Special levies on community and strata title properties can significantly impact property valuations and family law settlements. These one-off charges are imposed on owners when the building’s funds are insufficient for unexpected or major works.
Understanding Special Levies
A special levy is an additional cost charged to owners in a community title building. It is separate from the regular Body Corporate fees, which are typically split into an Administration Fund for daily running costs and a Sinking Fund for future maintenance projects.
These funds are usually set up by a Quantity Surveyor at the building’s inception, based on assumptions about maintenance costs and inflation. However, actual expenses can sometimes exceed the budgeted amounts. This may happen due to rising costs faster than anticipated or because of unforeseen structural issues, such as water ingress or roof replacement.
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Identifying Special Levies
Special levies appear in the Seller Disclosure Report, which includes Body Corporate records. Sellers cannot hide this information, and it affects the client’s asset pool. A valuer may learn of a levy through local agents or their own knowledge of a building.
These levies can shift a property’s value by significant amounts. The adjustment may vary depending on the case. In some instances, a property sells below expectation because the owner could not cover the levy and sold with the debt attached.
For older buildings, sinking funds are more likely to be under pressure, making special levies more common. Asking about any discussed or imposed levies early saves time. It also protects clients from being blindsided by an unflagged liability.
Impact on Property Value
Once a special levy is identified, a property’s market value is usually adjusted downward by the amount of the levy. The size of this adjustment can vary depending on the specific circumstances of the case. A valuer typically does not request Body Corporate meeting minutes as standard practice, so this information may not be immediately obvious.
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Why This Matters in Family Law
In a family law settlement, a special levy can substantially alter the value of a client’s asset pool. A property that appears to have a clear value on paper might carry a significant hidden liability. This is especially relevant for older buildings, where sinking funds may be under greater pressure and major works are more likely to be overdue.
Before a valuation is finalized, it is important to ask specific questions. Check if the property is part of a community or strata scheme, and whether any special levies have been discussed or imposed. Also, inquire about known structural problems. If the answer to any of these questions is yes, request the Body Corporate minutes to confirm the levy’s amount and timing.
A special levy can drastically change a property’s value. Addressing this early in the process saves time and protects a client from an unexpected liability that could have been identified with the right questions.
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