Setting the budget for bodies corporate can cause arguments - but reserves should always be allowed for
If there is one subject which can be relied on to cause disagreement between the owners and the trustees of bodies corporate it is the level at which levies should be set, says Michael Bauer, General Manager of IHFM, which specialises in the management of bodies corporate and home owners’ associations.

“There are,” says Bauer, “two principles here which should be observed. The first is that the levies should be sufficient to cover all the ordinary budgeted operating costs facing the body corporate - and members are usually able to accept that.

“However, the other principle is that in every body corporate there will always come a point at which some unforeseen repair, maintenance, improvement or upgrade item will become essential - and this has to be recognized and allowed for in advance.

“For this reason, wise trustees will always add to their budget a little extra sum, increasing the levy by more than it is actually required and allowing for a profit to accumulate reserves that can later be used for planned and unplanned repairs and maintenance.

“If this is done, the likelihood of special levies having to be raised at some stage, e.g. for lift repairs or the replacement of windows, can usually be avoided.”

Special levies, says Bauer, are always ‘a shock to the system’ and cause owners to resent the trustees. However, they may be the only option open to the body corporate if it has no reserves.

“It is characteristic of all successful bodies corporate that they do increase their levies on an ongoing basis and are never forced into having to raise a special levy,” says Bauer. “It is the unsuccessful schemes which invariably end up having to take this route and raise a special levy, but collecting the funds in these cases from owners can be very difficult.”

A good managing agent, adds Bauer, will always coax the trustees into recognising the possibility of major repair or other items becoming payable at some stage in the life of the body corporate and make provision for that.

At the same time, he says, members of bodies corporate should not be too complaint: they should go through the proposed budget figures which, by law, they have to receive two weeks ahead of the Annual General Meeting and they should check them thoroughly and take the opportunity to analyse them and question them critically.

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