We’ve all heard the term ‘body corporate’ - it conjures up images of A Current Affair neighbours from hell, wars over shared fences, and complaints about barking dogs and having a goldfish on your balcony.
But what are they, how much do body corporate fees cost and how can you save money on such a mysterious entity? The fees are also called strata fees, but there's a slight difference - body corporate refers to the group of owners, while strata refers to the title giving you a proportionate piece of the land.
The good news is that if you're a homeowner with a strata title, you're on the body corporate - the power (partly) is in your hands.
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What is a body corporate?
Generally, a body corporate is a legal entity that is created when land is subdivided and registered - that means apartments, townhouses, duplexes and other multi-resident lots.
By buying an apartment, townhouse or duplex, you, the owner are automatically part of the ‘body corporate’ for that complex, meaning you can have your say on issues that arise in it. On top of this, a treasurer, secretary and chairperson are usually elected, and these spots can be filled by any owner.
In many ways, body corporate acts as a little council for your complex, sometimes with all the trials, tribulations and backstabbing you’d see in House of Cards, minus Kevin Spacey being a creep.
How much are body corporate fees?
Body corporate fees vary wildly based on the complex you’re in - anywhere from $1,500 to upwards of $25,000 per annum is common. Fees for the previous year can be found in the complex’s ‘strata report’, but more on that later.
Usually, body corporate fees are paid quarterly, so it pays to factor those in on top of your mortgage repayment, and council rates when determining if you can afford the apartment or townhouse or not.
What determines the body corporate fees?
Simply taking a look at your complex can be a handy indicator if your body corporate fees will be high or low; if it’s low-set and brick, without a pool or gym, chances are it could be at the lower end of the scale.
Conversely, if you’ve bought up a schmick apartment with fancy fittings, undercover garage, a pool or three, plus a gym, you can probably expect to pay more. Penthouse apartments may even incur a set of their own fees.
Other factors include:
- The size, structure and age of the building: brick is pretty sturdy, whereas wood can cost more to maintain.
- The fees body corporate charge for its management service: these services are usually contracted out and include plumbing, carpentry, electrical work, handyman services and more.
However, bigger doesn’t always equal more expensive. A four-unit lot with a pool may cost more than a 10-unit lot with similar facilities. That said, a smaller apartment block means you own a bigger proportion and more power is technically in your hands.
The total amount required to maintain the building for each year is budgeted and divided up among owners. As such, fees can vary from year to year, and are usually presented at the annual general meeting, with owners given the chance to agree or disagree with the figure. So, it can be important to attend those meetings and have your say - after all, as an owner you are a part of the body corporate.
What makes up body corporate or strata fees?
You're paying all this money hand over fist every quarter - it's easy to be cynical about where the money's going. Body corporate fees usually go towards:
- A sinking fund: A healthy sinking fund can cover infrequent upkeep of the property, including repainting or replacing the ducted airconditioning in an apartment block.
- Insurances: Insurance premiums cover replacement value of common areas plus public liability.
- Administration: This encompasses common maintenance of the common areas including lawns, pool cleaning, and recurring expenses such as pest control and so on.
All of this can easily add up to thousands of dollars a year, even if you don't have a pool and very little maintenance requirements in the common areas.
Apartment or house? House maintenance versus body corporate fees
The general rule of thumb for the cost of maintaining a house is 1% of the purchase price per year. So on a $600,000 home, that's $6,000 per year. Obviously this depends on the property market. For example, it's a dubious rule if Aunty Flo paid $80,000 for her North Sydney mansion 50 years ago to only be paying $800 a year to maintain it.
With house maintenance, you're mostly on your own, and it's your responsibility to maintain it, unless you hire someone to fix and maintain things, like gutters, lawns, pools, plus any breaks and leaks that happen within the home. If you're deciding on a house or apartment, you'll have to weigh up the body corporate fees versus the '1% rule of thumb' as to which is the more economical option.
Body corporate responsibilities
A body corporate is a lot more than a mysterious entity that sets the rules of what you can and can’t do on your balcony. A body corporate:
- Maintains, manages and controls common property on behalf of owners such as elevators, gardens, pools, gyms, hallways and other shared spaces.
- Decides the amounts to be paid by residents - usually quarterly - to make sure maintenance of facilities can be taken out. These fees go into a sinking fund, which is used to replace major items, as well as structural repairs or painting.
