Strata levies are the ongoing cost of apartment ownership that many first-time buyers underestimate. They're not optional, they can change significantly over time, and understanding them is essential to knowing what you're really paying for a property.
This is Part 2 of our Beginner's Guide to Strata. If you haven't read Part 1 yet, start there for the basics of strata title and ownership.
The Two Funds: Admin and Capital Works
Every strata scheme in NSW is required by law to maintain two separate funds. Your quarterly levy payment is split between them.
The Administration Fund
Think of this as the building's everyday bank account. It covers recurring expenses:
- Strata manager fees
- Building insurance premiums
- Cleaning and gardening
- Lift maintenance contracts
- Fire safety compliance
- Utilities for common areas (electricity, water)
- Minor repairs and day-to-day maintenance
The admin fund should generally hold enough to cover a few months of operating expenses. If it's running close to zero, that's a sign the levies may not be set high enough.
The Capital Works Fund
This is the building's savings account for major repairs and replacements — the big expenses that don't come up every year but can cost hundreds of thousands when they do:
- Roof replacement or waterproofing
- Repainting the entire building
- Lift upgrades or replacement
- Plumbing or electrical system overhauls
- Balcony remediation
- Car park resurfacing
NSW law requires every strata scheme to have a 10-year capital works fund plan, prepared by a qualified person (usually a quantity surveyor). This plan forecasts what major works will be needed over the next decade and how much money needs to be set aside each year.
The capital works fund used to be called the "sinking fund" — both terms are still used interchangeably. What counts as a healthy balance?
How Levies Are Calculated
Each year, the owners corporation sets a budget for the admin fund and the capital works fund. The total budget is then divided among lot owners based on their unit entitlements — the proportional share assigned to each lot when the strata plan was registered.
For example, if the building's total annual budget is $200,000 and your unit entitlement is 5 out of 100, your annual levy is $10,000 — or $2,500 per quarter.
Levies are typically paid quarterly, though some schemes bill monthly or annually. They are a legal obligation — if you don't pay, the owners corporation can charge interest, register a charge against your property, and ultimately recover the debt through the courts.
Levy amounts are voted on at the Annual General Meeting (AGM). The strata committee or manager proposes a budget, and owners vote to approve it. In practice, levy increases are common — insurance premiums go up, maintenance costs rise, and buildings age.
Special Levies: When and Why
A special levy is a one-off charge on top of your regular levies, raised to cover a specific expense that the existing funds can't cover. They require a resolution at a general meeting.
Special levies happen when:
- Unexpected major repairs — a pipe bursts, the roof fails, or a building defect is discovered that wasn't anticipated in the capital works plan.
- Underfunded capital works — the building hasn't been saving enough over the years, and now a major expense is due. This is the most common scenario.
- Legal costs — the owners corporation needs to pursue or defend litigation, which can be expensive and unpredictable.
- Compliance orders — a government authority orders remediation work (e.g., cladding replacement, fire safety upgrades) that must be funded immediately.
Special levies in NSW can range from a few thousand dollars to over $100,000 per lot for major building defect remediation. The One Central Park case is an extreme example — owners face a potential $37 million bill for defect repairs.
As a buyer, checking whether a building has a history of special levies — and whether any are currently being discussed — is one of the most important parts of your due diligence. Look at the meeting minutes and financial statements for clues.
What Your Levies Actually Pay For
A common complaint among apartment owners is that levies feel high without understanding what they cover. Here's a typical breakdown for a mid-size residential building (30–60 lots):
| Expense | Typical share |
|---|---|
| Building insurance | 25–35% |
| Strata management fees | 15–20% |
| Cleaning & gardening | 10–15% |
| Lift maintenance | 5–10% |
| Utilities (common areas) | 5–10% |
| Fire safety & compliance | 3–5% |
| Repairs & maintenance | 5–15% |
| Capital works fund contribution | Varies widely |
Buildings with pools, gyms, concierges, or other amenities will have higher levies. Older buildings often have higher levies due to increased maintenance needs and rising insurance premiums. Newer buildings sometimes have artificially low levies set by the developer — watch out for sharp increases in the first few years after completion.
How Much Is Normal?
Strata levies vary enormously depending on the building's size, age, location, and amenities. As a rough guide for NSW:
- Small building (6–12 lots), no lift: $600–$1,200 per quarter
- Mid-size building (30–60 lots), with lift: $1,000–$2,500 per quarter
- Large building (100+ lots), full amenities: $1,500–$4,000+ per quarter
But the headline number doesn't tell the full story. A building with low levies and an underfunded capital works plan is effectively deferring costs — you'll pay eventually, either through levy increases or special levies. A building with higher levies and a well-funded capital works plan may actually be the better financial choice.
The financial statements will tell you whether the levies are adequate for the building's needs.
Red Flags in Levy Structures
When you're assessing a building, watch for these warning signs:
- Levies haven't increased in years — costs always go up. Flat levies usually mean the building is falling behind on maintenance or savings.
- Capital works fund balance near zero — a building with no savings is one emergency away from a special levy.
- No 10-year capital works plan — this is a legal requirement in NSW. Not having one suggests poor governance.
- High levy arrears — if many owners aren't paying, the building can't fund its obligations, and the paying owners shoulder the burden.
- Developer-set levies on new buildings — developers sometimes set levies artificially low to make apartments easier to sell. Expect increases once the owners corporation takes over.
- Frequent special levies — one special levy for a genuine emergency is normal. Multiple special levies in quick succession suggests chronic underfunding.
Next in the Series
In Part 3: The Strata Committee & Decision-Making, we cover how decisions get made in a strata scheme — committee roles, meetings, and the different types of resolutions that affect your life in the building.