What is a differential levy

The permitted Administrative and Sinking Fund levies raised by Owners Corporations (in NSW) are both differential because the units of entitlement for each lot, upon which they’re based, differ from one (lot) to another.

I’m aware of some Owners Corporations who have attempted to raise different levies and to apportion those on some other basis in circumstances such as where some Owners don’t have access to common facilities such as an elevator and do not want to contribute to its maintenance, but so far as I’m aware those types of additional levies are illegal.

If you could provide some additional information on the type of differential levy you’re referring to, for what purpose it’s raised, to which Fund it’s paid, and upon what basis it’s been authorised by the Owners Corporation, then I’m sure you’ll receive some more complete responses. 

Newlsie –  you haven’t said how the “subscription” is raised, on what basis, or where it’s held, but in an attempt to respond I’ll work on the assumptions that your Plan is in NSW, that the equipment in the common laundries is owned by the Owners Corporation (O/C), and that what it was trying to achieve via the “subscription” was a user-pays approach to the necessary repairs and maintenance of all that.

If that’s correct, then whilst I understand the rationale the “subscription” is in my opinion a differential levy and is therefore illegal as the special by-law is trumped by the Strata Schemes Management Act (a “superior law”), and in particular by Part 3 where the detail of what monies an O/C can raise, how it must be calculated, to which of the two (2) permissible Funds it can be deposited, and for what types of expenditures it can be withdrawn and used is prescribed.

It sounds to me that as only 50% of the Owners currently subscribe, the system’s not working too well!

What should be happening is that as with all expenses, the O/C calculates the amount of money needed to properly maintain its Common Laundries and the equipment therein, collects that together with amounts for all other budgeted items via its normal Levy Contributions, appropriately deposits those monies, and then expends it against accounts such as “maintenance of plant and equipment” and “replacement of plant and equipment” within the Administrative and Sinking Funds respectively.

In that way the O/C is able to track the amount of expenditure necessary to properly maintain the laundries, to share that deferentially amongst all Owners in accordance with the units of entitlement for their Lots, and to possibly convince the majority of those to have the drainage repaired and to accept a compliant pay-for-use system by coin or token operation of the machines, and with the monies collected being shown as income from “use of plant and equipment”.

All that said, nothing’s out-of-bounds with matters Strata until the proverbial hits the fan and/or until someone complains, but in my opinion the little extra effort necessary to do things the right way is almost always justified by the benefits.