- Makes and enforces its own rules, called ‘by-laws’, which set laws as to what residents can and can’t do - such as sticking your goldfish on your balcony.
- Takes out insurance on behalf of owners over common property and building insurance. Insurance payouts usually go into the sinking fund, which help pay for repairs and major repairs, such as when a pipe bursts or something goes awry.
- Manages and controls body corporate assets.
- Keeps records, such as minutes of meetings, a roll of owner details, finance accounts, asset registries and other financial and legal documentation.
Usually, decisions about these items are raised at general meetings, which happen at least once a year (AGM), where all owners are given the opportunity to attend. Other large meetings may take place, but usually require 14 days' notice.
How can I have my say at body corporate meetings?
The most important thing to remember is that as an owner, you are part of the body corporate, so you have a say in what goes on in your complex. Usually, body corporate has its AGM, where all owners can attend and have their say.
- Body corporate meetings are facilitated by an elected secretary, treasurer and chairperson and in the AGM go over forecast fees for the year, on top of any large repairs or maintenance needed. A particularly large event may require an additional meeting, with 14 days' notice usually required so owners can attend.
- In Queensland, at least, body corporate committees are required to be elected annually, with the presiding secretary responsible for providing ballots, and tallying votes.
First past the post wins, so no representative democracies here. As an owner, if you’re concerned about fees or issues that arise in the complex, it’s important to attend meetings and maybe even run in the annual election yourself.
Separating the good body corporate management from the bad ones
Doing a bit of digging to find out how competent body corporate is in a prospective unit you want to buy can seem hard, but there are a few signs to look out for that can help you separate the wheat from the chaff. A good body corporate should have these features:
- A consistent history of speedily addressing maintenance and repair issues.
- Few or zero building defects in new buildings.
- A healthy sinking fund - where will the money needed for irregular maintenance come from?
- Punctual AGMs and readily available minutes, with a new committee elected every year.
- A fully-insured building, in case the worst does happen.
- Complete records of finances, legal documentation, AGM and meeting details and more.
- A healthy level of complaints in the minutes: a handful of complaints can signify an honest and engaged body corporate, while too many may be cause for concern. Similarly, too few or none may imply that these complaints aren’t recorded or being addressed appropriately.
On the flip side of the coin, a shonky body corporate can be tough to spot, and you may not know unless you do your research or even until you’ve moved in. Some warning signs are:
- Poor recovery of levies: it can be optimistic to expect everything is in the black all the time, but consistent levies in arrears by more than 20 per cent can be cause for concern, implying owners cannot pay their fees or that the body corporate has a poor collection policy.
- Consistently missed or late AGMs: AGMs must be held within three months of the end of the financial year (June 30). A one-off is not cause for concern, however constantly missed ones can be a sign of slack body corporate, which means issues may not be addressed.
- Similar to the above point, slow or no response to repairs and maintenance can be a concern - this can be anything from blown lightbulbs in common areas, to a malfunctioning pool pump.
This is by no means an exhaustive list - a full strata report can shine a light into the mysterious ‘body corporate’ of the home and block you wish to purchase.
Where to find strata reports
There are numerous services from which you can purchase a strata report, which lists details such as financial status, pending and past building works, the cost of current levies and fees, the likelihood of extra levies, a long-term forecast and all expenses in the last two years. Insurance information and bylaws should also be listed.
- Strata reports can be pre-purchased online from many vendors; your conveyancing lawyer can also supply one for you.
Just like you wouldn’t purchase flights without first researching your destination (we hope), strata reports can provide valuable insight into the complex you’re looking to buy.
Savings.com.au’s two cents
Body corporate may seem like some mysterious entity but it really isn’t. It can be important as an owner of a lot in a complex to know what your body corporate is like, so consider attending AGMs and meetings. It’s like your complex’s very own Parliament House. If you are particularly engaged, you may even decide to put your hand up to be President, Treasurer, or Secretary.
Before buying an apartment or unit, it’s important to do your research. This includes looking at strata reports, and may involve enlisting the help of a conveyancing lawyer. In the strata report you’ll find expected levies and fees for the year - these can be a significant hit to the hip pocket, especially if you’re in a new fancy building. In overall housing affordability, body corporate fees should be considered along with mortgage repayments to determine if you can afford that apartment or townhouse or not.
Article first published 13 January 2020, last updated 22 April 2022.
Photo by Daniel DiNuzzo on Unsplash
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