to be done to add value and you know for owners that want to sell as well in the future. You know your strata plan has to look healthy and you've got to have these things in place.
Speaker 1:Thank you, legend. Hopefully you helped people out there today. If you have a friend that has a bad strata and they're dealing with this, send them this clip Bye. See you, legend. Friend that has a bad strata and they're dealing with this, send them this vid clip boy say legend.