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In 2011 our EC attempted to raise funds by imposing a special levy rather than contributions to the sinking fund. The purpose was to upgrade the lifts and waterproof the roof. These works were predictable and not an emergency. One of the owners (a solicitor) objected strongly and maintained that non emergency capital funding could only be raised by additional contributions to the sinking fund. In the end, the matter was resolved by renaming the special levy as a 'one – off' contribution to the sinking fund. In 2012, the EC is trying it on again! For a massive amount, upwards of $400,000, again calling it a special levy. There is little left in the current sinking fund, so the money has to be raised. However, a special levy can only be used for unexpected expenses. The works involved have been known for some time and tenders were received last October. Surely an increase in the sinking fund levy is the way to handle this. Methinks the EC is trying to cloud the matter and not put off potential buyers by pretending that the special levy is only another one off.
Doesn't this amount to an attempt to defraud?
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Hi tracer – While I don't know the details of your strata plan, I'm not sure I agree with your take on the role of a special levy. Others can talk here about the legal issues.
Our complex was neglected for many years… leaving predictable long term maintenance undone. Now there's a huge backlog of works to be done and not much in the sinking fund to pay for it. We sacked and replaced our strata manager, contracted engineers to review the main problems and are currently getting quotes and investigating whether a levy or strata finance is more appropriate/affordable to finance necessary repairs and maintenance.
Most of the repairs we have to do were predictable. Most are not emergencies, but if they're not fixed asap they will become more expensive and some could become urgent. Since the OC is legally responsible to maintain the premises, repairing the problem(s) will help us avoid the cost of someone taking legal action over works which should have been done. Plus there's the side benefit of improving the value of everyone's property investment by having a better maintained unit complex.
Your EC is answerable to all owners – the OC did elect them after all. If you're questioning their actions, hold an EGM and discuss your complaints. But an attempt to defraud?
There has to be a reason why your sinking fund was/is inadequate. In our case, it was poor management, poor advice and an obsession by owners in the past (and individuals controlling a non-democratic EC) with keeping strata fees so low that there was never enough money to fix the essentials.
Hi Gilgal1 – thanks for your reply.The issue here is not the purpose of the money, but the method of raising it. We live in a building which has been neglected for years. Our EC is stacked and have a record of running the place very poorly.
In these circumstances, surely it is preferable and appropriate to increase levies to the sinking fund, rather than attend to capital expenditure by way of ' just a one-off, never to be repeated' special levy. This would ease the burden on owners by staggering payments. At the last AGM owners overwhelmingly voted to commission a structural engineers report (not proposed by the EC) and tenders so we know what's ahead of us.
The reference to fraud was a touch emotional, however the EC reasoning is that potential purchasers would be put off if future standard levies were high, however are likely to forget a 'one-off' payment
The fact is you need to do both. You need to raise money to fix the things that have been allowed to run down and you need to start raising your Sinking Fund inputs to avoid this happening again. However, you could raise a loan to fund the immediate repairs and that spreads the load for everyone.
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
We have only had once instance of a special levy for repairs to our complex (when our insurer informed us that areas of the common property did not meet building code standards and needed attention). The repairs were not urgent ie the complex was not falling apart, but money needed to be spent. We divided our special levy over a number of months to ease the burden on owners.
Perhaps you could do that too. Owners could put in an extra amount every quarter for the special levy and that money could start to be used. Even getting reports done costs money. Then you can look at how much to raise the levies.
We have quite low levies in our complex. However, our complex is not very old. And levies have gradually increased over the years (now almost double). Though I do fear that owners believe that levies will never have to go up much in the future. Owners here have indicated that they would prefer the occasional special levy rather than large increases in levies in general. I don't think owners realise that with the complex getting older, and costs getting higher, that both special levies and raised levies will be in our future.
Fair Trading advises that the 'appropriate' way to raise funding is by way of contributions and adjustments to the sinking fund (our current sinking fund has a number of unapproved discretionary items in it). Our concern is the EC is hopeful a large special levy faces likely rejection, whereas contributions to the sinking fund may be accepted out of habit. Sounds paranoid, but this EC has a 7 year history of neglect when it comes to structural works, preferring to spend money on cosmetic things.
We live in a block of 36 units built in the 1970s. There are 7 people on the EC and they have 8 firm proxies (including one who owns 3 units). Therefore they can easily stack the EC (which they do) and control the votes on most issues.
In hindsight, we should have acted earlier. Bad apples don't come good.
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