OC fees are calculated using two pieces of information:
The budget presented to the AGM states the total amount of money that an owners corporation raises (that is, the total amount of money if you added every owner's annual fees together). For a small corporation, the total might be as low as $2,000 (or around $500 each, for 4 townhouses). For a large owners corporation, this total might be well over a million dollars (for example, 300 apartment owners each paying $3,500 per year).
The percentage of the total amount that each owner is liable to pay is calculated with the Schedule of Lot Liability.
To put this another way, the lot liability expresses the proportion of expenses of the owners corporation which each lot owner is obliged to pay.
A lot liability and lot entitlement schedule could look like this, for a plan with four lots:
Lot Number | Lot Liability | Lot Entitlement |
1 | 20 | 20 |
2 | 30 | 35 |
3 | 40 | 35 |
4 | 10 | 10 |
Total | 100 | 100 |
The schedule of lot liability is used to calculate owners corporation fees. To work out the percentage of the total corporation fees that everyone pays, simply divide each lot's liability by the total.
Lot 1 pays 20 lots out of 100, or twenty percent. Lot 3 pays 30%. And so on. This means if this owners corporation passed an annual budget of $2000, the fees would be broken down to each owner as follows:
Lot Number | Lot Liablity | Annual Fees |
1 | 20 | $400 |
2 | 30 | $600 |
3 | 40 | $800 |
4 | 10 | $200 |
Total | 100 | $2000 |
There might be a more complicated schedule. For example, a building comprising 300 apartments, may have each lot with varying liability between 20 and 70 each, and a total lot liability of 12,365. If this is the case, the math is the same as before. If your lot has 37 lots of liability, and the owners corporation has a total liability of 12,365, simply divide 37 by 12,365 which equals 0.299%. This means your lot would be responsible for 0.299% of the OC fees agreed on at the AGM. If the AGM agreed to raise $1M, your annual fees would be $2,992.32. (37 divided by 12,365, multiplied by 1,000,000).
Why do different owners pay different amounts?
One lot may be bigger than another, so it could have more people living there, and so is responsible for more wear and tear on the communal carpets, or on the lift, for example. There are any number of reasons.
The schedule is written by a licensed surveyor, and must be registered with Land Use Victoria prior to the building even being built, so it is up these professionals and the government body as to how the schedule is calculated.
Note that the schedule of lot liability and entitlement (see more about lot entitlement here) in the plan of subdivision can only be amended by a Unanimous Resolution, where 100% of lot owners are all in agreement. In reality, this means that the schedule will probably never change.
How are your OC fees? Speak to Melb OC about how we can save you money.