Introduction

Living in a strata-titled property in New South Wales involves contributing financially to the upkeep and management of shared spaces through strata levies. These regular payments, typically determined annually by the owners corporation based on unit entitlements, fund the maintenance, repairs, and operational costs associated with the common property, ensuring the scheme functions effectively.

Occasionally, owners may find their strata levies, including standard contributions or special levies raised for specific purposes, to be unexpectedly high, leading to concerns about fairness and justification. This guide explores the factors that can contribute to high strata levies and outlines the processes available under the Strata Schemes Management Act 2015 (NSW) for owners to query, challenge, and resolve disputes regarding levy amounts in NSW.

Understanding Strata Levies

Property owners within a strata scheme are required to pay an annual levy, also referred to as a contribution or fee. This payment funds maintenance and repair of common property areas and covers the running costs associated with these spaces.

The amount and frequency of levies are determined by the budget, which outlines total levy charges and specifies the payment schedule:

• Quarterly
• Annually

Levies are calculated based on each property’s unit entitlement, reflecting the owner’s share within the scheme. For example:

• A smaller apartment may have a unit entitlement of 10.
• A larger apartment might have a unit entitlement of 15.

Consequently, owners with higher unit entitlements wield greater voting power within the owners corporation and are subject to higher levy payments.

Levy rates and any increases require approval by the owners corporation during the annual general meeting (AGM). Additionally, the strata committee can propose a special levy when standard levies fail to cover significant expenses—such as major repair works. Introducing a special levy similarly requires approval at a general meeting, following the procedural steps established for annual levies.

Both annual and special levies are calculated according to each property owner’s unit entitlement. In cases of emergency repairs necessary to address a serious and immediate risk to residents’ health or safety, the owners corporation must:

• Issue written notice of the required levies.
• Provide a minimum of 14 days’ notice for payment.

This ensures all property owners are adequately informed and have sufficient time to meet their financial obligations towards the upkeep and safety of the common property.

Reasons for High Strata Levies 

The cost of strata levies can vary significantly based on several factors, such as amenities, building age, and condition. Consequently, some property owners may face higher fees. Below are key reasons why levies might be high:

• Facilities and Building Age: Properties with extensive amenities or older structures often incur higher fees.
  • Older buildings typically require more frequent repairs and maintenance, increasing costs for owners.
  • Such properties are more likely to necessitate special levies to cover unexpected expenses.
• Strata Management Efficiency: The proficiency of the strata management team directly affects levy rates.
  • Incompetent management can lead to unnecessary wastage and accidents, inflating fees.
  • Conversely, adept managers implement industry best practices, potentially reducing costs.
  • Effective management also mitigates stress for lot owners by efficiently addressing occupier issues.
• Mismanagement Consequences: Poorly managed schemes risk fines, penalties, and a decrease in market value. As a result, the investment value for owners can decline, highlighting the importance of competent management.
• Frequent Special Levies: Regular imposition of special levies may indicate underlying management or planning issues. These levies typically cover significant, unforeseen expenses—such as major repairs or legal costs. If they become commonplace, it could signal a failure to plan for maintenance and future needs.

To manage high strata levies, property owners should closely examine their scheme’s management practices. Ensuring efficient management can help control costs and maintain or enhance the long-term value of their investment.

Dealing with High Strata Levies in NSW: How to Resolve Disputes

Ensure the Strata Levies are Legal

You can take legal steps under the Strata Schemes Management Act 2015 (NSW) if you believe your strata levies are unjustified. Before proceeding, thoroughly review the Act—particularly Division 2, which governs levy resolutions. In particular, confirm that:

• the levies have been imposed in line with Division 2
• the resolutions underpinning them are valid

Any levy not compliant with Division 2 or based on an invalid resolution may be open to challenge.

Gather Evidence and Discuss Amicably

Substantial evidence and expert advice can bolster your challenge. To this end:

• Gather evidence to support your claim
• Consult strata law experts for tailored legal advice
• Attempt an amicable resolution within the strata scheme through discussion and negotiation

Resolving the matter internally can be a prudent first step before escalating to the Tribunal.

Approach the NSW Civil and Administrative Tribunal

Where internal resolution fails, prepare a meticulous application to the NSW Civil and Administrative Tribunal, including all necessary documentation and evidence.

