Levies vs Recoveries: Why Utilities Shouldn't Be Split by PQ

A Levy Funds a Shared Cost. A Recovery Recoups a Specific One.

A levy funds something every owner benefits from more or less equally, regardless of how much any individual unit uses it – admin costs, insurance, reserve fund contributions, security. Because the benefit is shared, the cost is shared too, apportioned according to each unit's Participation Quota (PQ) as set out in the sectional title register.

A recovery repays the scheme for a cost that was caused by one specific unit's usage. Water and electricity are the clearest example: a two-person unit and a family of six sharing the same PQ do not use the same amount of water, and there's no reasonable basis for splitting that cost by anything other than what each unit's own meter actually recorded.

Mixing the two up – funding metered usage the same way you fund insurance – is where under-recovery starts.

A Municipal Bill Is Never Just "Usage"

Part of the confusion comes from the municipal bill itself. Water and electricity accounts are rarely a single line item – they're a bundle of charges, and only some of them scale directly with consumption:

All of these components land on the body corporate's municipal account as one bill. Some of it can be traced back to individual unit meters; some of it genuinely can't. Treating the whole bill as one undifferentiated cost – and either recovering none of it, or spreading all of it evenly – is where schemes get into trouble.

Why "Equally Across Units" Is Not the Same as "Fairly"

It's tempting to think that splitting utility costs evenly across units – or by PQ, alongside the rest of the levy – is the simplest and fairest approach. In practice it does the opposite:

• It subsidises high users at the expense of low users. An empty-nester couple in a two-bedroom unit ends up paying for a portion of a neighbouring family's pool top-ups, irrigation and daily showers, simply because PQ reflects the size or value of a unit, not how much water or electricity it consumes.
• It removes any incentive to conserve. If a unit's usage doesn't affect what that unit pays, there's no financial reason to fix a dripping tap, switch off unused pool pumps, or think twice about running the geyser on full blast.
• It hides the real cost until it's unavoidable. If utility costs aren't recovered as they're incurred, the body corporate is quietly carrying the full risk of the municipal bill on its own balance sheet – with no income line that moves in step with it. Eventually that gap has to be closed, usually all at once, and usually as an unwelcome special levy rather than a predictable monthly charge.

The fair, and financially sound, approach is to recover metered consumption directly from the unit that used it – the same way a landlord would recover a tenant's own municipal usage – and reserve PQ-based levies for the costs that are genuinely shared.

The One Part of the Bill That Legitimately Is Shared

None of this means every drop and every kilowatt-hour on the municipal bill should be billed straight back to a unit. Common property usage – water and electricity consumed by the scheme itself rather than inside any unit – is a genuine shared cost, correctly funded through the levy:

Because common property usage has no meter of its own, it has to be derived rather than read directly – by taking the total usage on the municipal bill and subtracting the sum of every unit meter's reading for the same billing period:

That figure – and only that figure – is what belongs in the operating budget and PQ-based levy. Everything a meter can trace back to a specific unit belongs in that unit's recovery.

What Trustees Should Be Checking

• Every owner statement shows a water and electricity recovery line based on that unit's own meter reading, every single month
• The municipal bill and the unit meter totals are reconciled monthly, not left to accumulate into a once-a-year surprise
• Meter readings themselves are checked for accuracy – an unread or frozen bulk meter can mask months of real consumption that eventually arrives as one large back-bill
• Only calculated common property usage – not an estimate, and not the whole bill – is funded through the levy

Get this split right and utility costs stay predictable and self-funding. Get it wrong, and the gap between what the municipality bills the scheme and what owners actually pay back grows quietly for months – until it lands as a special levy nobody budgeted for.