The owners corporation must levy owners in the strata scheme to raise enough funds to carry out its duties. All levies must be worked out in proportion to the unit entitlements of each lot [s. 78].
The Administrative fund is for day-to-day recurrent expenses. The amount in it must be enough for the owners corporation to pay its expenses:
for the cost of looking after common property and personal property of the owners corporation
for the payment of insurance premiums
for any other recurrent expenses other than amounts covered by the sinking fund or by a special levy [s. 75 (1)].
The sinking fund is to cover future capital needs. Some schemes are required by law to plan ahead for at least 10 years [s. 75A]. The amount in the fund must be enough to cover all the owners corporation’s expenses:
for painting of common property
for obtaining personal property of the owners corporation (eg. mowers or washing machines)
for renewing or replacing any fixtures on the common property and any personal property owned by the owners corporation
to replace, repair or make good the common property
for any debts, other than amounts covered by the administrative fund
for other capital expenses [s. 75 (2)].
Ten-year sinking fund plans
All schemes that came into existence on or after 7 February 2005 are required to have a ten-year sinking fund plan for the life of the scheme. The plan has to be reviewed at least every 5 years [s. 75a].
Older schemes were also required to begin ten-year sinking fund planning from 1 May 2006, although these schemes have been given more time. Check with Fair Trading for details.
Transfer of money between funds
The owners corporation can transfer money from one fund to the other or make a payment from one fund that should have been paid from the other. But the owners corporation must make a levy to repay that fund within three months after the transfer of monies [s. 68 (2) & (3), s. 71 (2) & (3)].
Levies must be decided at each annual general meeting
[s. 75 (1) & (2) and 76 (1)]. When a levy is to be decided at a meeting a budget must be given showing the existing financial situation and an estimate of receipts and payments [s. 75 (3)]. You can give the budget with the notice of the meeting or at the meeting before voting on the motion. A motion to decide a levy must:
show the amount for each fund
be approved by a majority vote.
The owners corporation may decide to allow payment by instalments.
After the decision is made, the Treasurer must write to the owners and tell them the amount to pay and the date to pay [s. 23]. This notice only has to be given once [s. 78].
If the owners corporation has to pay a debt that was not budgeted for in the administrative or sinking fund estimates, a levy must be set at a general meeting and the amount collected paid to the administrative fund [s. 76 (4)].
Interest and discounts on levies
An unpaid levy gains interest at the rate of 10% simple interest a year if not paid within one month after it is due. The owners corporation cannot increase or decrease the interest but it can make a special resolution to charge no interest [s. 79 (3)].
Unpaid levies, including interest, can be recovered by the owners corporation as a debt in court [s. 80]. An owners corporation may make a special resolution to give a 10% discount where a levy is paid before the day it is due.
Payment made on the day it is due does not attract the discount [s. 79 (4)].