Under Section 87 of the Strata Schemes Management Act 2015 (NSW), the Tribunal may:

• adjust levies if they are inadequate or excessive
• modify payment methods deemed unreasonable

An application can be lodged by:

1. the lessor of a leasehold strata scheme
2. an owners corporation
3. property owners
4. a mortgagee in possession

When deciding, the Tribunal evaluates whether:

• the proposed levies are disproportionate to required expenditure
• the payment method is unreasonable
• the levy amount aligns with the purpose and interests of the owners corporation
• the decision to impose the levy was reasonable

However, the onus is on the applicant to prove the levy’s unreasonableness. Tribunal proceedings can be complex and may carry the risk of cost orders if the challenge is unsuccessful.

Practical Tips to Pay Lesser Strata Levies 

To effectively lower strata levies, property owners and Owners Corporations can adopt several strategic approaches. Here’s a concise guide to these strategies:

Optimise Strata Insurance

Insurance premiums constitute a significant portion of strata budgets. By comprehensively understanding the specific risks associated with your property, you can take steps to mitigate these risks, potentially leading to fewer insurance claims and, as a result, lower premiums.

Ensuring that your insurance coverage is both adequate and appropriate is crucial. Specialised equipment and systems—such as lifts or air-conditioning units—may require additional coverage not included in standard policies. This precaution helps prevent the need for unexpected special levies in the event of a major incident.

Consider exploring self-insurance options to achieve substantial savings on insurance costs:

• Agree to a higher excess
• Opt for policy exclusions

Embrace Sustainability

Sustainability initiatives offer dual benefits of environmental responsibility and financial savings. Moreover, governments at various levels provide an array of rebates and incentives aimed at enhancing buildings’ sustainability. These programs can significantly reduce operational costs and, consequently, strata levies.

These incentives encompass:

• Light-emitting diode (LED) lighting upgrades
• Solar panel installations (with battery charging incentives)
• Subsidies for electric vehicle charging stations
• Participation in waste management and recycling programs

By taking advantage of these offers, strata schemes can improve their infrastructure while putting money back into the pockets of strata owners.

Prioritise Preventative Maintenance

A well-implemented preventative maintenance program is key to prolonging the lifespan and efficiency of a building’s critical infrastructure.

Regular maintenance ensures systems run optimally, reduces the frequency of breakdowns, and minimises inconvenience and potential costs for residents.

To achieve additional cost savings, consider the following measures:

• Off-peak scheduling: Operate energy-consuming appliances (e.g., pumps, heating, ventilation, and air conditioning (HVAC) systems) during off-peak hours.
• Energy-efficient upgrades: Install systems such as motion-sensor lighting or high-efficiency HVAC units.

By adopting these strategies, strata schemes can significantly reduce common area electricity bills over time.

Utilise By-laws for Administrative Costs

Strata schemes can manage administrative costs effectively through the adoption of specific by-laws. These by-laws enable the charging of certain costs directly back to lot owners.

Moreover, tribunal decisions support this practice, provided that the by-laws are fair and reasonable.

To implement effective by-laws:

• Ensure fairness and reasonableness: Align by-laws with tribunal guidelines to avoid disputes.
• Consult a specialist strata lawyer: Obtain expert drafting and implementation, offering a sustainable method to offset administrative expenses.

By following these steps, strata schemes can sustainably manage and recover administrative costs.

Avoid the ‘Lazy Tax’

Regular review and negotiation of contracts with service providers are essential to avoid overpaying—a phenomenon known as the lazy tax. While cutting costs isn’t always the goal, securing additional services or price guarantees can provide budgetary stability.

Consider the following strategies:

• Bulk tendering: Leverage collective buying power for contracts such as:
  • Electricity
  • Lift maintenance
  • Other essential services
• Broker engagement: Employ a broker specialising in bulk tendering to align your scheme’s needs with similar entities, maximising savings and benefits.

By implementing these measures, strata schemes can ensure service contracts remain cost-effective and tailored to their requirements.

Conclusion: Need More Help? We’re Here for You.

Strata levies are essential for the upkeep of shared spaces, but high rates can present challenges for property owners. Understanding how levies are calculated, the reasons for potential increases, and the avenues for dispute resolution is key to managing your financial obligations within a strata scheme. Exploring cost-saving strategies like optimising insurance, embracing sustainability, and prioritising maintenance can also help mitigate high costs.

Navigating levy disputes or implementing cost-saving measures can be complex. If you believe levies are unreasonable or require assistance understanding your rights and options, seeking professional legal advice from experienced NSW strata title lawyers is advisable. Contact PBL Law Group today for expert guidance tailored to your strata levy concerns.