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Every year it is the committee’s (or the owners’, in the event of an absence of a committee) responsibility to write a budget prior to each AGM for all owners to consider. The majority of line items on an owners corporation budget are very simple to write, and many costs are in fact fixed. Many owners corporation committees delegate the responsibility of writing the draft budget to the owners corporation manager, and then simply review and make a few changes before presenting to all owners at the AGM.

All line items on the budget fit into the following categories:

1. Existing contracts

2. Non-contracted compliance, and recommended maintenance items

3. Insurance

4. Allowance for repairs, ad-hoc maintenance and insurance excesses

5. Utilities

6. Projects for the committee to consider and undertake

The committee spend most of its time and energy on item 6, as this is where owners corporations have the most options regarding expenditure and improvements.

Note: In addition, the owners corporation may wish to add a line item to address budget repair if required, or to add to the surplus for future expenditure.

1. Existing contracts

The owners corporation may be a party to one or more contracts regarding ongoing services. These services may pertain to:

  • Owners corporation management

  • Regular cleaning

  • Building management

  • Facility management

  • Lifts

  • Car stackers

  • Fire panel monitoring

  • Landscaping

The price of these contracts are fixed, and so the budget needs to reflect the expected price of each of these contracts over the next 12 months. It is best practice to review all contacts three months prior to their expiry, to ensure that the owners corporation is getting the best value for money.

2. Non-contracted compliance, and recommended maintenance items

The owners corporation is obliged to undertake services each year, but are not necessarily under contract. It is best to speak with your owners corporation manager to see which apply to your precinct.

These items may include:

  • Essential services maintenance, including active and passive fire systems

  • Backflow testing (plumbing)

  • Mechanical ventilation maintenance, including carbon monoxide sensors and exhaust systems

  • Roof anchor point testing

  • Electrical switchboard thermographic testing

  • Circuit breaker (RCD) testing

  • Hot water plant maintenance

  • Window cleaning

  • Garage door maintenance

  • Automatic pedestrian door maintenance

  • Swimming pool maintenance

  • Gym equipment maintenance

  • Corridor carpet steam cleaning

In most cases, the budgeted allowance will be the same as the previous year, plus CPI.

3. Insurance

Your owners corporation manager should engage an insurance broker to approach the market and obtain quotes for a suitable insurance policy. Currently in Victoria, owners corporations should be allowing around a 15% increase in insurance premiums compared to the previous year, assuming that the building has neither combustible cladding present or an excessive claims history.

4. Allowance for repairs, ad-hoc maintenance and insurance excesses

The owners corporation should raise a contingency every year for the maintenance items in lists (1) and (2) above, as well as any prescribed items such as intercoms that the owners corporation owns. To decide the best contingency for your building, look at the money spent on ad-hoc repairs for each item over the last 3 years. If you owners corporation has spent $5000 per year on plumbing repairs each year, it would be unwise to lower this to $3000 for the next year, just so everyone’s fees look lower at budget time.

In our extensive experience, big buildings need big contingencies. Remember:

  • Basements do leak

  • Power surges do happen

  • Fire sprinkler pumps require new parts regularly, just like cars

  • Corridor lights need to be replaced

  • Intercoms, like computers, sometimes decide to shut themselves off

  • When lifts break down, they need to be repaired quickly

It’s always better to factor in higher contingencies than lower contingencies. After all, if the contingency money isn’t spent in the next year, that money can then be used to offset fees in the future, or to start a nest-egg for future projects. Failure to raise enough money for contingencies can lead to unwanted extraordinary levies, and a delay in emergency repairs.

5. Utilities

Look at the previous year’s expenditure for water, gas, electricity, phone lines, and waste management. If the past billing periods match the previous financial year, it’s easy to budget the expenditure for the next year. (Sometimes 5 quarters of electricity is paid for in a single financial year, for example, due to the timing of invoices sent by the retailer. Keep this in mind when budgeting for future years).

6. Projects for the committee to consider and undertake

This final section of the budget is the most important.

It is the one part of the budget which requires large amounts of discussion and decision making from the owners and the committee. The owners corporation may wish to undertake large projects such as major water ingress rectification, new windows, or combustible cladding replacement. Smaller projects such as a CCTV upgrade or even repainting car park lines may be on the table. This is the part of the budget where the committee can really decide how much or how little to spend, and whether to raise fees for building improvements, or keep everyone’s costs to a minimum.

In addition to affecting everyone’s fees, it is in this final section of the budget that will direct the committee’s responsibilities over the coming year.


Need some budget advice? Contact Melb OC on 03 9108 3910.



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