All apartment owners pay it - but what are the Body Corporate fees actually used for?

It varies from building to building, from city to city, from region to region, and also on the number of units in a building. However in a recent presentation by SSKB director, Paul Wood, he shed light on 'Where does the money go?' comparing 180 Gold Coast buildings with over 10,300 units from 2009-2012. This is a very thorough overview and what I particularly like about it is that it examines a large range of buildings over a representative timeframe.

Although the Gold Coast was the focus of his discussion, the general dynamics and expenditure for large buildings there would roughly align to the situation in Brisbane's CBD.

Body Corporate fees are divided into two sections:

1. the administrative fund: this pays for routine running expenses of the building
2. the sinking fund: the monies in this fund pay for major planned items that lies outside the daily running of the building e.g. refurbishing or renovating the common areas such a lobby, pool area, function rooms

What are the Body Corporate fees used for?

While the percentage distribution of costs is roughly similar for buildings with up to 200 units, there is a decisive different once you examine high-rise residential complexes.

Administrative Fund:

Up to 200 units the main bulk of the Admin Fund expenses are for the Resident Manager (40%), followed by electricity & gas (together 18%), with all other costs below 10%.

On the other hand, once you examine buildings with more than 200 units the Resident Manager  costs still remain the highest cost but only make up 21% of the admin fund expenditure. The biggest jump is in cleaning costs: it accounts for 15% of expenses in high-rise buildings as is second highest cost, while for smaller buildings it's only 2%. This is logical as the basic costs, time, safety equipment etc. needed for cleaning such a building as 80-level Q1 is very different to a low-level apartment block.

"It's important to find that balance between spending, finding value for money and ensuring facilities and services are kept up to the standard they should be-maintaining the value of all lot owners investments," Woods concluded.

Sinking Fund:

General building expenses and painting costs are about equal (21% and 20%) as the largest expenses in mid-sized buildings, followed by 'others', plant & equipment and pool costs.

For high-rises it's similar but with painting the largest expenditure. Again, this has to do with the height, safety issues etc. which make it more costly than for lower-level buildings. Other items are similar, except for the higher costs associated with lifts in high-rises.

What should Body Corporates do?

Paul Wood's top 5 tips for Body Corporates are:

1. Set a realistic budget

2. Ensure all reports are up to date

3. Engage with the resident manager and body corporate manager

4. Investigate bulk utility & recovery options

5. Set budgets that ensure owner's investments are maintained.

Are the Levies high compared to other buildings?

This is a frequently-asked question by property buyers across the board, as well as many sellers. Paul Wood's advice is "You must compare Apples with Apples".

Most of Brisbane CBD buildings have Body Corporate rates that are 'much of a muchness'. By that I mean that similar buildings of similar ages usually have similar Body Corporate fees. However, a heritage building may have other characteristics and therefore other associated Body Corporate fees than a newly-completed high-rise. Wood recommends www.stratastats.com.au as a useful comparison tool.

View Paul Wood's presentation at 'Where does the Body Corporate money go?' presentation.