When you own an apartment or a townhouse in a Body Corporate, you have to pay a Levy to the Body Corporate. For example, this might be $400 each month, or $1,000 each quarter. This is often seen as a downside of a home in a Body Corporate - no one likes an extra bill to pay. I’ve heard people say it’s like buying a home and still needing to pay rent!
A detached house is simple, you buy it and it’s yours, you don’t have to pay money to keep living in it. So why do you have to pay to live in an apartment?
Well it’s not quite true that there are no fees for living in a house. There are lots of ongoing costs associated with home ownership. There’s the mandatory ones:
- You need to pay local council rates
- You need to pay insurance (if you have a mortgage the bank will insist on this)
- You need to pay for maintenance - when the roof starts leaking you need to patch or replace it
There are also optional expenses that you may choose to take up, for example:
- You may want to pay for a wheelie bin
- If you’re not a green thumb you may pay for a gardener
When you’ve living in an apartment building or a townhouse these things are all still needed - but by the building as a whole, not by each individual apartment owner. That’s where the Body Corporate Levy comes into play.
What’s in a Body Corporate Levy?
There is no fixed list of what must be included in a Body Corporate Levy. All Body Corporates are unique and it’s important to check exactly what is included for each one. Stay tuned for a future post on how to assess Body Corporate disclosures before buying.
A typical Body Corporate Levy includes the following:
- Insurance - in Wellington this is commonly half of the entire fee. Because the Body Corporate is covering the building insurance, you will generally only need to pay for a contents insurance policy yourself.
- Water rates - if the building has a water meter installed, then the Body Corporate will be billed for water usage and this will be included in the Levy. Because the Body Corporate is paying water rates, the rates that you need to pay to your local council will be lower.
- Long Term Maintenance Plan contribution - This is an annual contribution towards large, infrequent maintenance expenses. For example if the roof costs $30,000 to replace and needs to be replaced every 30 years, then the Body Corporate will set aside $1,000 per year. This means that when the roof does need replacing, there will be funds available to pay for it. Most homeowners don’t do this, preferring to take big expenses as they come, or starting to save up only when the roof starts leaking. But maybe they should! Taking a more thorough approach to saving for maintenance means that the cost gets evened out over time.
- General maintenance - Groundskeeping, unblocking drains, clearing gutters, trimming trees, water-blasting, etc.
- Electricity - If there are outside lights, a lift, electronic doors or similar, then the Body Corporate is the one paying the bill for these, and this will make up a portion of the Levy.
- Administration fees - This means the Body Corporate has a contract with a provider for administration services such as collecting levies, paying bills and arranging the AGM.
- Facilities Management fees - The facilities manager is the one that sorts out the broken lift, co-ordinating tradespeople and generally keeping the building in working order.
Often smaller body corporates will be self managed in which case there will be no Administration or Facilities Management fees, and committee members may be paid for their contributions. This generally results in a lower levy with the caveat that you may be enlisted onto the committee at some point to help out.
If you want to find out exactly what’s in the Levies that you will be paying then you can ask to see the budget for the current financial year. This will show the total amount of levies the Body Corporate is intending to collect and what they will be spent on.
What causes some levies to be vastly higher than others? It’s generally a maintenance or remediation issue with the building, such as an earthquake strengthening project that needs to be paid for.
Conversely, a low levy can also be a red flag - it may suggest that the Body Corporate is not setting aside enough money for maintenance. This means you may experience the building deteriorating around you, or have to pay a one off Special Levy to get maintenance work done on top of the regular levy.
Now let’s try a side by side comparison with a detached house:
| Detached house | Apartment (Body Corporate) |
|---|---|
| Local council rates | You still pay rates, but at a lower rate since water is included in levy |
| Insurance | Included in levy - you just need contents insurance |
| General maintenance | Exterior maintenance is included in levy |
| Long term maintenance | Exterior maintenance is included in levy |
| Rubbish | Generally included in levy |
| Gardening & Groundskeeping | Included in levy |
| Paying the bills | Included in levy (Administration fee) |
| Calling the tradies when something breaks | Included in levy (Facilities management fee) |
As the table shows, the stuff that needs doing is roughly the same. The difference isn’t really in what’s being done, but in how it gets paid for. Who makes the decisions and how those decisions are made.
Who decides the fee?
In a detached house if the roof starts leaking then you get to choose what to do: Maybe you don’t mind a few leaks and are happy to leave it be to save money. In a Body Corporate you don’t get to make that decision alone.
Decisions about how much to spend on maintenance, and many other decisions are made by the Body Corporate.
You’re not powerless though.
The term Body Corporate is often used to refer to the Body Corporate Committee, or even a professional Body Corporate management firm, neither of these are correct. All owners are members of the Body Corporate and have a say in decisions (larger Body Corporates have a committee to deal with the minutae of minor decisions).
Ignore the word Corporate in the name. A Body Corporate is a democracy, and democracy belongs to those who show up.
What to do about a leaking roof is a decision to be made collectively by all owners in the building. If you can convince them that it’s actually fine to live with buckets in each room to catch leaks then go for it!
Maybe you’re a green thumb who finds it hard to stomach paying professional gardeners to weed a few beds once a month when you would happily do it yourself for free. Do it then, you just need the support of your fellow owners.
Or maybe you feel that the Body Corporate is paying too much for electricity and want to switch to a different retailer - that’s also something you can propose!
If you show up and actively participate as a member of the Body Corporate then you can influence all of the costs that make up the Body Corporate Levy.
Summary
- Body Corporate Levies are a fee that you are required to pay if you own an unit in a Body Corporate. They are often payable monthly or quarterly and can change each year.
- They are made up of many costs that also exist for detached homes, such as Insurance and maintenance.
- In large Bodies Corporate things that a homeowner would do themselves (call the tradies) are managed by professionals (a facilities manager), in smaller Body Corporates they are done by the owners collectively.
- Every owner is a member of the Body Corporate and has a say in what makes up the Levy - Democracy belongs to those who show up.