Levies are voted on and approved by the Corporation (those owners in attendance and forming a quorum) at the Annual General Meeting (AGM) each year. They are based on budgets typically prepared by the Community/Strata Manager.
But it is the owners who vote on and approve budgets. This determines the levies they need to pay each year to maintain their building. All owners need to pay levies to contribute to the running costs of the building and its surrounds.
The Community Manager typically prepares a budget to present at the AGM, which will include expenditure and funding requirements for the Administration Fund and the Sinking Fund.
The Administration Fund is for regular recurring expenditure and includes payments to service contractors, management fees, insurance, utilities, ongoing maintenance and repairs and the upkeep of common property.
The Sinking Fund is a capital works account for the Corporation. This fund covers future non-recurring maintenance expenses, such as painting, or any unexpected major expenses, or the purchase of new Corporation assets.
The budget is based on a Sinking Fund Analysis, or a Statement of Expenditure, which is a compulsory requirement of the legislation for Corporations larger than 6 lots.
Having a healthy Sinking Fund reduces the need to raise a ‘special levy’ to pay for unexpected costs. It makes good management sense.