It a building is well maintained the usual increase of annual Body Corporate fees are 1-2% which covers inflation. Ensure you look at the Long Term Maintenance Plan to see what is coming up and if extra costs may occur during that period. A lawyer can assist you with this if need be.
Over time everything increases in price, for example buildings require cleaners for common areas, rubbish collectors and so on. In turn to cover these costs the Body Corporate need to increase their fees.
There are two major factors to watch out for to avoid more than the expected annual increase in fees.
Firstly, a building that is not well maintained may need extensive work to bring it back to where it should be, this will in turn effect the Body Corporate fees and they may rise significantly.
The second factor is to have a look at, is the Long Term Maintenance Plan for the building and seeing if funds are being allocated to save for any major changes that are required to be completed in the building, for example the need of new lifts. If the Long Term Maintenance plan is not being followed or funds aren’t being allocated to it, an unforeseen expensive cost may occur at the cost of apartment owners.
Good day, Andrew Murray here from the Apartment Specialists, talking about Body Corporate fees, how much do they go up each year? Now if the building is looked after properly it should go up with inflation, or remain pretty consistent, and inflation is generally about 1-2%. So not much. Now the reason for this is because, when you think about it, when I was small– okay 20 years ago, when I went to buy a can of Coke, when I was younger it was $1. Now it’s probably about $1.60. So over a long period of time, things go up.
You think about a Body Corporate, you’ve got cleaners, you’ve got rubbish collectors, over time their fees will slightly go up as wages go up, and things like that, which is perfectly normal. Now the big thing about a building, and the concern is – and this comes under when you’re going to purchase – is when a building is not looked after. And this is when Body Corporate fees can go up substantially.
So what do I mean by this? I mean let’s say, in two years time, the lift needs to be replaced. There’s a long term maintenance plan, and you can see in the long term maintenance plan it needs to be replaced. The cost that’s estimated is, say $200,000. Then when you look in the long term maintenance fund, or the contingency fund, and there’s, say $30,000, well you know that there’s going to be a shortfall, and money’s going to have to be raised.
Which will mean in that period you’re going to have an increase in Body Corporate fees to raise that money. So the key here is looking at the long term maintenance plan when you go to purchase, and the financials, specifically the long term maintenance fund, and the contingency fund, and see if they match up. I mean, how healthy, financially is it? And do they match the things that have got to, and I mean when that building needs to be painted in five years time.
Is the Body Corporate following that long term maintenance plan, and putting money aside each year for that time? Because if not, you Body Corporate fees could raise substantially and so that’s an unknown amount. And that means you’ve bought into the wrong building, or didn’t use your due diligence properly.
Make sure the Body Corporate that you’re going in to buy into is following the long term maintenance plan, and you can easily ask your lawyer to check this, or put this in as a condition when you purchase.
I hope that helps, Andrew Murray, Apartment Specialists, cheers.
If you have any questions, flick me an email at firstname.lastname@example.org or call +6421 424 892 and I’ll be happy to answer your queries.