Strata Cost Centres & Reserve Schedules: Why One Size Rarely Fits All

In strata management, budgets are often reduced to a single bottom-line figure for both the administrative and reserve funds. For many schemes, that approach works. But in mixed-use schemes, it’s rarely that simple.

Take a common example: a commercial lot on the ground floor with a completely separate residential building above. The residential owners enjoy access to facilities such as a pool, gym, lift and roof garden. The commercial owner does not.

In this scenario, it would be neither fair nor reasonable for the commercial owner to contribute to the ongoing maintenance of these facilities, or to a Reserve fund intended to replace them in future years. This is precisely where cost centres (or schedules) become critical. These should be clearly determined within the by-laws and referred to in the IGM notice.

Why clear cost centres matter

Once cost centres are established, it’s the strata manager’s role to ensure invoices are allocated correctly. That task is only possible when there are clear instructions in place. Equally important is ensuring those instructions are provided to any consultant preparing a 10-year plan or Reserve fund forecast. Without clarity, Reserve schedules can quickly become inaccurate with unintended cross-subsidisation leading to notoriously complicated disputes down the track. Trying to unpick and reallocate expenses years later is like trying to unbake a cake.

It’s not just residential vs commercial

Cost centres aren’t limited to separating residential and commercial use. Many schemes require additional, purpose-specific schedules. A good example is car stackers. Owners who benefit from the use of a stacker should be the ones contributing to its annual maintenance and long-term maintenance (e.g. a 5-yearly hydraulic fluid replacement). These schedules have their own unit entitlement apportionment, usually based on the number of spaces, and have their own dedicated reserve fund. This level of detail ensures costs are borne by those who actually use the infrastructure.

For those unfamiliar with the 2022WASAT103 Poland v Dolphin Apartments case, the Tribunal concluded that it held the jurisdiction to resolve the matter and determined that certain by-laws granted exclusive use of upper-floor amenities to residential owners. Consequently, the Tribunal issued a declaration that the applicant had been overcharged $20,011.16 in levies. The final orders mandate that the Strata Company correctly separate future expenses between retail and residential cost centres.

2022WASAT103.pdf

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