This is, without a doubt, the most common question that we are asked.
Owners corporation fees can be broken down into the following areas:
Cleaning and caretaking
Management of the owners corporation
Let’s look at each of these items individually.
In Victoria, it is a legislative requirement for most owners corporations to take out an insurance policy. The important items on the policy cover the structure of the building, and public liability, although there are a number of other policy items that you may choose to add, such as Volunteer Workers or Loss of Rent. The policy will not cover the contents of individual units, so if you want items such as your furniture, carpet, or jewellery insured, you’ll need to obtain a separate policy for those items. Landlord insurance is also available for you to take out individually if you rent out your apartment or townhouse.
Insurance can make up anywhere between 10% and 80% of your owners corporation fees, and can be one of the main reasons why owners corporation fees have risen over the last few years.
2. Common utilities
For an owners corporation featuring townhouses with a shared driveway, the utility component may be limited to electricity that powers the external lighting.
For a multi-level apartment building, the common electricity bills covered by your OC fees are required for the corridor lights, the lifts, the fire sprinklers, carbon monoxide fans (in case of an internal car park), security systems, various pumps, and so on.
Any owners corporation with a ‘bulk hot water setup’ whereby hot water is provided through a communal plant rather than individual hot water units will have a proportion of water usage paid through the owners corporation fees as well.
A building with passenger or car lifts will need to pay for an ongoing telephone subscription for the emergency line.
Internet is also sometimes provided through the owners corporation to the entire building.
3. Cleaning and caretaking
Small buildings may have a cleaner attend once a month or once a week, while larger buildings will have an on-site caretaker every day who will also assist with move ins and outs, reporting maintenance issues, and providing access to tradespeople. There will be a contract in place for this between the owners corporation and the service provider, meaning a percentage of your fees will go directly to them.
A townhouse development may have a local tradie attend once a month to mow the council strip, while a large precinct may have fully qualified horticulturalists on the site regularly to maintain a complex garden. Like the cleaning/caretaking arrangements, it is usual to have contracts in place.
6. Management of the owners corporation
Any owners corporation bigger than four lots should engage a manager to undertake the administrative functions of the owners corporation. Standard services will include convening the AGM, managing all accounts (including preparation of financial statements, issuing fee notices and paying all required invoices on behalf of the owners corporation), maintaining the OC Register in accordance with The Owners Corporations Act, arranging the insurance policy, and organising minor maintenance.
Your manager is also a consultant, who can ensure that your owners corporation is always given the best advice.
An experienced manager will charge between $250 and $450 per lot per year. This means that if your OC fees are currently around $2500 per year, only between $250 and $450 is going to the manager, while the remaining fees (over $2000) are allocated to to the items in points 1-5 above.
Are you happy with the advice provided by your OC Manager? Contact Melb OC to discuss a range of solutions for your precinct.