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Strata Schemes – Part 2 of 3

Posted by Ricky Raad on 28 Jul 2016

In my previous blog, I described the fundamental functions of a Strata Scheme, the Owners Corporation and the Executive Committee. In Part 2, it’s time to delve deeper into the specific responsibilities of the Owners Corporation and the Executive Committee, as well as explaining the various types of levies that may apply to members of the Owners Corporation.

Responsibilities of the Owners Corporation

Under the NSW Strata Schemes Management Act 1996 the Owners Corporation is responsible for the upkeep and maintenance of all common areas in the Strata Scheme. These common areas may include lobbies, lifts, hallways, shared laundry facilities and even luxury assets such as golf courses and swimming pools. They must also ensure that fire safety measures are maintained throughout the building. In addition to these responsibilities, the legislation also dictates that the Owners Corporation must make a record of all meetings that are held and must retain accounting and financial statements of all transactions that take place for a minimum of five years. 

On the administration side, the Owners Corporation must also keep a Strata Roll recording the name of each lot owner in the scheme. The Strata Roll contains general information regarding the Strata Scheme including the postal address and Strata Plan Number of the Scheme, the names of any people renting a lot in the Strata Scheme, building insurance details and any rules that the Owners Corporation has agreed to put in place to maintain harmony amongst the residents such as parking restrictions and noise curfews (called ‘by-laws’).

Responsibilities of the Executive Committee

Many of the Executive Committee’s responsibilities are similar to those of the Owners Corporation. However, while the legislation holds the Owners Corporation responsible for the completion of the duties outlined above, the majority of these day-to-day duties are delegated to the Executive Committee. 

The only additional responsibilities of the Executive Committee are the administrational duties fulfilled by the Chairperson, the Secretary and the Treasurer, as outlined in Part 1 of my blog series.

Levies and Special Levies

In addition to the original purchase price of the lot, members of the Strata Scheme are also required to pay levies that contribute to the upkeep of the common areas in the building. If you’re a lot owner, it’s in your best interests to pay as without them, the building would fall into disrepair and consequently the market value of your lot would fall. 

Levies are usually paid quarterly and are divided into two types of funds:

  • Administrative Fund – This fund is allocated to pay the day-to-day running expenses of the Strata Scheme such as water and electricity bills, repairs, gardening, etc.
  • Sinking Fund – This fund is used to pay both expected and unexpected large-scale maintenance costs. Ideally, the amount retained in this fund should be large enough to cover any unexpected expenses – for example, termite damage.

In some circumstances the funds raised in the quarterly levies may not be enough to cover unexpected, essential expenses. If this occurs, a third type of levy must be raised in addition to the previous two levies:

  • Special Levies – This levy is issued when the administrative fund and sinking fund don’t contain the required funds to pay for an essential expense such as weather damage to the roof or a termite infestation. If the expense is non-essential, it may be postponed until the next quarterly levy is issued. 

My third and final instalment in this blog series will discuss the benefits of preventative maintenance, dispute resolution strategies and strata management solutions that are available to the Owners Corporation.

If you have any questions or would like further information on Strata Schemes, please contact: