Strata Levies - Are owners paying too much?

Strata title is a popular form of property ownership in Australia but it comes at a cost. When you purchase a strata unit you pay annual levies for maintaining common property in addition to the purchase price. These ongoing costs can be significant with newer developments incorporating top-class facilities like heated swimming pools, gymnasiums and even golf courses.

"If you think you are paying too much in strata levies than you might not be too far wrong," say Ruth Cohen and Avron Newstadt, consultants with Expense Reduction Analysts .

Cohen and Newstadt were recently called to review strata costs for one of the largest residential communities in Sydney "The Waterfront" at Homebush Bay adjacent to Olympic Park. The developer Payce Properties decided that as the community had reached a level of maturity with over 1300 units built they needed an independent assessment of all the strata and community association costs. Payce was also keen to provide greater transparency of the costs for items such as landscaping, insurance and cleaning to owners and prospective purchasers alike.

The proposal carried no financial risk to existing owners or Payee as Expense Reduction Analysts is rewarded on a no savings, no fee basis. "We don't charge hourly rates," says Cohen. "Instead, we split the future benefit of any savings we find with the client."

"Once we identified the service and expertise that Expense Reduction Analysts were able to deliver I had no qualms about giving them free reign to work with the various strata's and the Community Association," says Basil Klevansky, General Manager of Payee. "The fact that they would only be paid a percentage of what they saved was a no-brainer."

The existing supplier contracts had been put in place over time and as with all new communities and strata buildings it takes time for a community to mature and identify the exact nature of the services required. Expense Reduction Analysts accounting services business took a rigorous approach to reviewing and benchmarking costs, interviewing and involving key stakeholders and incumbent suppliers, introducing a supplier selection process and introducing service agreements to ensure consistent high-quality delivery from suppliers.

"As the assignment progressed, we needed to liaise with many stakeholders; the owners represented by the Community Association, the strata management company as well as the developer, who was still selling units in the project and therefore demanded a continued high standard of appearance for all of the buildings," says Newstadt.

Expense Reduction Analysts home based business was able to obtain buy-in from all stakeholders by ensuring they took a win-win approach to the project. The result achieved was nothing short of astounding with average savings of 38% for insurance, cleaning, and grounds maintenance, all without affecting the quality and efficiency of the services provided. Furthermore, the owners and residents have now been given complete transparency of the costs involved across all of the areas reviewed.

Expense Reduction Analysts business services franchise found that on the whole, power and security services for the complex were already competitively priced. However, when their expertise was applied to the tender process, savings of 30% were achieved on insurance charges. Importantly, all strata policies now have a common renewal date which allows greater flexibility in negotiating rates for the group as a whole," says Cohen.

The outcome in grounds maintenance costs was also considerable with savings of 40% achieved and all parties were satisfied with the new supplier and immediate visible improvement to the grounds. Cleaning services provided the largest avenue for savings with a 45% reduction in cost.

Expense Reduction Analysts has been asked to review further cost categories as other contracts fall due for renewal. "It has been a great outcome for the residents with reduced costs and greater service and accountability being given by all the service providers," says Newstadt.