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How do we placate owners [in a new building] about strata levies that were clearly underestimated and make them understand that this is only the ‘honeymoon’ year, and they will all likely go up by 20-25% next year due to the first year not including Capital works budget and extra required for other things mentioned.
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Deflect blame to the developer who did what developers do when they sell units: They set the levies artificially low to attract sales and now the new executive committee has the unpleasant task of proposing a budget with them to more realistic levels. Also explain that some major OC costs are going up substantially every year such as insurance. Just explain the reasons clearly and you will probably bring people along. Emphasise that you are all in this together and you don’t like having to pay higher levies either. Strata is us together, not something external imposing on us.
You can appeal to logic
A well prepared budget will show where the money is going. That also needs a well prepared capital works plan.
However this is also any emotional issue. You should not try to convince 100% of the owners of the correctness of the above.
Remember you only need a majority of votes to pass a motion. When you feel you have the numbers , put it to the vote.
Having had recent experience in a new strata building, albeit a commercial property, I can say the initial budget , usually prepared by the anointed strata manager, is woefully under budget.
What has surprised me for new buildings is the amount of money that needs to be spent on certifying on an ongoing basis all sorts of building equipment ( afss, co sensors, height safety equipment, plumbing etc etc)
It’s taken about 4 years to identify and budget for all this.
Whilst the strata manager should have budgeted for these things, it’s also fair to say that every building is different, AND like you they are dealing with a non existent building till it’s finished.
There is a provision under NSW strata law that if the developer presents a budget that is seriously under estimated – to keep levies low to help sell their properties – the Tribunal can order them to compansate the owners.
The informal advice I’ve had on that is that the cost of pursuing a claim would outweigh any benefit. So why have the law in the first place if it is so impractical.
The next review of strata laws should establish benchmarks – maybe CPI plus 5 per cent – after which the developer has to make up the shortfall for the first three years.
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.
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