Levies

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The NSW Government has outlined its plan to reform developer levies and contributions to unlock new housing supply, deliver vital community infrastructure and boost investment in NSW.
Planning and Public Spaces Minister Rob Stokes today announced he had appointed Productivity Commissioner Peter Achterstraat to undertake a review of the current contributions and provide recommendations for a new system by the end of the year.
“Our pathway forward includes a mix of quick wins and longer-term reforms, which will ensure NSW remains the economic powerhouse of Australia," Mr Stokes said
$70 million will also be invested to co-fund vital new community infrastructure in the high-growth areas of North West Sydney where thousands of new houses are being built.
“Our population is growing, and we need to make sure that where we’re unlocking housing supply, we’re also facilitating the delivery of vital community infrastructure so people are moving in to connected and vibrant communities,” Mr Stokes said.
A series of more immediate changes will also be released today for public comment, including measures to require councils to publish how much they have collected in developer levies and where they have been spent, new guidelines related to the State’s Special Infrastructure Contributions, options to simplify and shorten the process for reviewing s7.11 local contributions plans, and proposed changes to s7.12 levies and voluntary planning agreements.
NSW Treasurer Dominic Perrottet welcomed the appointment of Mr Achterstraat, and said the overhaul of the system would help boost the NSW economy at a critical time.
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NSW's plan for contributions reform and developer levies

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Strata corporations have a financial lifeline if owners are unable to pay levies because they have lost their jobs or their tenants have stopped paying rent due to the COVID-19 crisis, according to strata lender Lannock Strata Finance.
Lannock CEO Paul Morton said the owners’ corporation in this situation can take advantage of a product called Levy Assist, which provides a loan to help manage levy payments.
“Levies are the lifeblood of the body corporate system as they cover the cost of maintaining the building, insurance and other running costs,” Mr Morton said.
“Given the economic downturn due to COVID-19, many owners are afraid that they will be unable to pay their levies. This will mean people who maintain strata complexes such as gardeners, builders and cleaners won’t be paid.
“Levy Assist will provide a year’s funding for all owner corporations, and more if required. It enables an owners’ corporation to meet its financial obligations way past the anticipated end of the virus crisis.”
Mr Morton said the decision about levies and loans should be made at a body corporate general meeting.
“Every owner corporation is different and owners have different needs and objectives – the general meeting is the place to decide which is best for each particular group,” he said.
“Levy Assist is a safety net for strata. And if the corporation never uses it, they won’t have to pay a cent. Our Levy Assist loan is incredibly flexible and puts the owners in control. We don’t tell the corporation what amount we’ll lend, we let the owners work out what is best in their situation. There is a standard term and interest only period, but we’ll also adjust that if you want something different."
“We don’t restrict you to a three or six month period, we let you decide for what period you’ll need this assistance. We don’t ask for personal financial information, there’s no security, set up cost, bank liens, fees, charges, caveats or personal guarantees."
“We let you pay it back over time or in one hit whenever you like without penalty. Levy Assist gives control to owners. The corporation can decide each month whether to fund its needs by drawing on the loan or by using funds from other sources.”
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Strata corporations have options for financial lifeline

