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Most owners are familiar with regular contributions, commonly known as levies. However, when unexpected expenses arise or additional funds are needed outside the normal budget cycle, the body corporate may need to raise a special levy to bridge the gap.
A special levy is usually a one-off payment that owners are required to make in addition to their regular levies. Unlike annual levies, which are based on the body corporate’s approved budget, a special levy is raised to fund unexpected or extraordinary costs that weren’t accounted for when the budget was set.
Special levies are legally enforceable once properly approved by the body corporate and must be paid by owners in accordance with their lot entitlements.
Why Do Special Levies Happen?
There are several common reasons why a body corporate may need to issue a special levy:
1. Unexpected Repairs or Damage
Sometimes buildings experience damage that isn’t covered by insurance or needs to be addressed before a claim is processed. This could include:
- Structural issues such as foundation movement or roof failure
- Fire, water, or storm damage that exceeds the insurance excess
- Emergency plumbing or electrical repairs
- Emergency works resulting from a catastrophic event where insurance does not cover the event
2. Underbudgeting or Inadequate Sinking Funds
If the sinking fund has not been properly maintained or if previous budgets underestimated the actual costs of upcoming works, there may be insufficient funds available for necessary capital projects.
3. Legal or Compliance Costs
A body corporate may encounter unforeseen legal or compliance-related expenses. These can include tribunal or court proceedings, dispute resolution costs, or expenses required to comply with updated building regulations or safety standards.
4. Improvements or Owner-Approved Upgrades
From time to time, owners may vote to carry out improvements that go beyond basic maintenance. Projects like installing solar panels, upgrading communal security systems, or enhancing shared spaces often fall into this category. If these improvements weren’t included in the original budget, a special levy may be necessary to fund the works.
How Are Special Levies Approved?
Special levies must be formally approved by the body corporate before they can be charged to owners. This usually occurs through an ordinary resolution passed at a general meeting. The committee or a lot owner proposes a motion to raise the funds, which is then included on the agenda for either the annual general meeting (AGM) or an extraordinary general meeting (EGM).
The motion must clearly outline the reason for the levy, the total amount to be raised, how the funds will be used, and how much each lot is required to contribute, typically based on lot entitlements. For the motion to pass, a majority of votes cast must be in favour.
Once the resolution is passed, the special levy becomes enforceable. The body corporate will issue notices to all lot owners, and payment becomes due in accordance with the terms set out in the resolution. If an owner fails to pay, the body corporate can take recovery action in the same way it would for unpaid regular levies.
How Special Levies Work Once Approved
Once a special levy has been properly approved, typically by ordinary resolution at a general meeting, it becomes a binding financial obligation on all lot owners.
Following approval, the body corporate will issue formal levy notices to each owner. Payment is usually required in a lump sum, though in some cases, the committee may allow staged payments or extended deadlines depending on the nature of the works and the financial impact on owners.
Importantly, once issued, special levies are enforceable in the same way as regular levies. If an owner fails to pay by the due date, the body corporate has the legal right to initiate recovery action, which may include interest charges, legal fees, and potentially court proceedings.
Special levies can come as a surprise so if you are unable to pay a special levy, it is also worth discussing this with your committee and body corporate manager and setup a payment plan.
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