Community title buildings often require owners to pay Body Corporate fees, which are divided into two accounts: the Administration Fund for routine expenses and the Sinking Fund for long-term projects like renovations or structural repairs. When unexpected costs, such as urgent repairs or major maintenance, exceed the allocated funds, a special levy may be imposed, adding an extra financial burden on top of regular payments.
A Quantity Surveyor typically sets these funds up at the start of a building’s life, assuming steady maintenance and CPI-style increases over time. However, costs can rise faster than the original budget allowed for, and a building may develop a structural fault, such as water ingress or roof replacement, requiring immediate attention.
When this happens, the work needs to be done quickly to prevent further damage, and the Sinking Fund often doesn’t have enough funds to cover it. The resulting gap is filled by a special levy on unit owners, which can be as high as $100,000. This is a significant hit to a client’s asset position and can affect property valuations.
Impact on Property Valuations
Special levies usually come to light through conversations with local agents or through a valuer’s knowledge of a particular building. In some cases, the impact shows up in the sale price itself, with a unit selling well below expectation due to the owner’s inability to cover the special levy.
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Once a valuer knows about a one-off special levy, the market value is usually reduced by that amount. However, the adjustment can vary depending on the specifics of the case. A valuer may not request Body Corporate meeting minutes as standard practice when valuing a property, but this information is important in determining the impact of a special levy.
Considerations in Family Law Settlements
If a client’s asset pool includes a community title property, a special levy can change the numbers significantly. A property that looks straightforward on paper might carry a hidden liability that only becomes clear once the right questions are asked. This is particularly important for older buildings, where Sinking Funds are more likely to be under pressure and major works more likely to be overdue.
Before a valuation goes ahead, it’s essential to check if the property is in a community or strata title scheme, if the client has heard of any special levies being discussed or imposed, and if there are any known structural issues. If the answer to any of these questions is yes, or even maybe, it’s necessary to request the Body Corporate minutes to confirm the amount and timing of any payments before the valuation is finalized.
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