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In our Purchase or Pass segment this week with Charles Tarbey and Tom Panos we take a look at a potential investment that has had a very large special levy raised against it but it’s actually been paid by the vendor. 
Location: 4.6 kms from CBD and less than a km from a university, hospital Beds: 2 Bath: 2 Parking: 1 SQM: 94m Price: $765k Rent: $700/wk
Chris: So we’ve got a <a href="https://www.domain.com.au/304-50-56-mallett-street-camperdown-nsw-2050-2012362589" target="_blank">two bed two bath unit</a> with security parking in a block of 14.
The building is located just 4.6km from the CBD and less than a km to a university, hospital and the local shops, restaurants and bars. Now the property is quite large at 94sqm and features a second bathroom and balcony with a bright northerly outlook. A special levy of $50,000 per unit was raised and paid by the current owner but the work has not yet been completed and is due to be done this current year to sort out some water proofing issues and to repaint the facade. So we’ll start with the basics, Charles, what is a special levy?
Charles: Yes, well what was waterproofing for, what happened?
Chris: Yeah, something funny happened. What is a special levy?
Charles: Obviously, you’ve got to raise if there are certain issues such as that and they need extra funds. If the current funds that they have in place are not covering what they need they’ll raise it. We did a renovation in a foyer in Sydney in one of our office complexes which I’ve got a couple of floors and there was a special levy raised for that as well, so we had to make sure… it wasn’t for any other reason than beautification for example, and everybody agreed on it, we thought it would be good for the building. But you’ve really got to protect yourself too because if the owner’s already paid that, how do you know that the owner’s not going to take that back before the money’s spent which they’re entitled to do. You’d know that.
Chris: Tom with the special levies, how expensive can they be, I mean you’d obviously see it at auctions?
Tom: Well, if you’ve got a strata plan that people have been contributing very little money and because they’ve been contributing very little money there’s been no work been done and then there comes a point where serious work needs to be done, you could actually have a big special levy. But, on the other hand, if you’ve been contributing to a strata scheme at the average rate you’ll only get a special levy if there’s an emergency and that’ll be, as Charles says, for funds beyond the normal. So I think it’s an important learning that when you buy a property that you get a strata report done and you can actually see how much money’s in the sinking fund and you can actually see what work’s been done, because if no work’s been done on a property for 20 years, sooner or later work is going to have to get done and if there’s no money, you should be thinking that, hang on a second I might be up for a special levy which no one knows about at the moment.
Chris: It’s a really good point, because so many people, especially first home buyers, will go and choose somewhere because it’s maybe $500 a quarter, normal levies, rather than maybe a thousand, and say this building’s cheaper, but it’s the false economy because maybe they’re not looking after it but a thousand dollars would have been cheaper.
Tom: Absolutely, to me, a special levy is for saving. It’s allowing you to be protected for a time that the money’s going to be needed verses having to hear a bad surprise.
Chris: And these special levies, they can almost happen overnight, can’t they?
Charles: They can and if you’ve got major issues, like some of the apartment complexes around the country have got concrete cancer and it becomes noticeable. You’re talking about waterproofing in an apartment above a certain apartment and it starts to cause a problem, well they’ve got to do something urgent about it, and they’ve got to vote and generally people don’t want their property to fall apart so your stuck in that, in that process.
Chris: So the two scary things I’ve heard about special levies is… we bought apartments where you suddenly buy and exchange and there’s no talk about it at all and miraculously the body corporate gets together and between exchange and settlement they suddenly put a special levy in and then suddenly there’s nothing the new owners can do about it. To me that’s fraud.
Also, I think in these cases where there’s funds in, so if they put the 50 grand in, we’ve been told by solicitors that there’s nothing to stop that owner taking it back out. So it’s then the buyer’s will to get the clause to say, well, I’m buying it in this condition with this amount of money in strata, if you take the money out then that’s coming off the purchase price.
Charles: That’s what you’ve done, so it looks like a pretty good apartment in any case. For that price it’s quite low for where you’re saying it is located. Something like that’s a very good price.
Tom: Yeah, I would say a purchase as well because one of the pluses is you scare a lot of buyers when they hear this sort of stuff, and that’s a big plus because you’ve got less competition.
Chris: Yes, so for some people it’s a scare, for other people it’s a positive. So look I’m generally a fan of special levies as it either means they’re nipping a problem in the bud before it gets more expensive and they often improve the building and add value. It’s a great sized apartment for the money and so I would purchase.
To watch the discussion in full, <a href="https://www.youtube.com/watch?v=Ucrt2tu9pEg" target="_blank">click here</a>. 
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