For new bodies corporate, the initial installments are set at the First Extraordinary General Meeting, and then later confirmed at the First Annual General Meeting. These installments are set in line with the disclosed budget and engagement schedule for the body corporate and can be calculated one of two ways.
- Equal installments – each lots contribution is split equally across three levy periods for the financial year.
- Pro-rated installments –each lots contribution is pro-rated due to the timing of registration, based on the total number of days in the financial year, across three levy periods.
The First Extraordinary General Meeting and First Annual General Meeting will generally approve an advanced issue for the new financial year. This is to ensure there are enough funds available during the time it takes for a new budget to be prepared and approved for the new financial year.
A budget is generally included in the disclosure material provided by the developer under the contract of sale for off-the-plan sale of the lots. The developer may decide to pay a portion of the installment for the period of time that the developer owns the lot prior to settlement with the purchaser. This is generally done by a “settlement adjusted” prepared and finalized by the solicitor upon settlement of the lot.
Once settlement has occurred, the payment of the contributions becomes the responsibility of the new owner of the lot. This responsibility will exist regardless if the lot is an investment property, if the new owner has not yet moved in, or if the new owner is waiting for a portion of construction of the lot, or common property, to be completed. If the body corporate has reduced expenses due to lots, or common property, not yet being completed, then this may be reflected in the budget due to lower or higher expenses being incurred.
At no time will owners be entitled to a rebate or amnesty from the body corporate contributions. There may be a reduction in the body corporate budget for the first period, due to timing of registration. However, a reduction in the budget may not be significant because most body corporate financial commitments are fixed or relate directly to the number of lots in the scheme. Budgets are neither a commitment nor an authorization to spend money in a particular way during that particular period.
It is prudent financial management to include expenses even though the timing of those expenses may not be fixed. At all times, sufficient funds must be collected to ensure that the long-term interests of the body corporate are protected.