Once you’ve got over the shock of having complete strangers deciding where you can dry your laundry and how loud you can play your early Elvis Costello records, the biggest surprise for most first-time apartment owners are the quarterly levies.
Even if you don’t use some of the services in your building you still have to pay for them and your levies, or your share of the running costs for whole building, cover maintenance, repairs, cleaners and lifts and, in some cases, the concierge, building manager, swimming pool and even a communal hot water system. The amount you pay is based on your “unit entitlement”, a value specific to your apartment calculated on its size, outlook and position in the building.
When you buy into an established building, you will be told exactly how much you will have to pay in your quarterly levies. But in new buildings the costs are estimated at first, it’s not unknown for some unscrupulous developers to deliberately understate the expected level of the levies to entice people to buy off the plan. That’s why levies often shoot up in the first year of a new building’s life as owners realise that the developers’ estimate would only allow them to employ a jumped-up doorman as their building manager and clean the pool once a year.
So be wary of buildings that offer fantastic facilities – concierges, 24/7 security guards, lifts and swimming pools are major money sinks – but promise ridiculously low levies. It does not compute.
And look out for mixed residential and commercial buildings where a huge shop or restaurant has a lower unit entitlement than a one-bedroom flat: businesses are often attracted to buildings with the promise of low fees. You can challenge unit entitlements, by the way, but it can be a long and costly process.
In older buildings, be wary where the levies are low but there’s no money in the sinking fund (a maintenance fund all strata buildings must have). It usually means the owners have decided to save themselves money and pass on any problems to the next guy – i.e. you.
In either case you should be aware that there can be special levies, brought in to deal with unexpected problems. And don’t forget, you still have to pay council and water rates too.
Apartment living can be easy but it’s not free.
We have an apartment with two car spaces but we only have one car. Someone in our building, an up-market block, is selling a parking space and bidding has gone up to $60,000. Our apartment is two bedrooms plus a study. We’re renting the car space out for $50 a week. Should we sell it?
DM, Potts Point
This may be a question for a financial manager but you would probably make more than you do from renting the car space by selling it and investing the money. However, you also have to offset how much less saleable your apartment might be as a result. My rule of thumb is that, minimum, you need one fewer parking spaces than you have bedrooms and that puts you right on the borderline. I’d hang on to it but think about making the rent an annual lease paid in advance – that’s a tidy sum that you could invest.