Is it wise to REDUCE levies? | Levies and Unit Entitlements | Flat Chat Forum: Your Questions Answered
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As treasurer I have been OK with not putting levies up for the last several years even though the budget has been a little higher each year. IE we have had a deliberate slight deficit budget. The result is that our Admin fund balance has reduced over a few years from being about 50% of the annual budget to being about a third of the annual budget. This was conservative since our managing agent advised that maintaining a balance of around 25% was normal and adequate. This year we will recommend a return to levies matching the anticipated expenditure. I would not ever recommend reducing levies but you might sometimes have them stay the same for a while and I don't think they have to exactly match anticipated expenditure if you have more or less than is an appropriate admin fund balance to maintain.
At your AGM you would vote to approve or amend a budget and levies. Any owner is welcome to question the numbers but as a treasurer I would much rather that someone disputing the EC's recommendation discuss it with me before the meeting.
The only valid way of reducing levies is to cut out waste and inefficiences and to renogotiate unfair contracts inherited from previous ECs or the developers.
Reducing services and neglecting current and future repairs and maintenance to cut levies is ripping off people who have bought into strata blocks expecting a cerain level of service and amenity.
This is going to become a big issue in the future as people on fixed or reducing incomes watch their levies rise (as they will with inflation). The answer is not to start cutting services and facilities to suit the lowest common demoninator. Those who can't afford to live in some buildings need to find somewhre they can afford.
This obsession with reducing levies is turning some perfectly decent buildings into the crumbling slums of the future. Every time you reduce levies by reducing services, neglecting repairs or starving the sinking fund, you reduce the value of everyone's homes.
Do you have a budget for approval at the AGM, whch should show:
1. Estimate of administrative expenditure for coming 12 months
2. Funds which should be in the sinking fund to cover future needs.
3. Funds currently available.
1 + 2 – 3 = funds needed for coming year.
Personally I would not suggest lowering levies. Better to hold them at current levels and offset future increases.
The coffers are quite healthy here at our strata of 30 because we bit the bullet a couple of years ago and put the levies up with the aim of fixing a few problems such as minor concrete cancer and OH&S issues, and because levies were way too low anyway; there wasn't much in the kitty.
Unfortunately a few inexperienced youngsters have succeeded in taking control of the Executive Committee and nothing has been done, in fact, to my mind, they are 'not maintaining the common property' according to the rules.
Now the word on the street is they want to actually reduce the levies. While that's just a rumour, I and my more experienced cohorts want to keep fees as they are, at least, or even increase them a bit (and do the work needed).
Please could someone tell me how a possible levy reduction, which is bound to be a popular suggestion, would be required to be notified in an AGM agenda or otherwise? I have read nothing about is in their Executive Committee agendas or minutes; does any discussion or formulated policy about this need to be recorded on file in our strata's books?
Thanks for reading.
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