What is a reasonable body corporate levies increase?

[klauster]

I need some help from you to answer that question – what are reasonable body corporate levies and fair increases for the next budget?

I would assume fair levy increases are around the inflation rate plus contributions to planned work like replacing hallway light with LED lights, carpet replacements, etc.

I have seen huge differences in levies based on building costs per square meter. For instance an apartment in WLG sold for 6500 $/m2 had an increase in BC levies from $2091 in 2010 to $6495 in 2013, more than three times the amount when it was sold.
Another example is 2600 $/m2 that had a levies increase from $2045 to $2903 in the same time frame.
In other words the second example has 80 Dollars less levies per square meter than the first one.

[partya]

'Reasonable' is probably a moot concept in Wellington at the moment. Realistic would be a better concept to use. At the moment, there are many BC's in Wellington facing huge increases due to earthquake strengthening and insurance increases (though these seem to have levelled off for now).

A fair levy increase is reflective of a well run BC, a complex which is on top of its LTMP (both maintenance wise and funding wise) and has no earthquake issues or any major repairs or maintenance to do. It doesn't really have much to do with m2 of an apartment as this is only an indicator of the portion of the entire levy you will pay.

[speights boy]

Surely it depends on what the increase is being allocated towards.

IE: big difference if increases are being used for sinking fund / major projects in the next 2 or 3 years.
As opposed to just general increased management / day to day running of the building.

Also there would be different attitudes to increases in a majority owner occupied building with an active and engaged committee, as opposed to majority absentee landlord one.

Why do you use sale price in comparison ?
Sale price may drop precisely because large BC levies are needed for major repair.

[klauster]

Thanks guys – true, levies include two parts; maintenance/repair & management and up-front payments for LTMP and improvements confirmed by the AGM’s budget.

Partya, yes, there is no relevance to the m2-price of the apartment as the levies are an indicator how well the BC has been ran.

I hoped to find some clues that the more expensive apartments with higher owner-occupancy rate are ran by active people living in the building. As speights boy pointed out, I have seen a building with 100% rental apartments that had in one year 41% levy increase for bad management and higher insurance premium (because of excessive insurance claims).

How about the size of the apartment complex – how much do levies in a 30 units building differ from a 300 units apartment block?

[marklowes]

Wellington buildings have had some big differences in insurance premiums which I suspect would explain that large increases for one of the apartments and smaller increase in the other. The land the building is on seems to have impacted things the most, with buildings on softer soils (which have longer periods) had larger increases following chch.

This years insurance premiums were slashed by over 30% over all buildings (approx 30) run by one major body corp management firm. Some buildings saw premiums half, un-doing most of the recent hikes. A lot of this is due to the higher premiums attracting more competition back into the market, so instead of only having one company to go with and being held to ransom on price, can get a tender from multiple and prevent being ripped off. Prices have stagnated due to insurance scares in the news, so had been and still is a good time to pick up a bargin as far as wellington apartments go. Almost all buildings have been assessed for earthquake strengthening, if the building isn't prone now, then likely 15 years+ before next re-assessment so fairly safe to buy.

[kapitibeanman]

A reasonable Body Corp levy would be an equitable allocation of the costs of running and maintaining a building to a standard that ensures the building will be fit for purpose for the foreseeable future.
It is hardly a surprise that there have been big increases over the last few years, as owners gradually in some cases begin to realise their buildings are becoming dated and are possibly deadly.
The real problem is getting to understand and quantify any issues on an ongoing basis and keeping the budget relevant.
Any Wellington Body Corp whose levies have not risen substantially over the last few years would have either very good or very useless management ie they would have foreseen problems years ago, or they still haven't taken steps to catch up.

[marklowes]

No bc would have predicted chch and the remodelling of premiums in light of it

[klauster]

Interesting – the focus on insurance. Cases I have seen earthquake strengthening was not required and insurance premium from 17k risen to 33k were less than 500 Dollars per unit. Even doubling the compliance costs for the UTA 2010 would not rectify those increases with zero pro-active contributions to LTMP and sinking fund.

I follow Kapitibeanman’s direction that inactive BCs are overtaken by the management driving BC’s expenses to extreme. Your only chance is to attend the AGM and ask questions. Unfortunately voting power is another problem especially in large BC.