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If you own a unit, apartment, or townhouse within a body corporate scheme, you may have come across the term ‘entitlements.’ But what exactly are they, and how do they affect the levies you pay? Let’s break it down in simple terms.
What are entitlements?
Entitlements are numbers assigned to each lot (unit, townhouse, or apartment) within a body corporate scheme. They determine two key things:
- How much you pay in levies
- Your voting power in general meetings (in instances of poll voting)
Think of entitlements as your share in the whole property. The higher your entitlement, the more you’ll pay in levies and the greater your voting power (in instances of poll voting).
How are entitlements set?
Entitlements are set by the developer when the scheme is first established. They are recorded in the Community Management Statement (CMS).
There are two types of entitlements:
- Contribution Schedule Lot Entitlements (CSLE): Determines the index or number used to apportion each lot owner’s share when it comes to paying contributions towards the administrative and sinking fund. The CSLE is also used to determine the share an owner is obligated to pay if special levies are required.
- Interest Schedule Lot Entitlements (ISLE): Determines the index or number used to apportion each lot owner’s share when it comes to paying contributions towards the insurance levies when the CSLE and ISLE are different. Where the CSLE and ISLE are the same, separate insurance levies are not required.
Why are entitlements different?
Developers assign entitlements based on factors such as:
- Size of the unit: Larger units often have higher entitlements
- Location or view: Premium units like those with waterfront views can have higher entitlements
- Facilities: Units with exclusive facilities like a private courtyard may also have higher entitlements
- Market value: Sometimes, the value of the unit can influence entitlements
- Common property: a lot’s burden on the common property – for example a larger home with more occupants will have a greater burden on the common property than a home with 1 bedroom or occupant.
The developer has some discretion when setting entitlements however emphasis should be on ensuring all entitlements are reasonable, just, and equitable.
How do entitlements affect levies?
Levies are the fees you pay to cover the body corporate’s expenses, including maintenance, insurance, and administration.
- If your CSLE is higher, you’ll pay a greater share of the total levies
- If your ISLE is higher, you’ll pay a higher contribution towards insurance levies
Example:
Imagine a body corporate has a yearly budget of $100,000 with only 10 lots in the scheme and an aggregate of 100 CSLE:
- Lot 1 has 20 entitlements, while Lot 2 has 10.
- Lot 1 would pay 20% of the total budget ($20,000), while Lot 2 would pay 10% ($10,000).
Can entitlements be changed?
Yes, but it’s not easy. Changing entitlements usually requires:
- A unanimous agreement from all lot owners, or
- A decision by a specialist adjudicator or the Queensland Civil and Administrative Tribunal (QCAT).
Typically, changes occur if the original entitlements were set unfairly or don’t reflect the actual circumstances of the lot.
Why understanding entitlements matters
Knowing how entitlements work is essential because they impact your financial obligations. If you’re buying a lot, always check the CMS to understand your entitlement numbers. This will give you a clear idea of your future levy payments and voting power.
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