If your scheme's financial year ends in February, next year's budget is being drafted now. With higher interest rates and fuel prices pushing up contractor, security and insurance costs, many schemes face bigger levy increases. Following the rules protects trustees from disputes and owners from surprises.
The rules that apply
These come from the Sectional Titles Schemes Management Act (STSMA) and its Prescribed Management Rules (PMRs):
- Owners approve the budget. Owners approve the estimate of income and expenditure at the AGM by ordinary resolution, and levies are set in line with each owner's participation quota.
- Interim increases are capped at 10%. At the end of the financial year, before the new budget is approved, trustees may raise contributions by no more than 10% under Prescribed Management Rule 21(3)(b).
- The reserve fund has a legal minimum. If the reserve fund is below 25% of the previous year's administrative fund contributions, the budget must add at least 15% to the reserve fund.
- A 10-year maintenance plan is compulsory. Under Prescribed Management Rule 22, trustees must prepare a written maintenance, repair and replacement plan, owners approve it at a general meeting, and trustees report on progress at every AGM.
- Special levies follow their own process. Any contribution outside the AGM-approved budget is a special contribution.
- Owners can see the books. Members and bondholders may inspect and copy the books and records, including AGM minutes.
- CSOS can step in. The Ombud can ask a body corporate to justify a levy decision and can set it aside or change it.
HOAs are governed by their own memorandum of incorporation and rules rather than the PMRs, but they face the same cost pressure and the same CSOS oversight.
Your 2027 budget and levy checklist
Use these ten steps to take your budget from first draft to AGM:
- Compare this year's actual spend with budget, line by line.
- Get updated quotes for security, garden, cleaning and insurance.
- Allow for municipal tariff and fuel-linked increases.
- Check the reserve fund against the legal minimum.
- Update the 10-year maintenance, repair and replacement plan.
- Review levy arrears and the collection policy.
- Check that the building's insurance replacement value is up to date before premiums are budgeted.
- Book the AGM date early so owners have time to read the budget before they vote.
- Decide on any interim increase (a maximum of 10%).
- Prepare a plain-language explanation of every major increase for the AGM pack.
Want a second opinion on your budget? Hewett Legacy Estates clients have achieved levy savings of up to 43%, with transparent finances and a senior manager at every AGM. Book a free levy and budget review
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- Coming next week: is your scheme, and your managing agent, compliant with CSOS and the PPRA? Subscribe to our newsletter so you don't miss it.
All posts are general information, not legal or financial advice.
