Service Charge Budgeting for Estates: The Levy Should Follow the Cost, Not the Other Way Round
Service charge budgeting for estates is done backwards in most developments, and the consequences of that reversal take years to arrive and then arrive all at once. The levy is set first — usually by the developer at a figure that makes units attractive to buyers, sometimes by a first committee that inherited that figure and did not want to be the ones to raise it — and the budget is then whatever that levy happens to produce. Security is contracted to fit it.
Maintenance is deferred to fit it. Nothing is set aside for replacement because there is nothing left over to set aside. The estate runs, the grounds look reasonable, and for several years nobody notices that every asset in the development is ageing on the same schedule with no provision for the day the lift, the pumps, the road surface and the perimeter wall all need attention within eighteen months of each other.
When that day comes the committee proposes a special assessment equal to a year’s levy, members are outraged because nobody told them this was coming, a proportion cannot pay, and the association discovers that the levy it has been collecting for eight years was never the cost of running the estate — it was the cost of running it while the bill accumulated.
Budgeting properly means starting from the other end: establishing what the estate actually costs to run and maintain over its life, apportioning that honestly across members, and setting the levy at what the sum requires. This guide covers that discipline: the cost base line by line, the reserve contribution, apportionment and its disputes, the low-levy trap, raising the levy through consultation and governance, in-year variance, shortfalls, surplus and multi-year planning.
The value of service charge budgeting for estates done from the cost base is a levy that members understand and an estate that does not deteriorate, and service charge budgeting for estates that includes the reserve is the single thing that prevents the special assessment — which is why service charge budgeting for estates should begin with the asset register rather than with last year’s levy.
Table of Contents
- Why the Levy Is Usually Wrong
- The Kenyan Context
- What Service Charge Actually Funds
- Budget First, Levy Second
- The Governance of the Budget
- Starting From the Cost Base
- Recurring Operational Costs
- Security
- Common Area Utilities
- Waste and Cleaning
- Landscaping and Grounds
- Maintenance: The Reactive Allowance
- Maintenance: The Planned Programme
- The Reserve Fund Contribution
- Insurance
- Management and Administration
- Statutory and Compliance Costs
- Contingency
- The Arrears Allowance
- Income Other Than Levies
- Apportionment Methodology
- Apportionment Disputes
- The Developer-Set Levy and the Low-Levy Trap
- Raising the Levy
- Member Consultation
- Approval Through Governance
- Presenting the Budget
- Billing Cadence
- In-Year Monitoring and Variance
- Shortfalls and Special Assessments
- Surplus Handling
- Multi-Year Planning
- Transparency and Reporting
- Systems and Costs
- Frequently Asked Questions
Why the Levy Is Usually Wrong {#levy-wrong}
The reasons the levy diverges from the cost are structural.
It was set by the developer to sell units rather than to run the estate.
It was inherited by the first committee, who did not want to raise it.
It was set to cover running costs only, with nothing for replacement.
It has been increased by a round percentage rather than recalculated from cost.
Nobody has built an asset register, so nobody knows what replacement will cost.
Members resist increases, and committees serving two years defer them to the next committee.
Arrears mean the levy collected is less than the levy set.
The gap is invisible until something fails, and service charge budgeting for estates that recalculates from the cost base annually closes it, where service charge budgeting for estates that adjusts last year’s figure by inflation carries the original error forward indefinitely.
The Kenyan Context {#kenyan-context}
Local conditions shape the budget substantially.
Security is typically the largest single line, since guarded gates and patrols are standard in gated developments.
Water infrastructure is frequently the association’s, with pumps, boreholes and storage to run and replace.
Power backup for common areas including gates, pumps and lighting.
Developer handover routinely leaves no reserve, as the handover article explains.
Levy resistance is real, since members compare their levy to neighbouring estates without comparing what each estate provides.
Arrears are common and affect what the budget can rely on.
Inflation in contractor costs, particularly security wages, moves faster than round-number levy increases.
Governance around approval varies, with some constitutions requiring member approval and others leaving it to the committee.
Apartment developments with lifts, generators and shared plant carry larger replacement liabilities than house estates.
Each affects the lines below, and service charge budgeting for estates built on assumptions from elsewhere will be wrong in predictable places, where service charge budgeting for estates that reflects the actual estate produces a levy members can be shown the basis for.
What Service Charge Actually Funds {#what-funds}
Clarity about scope prevents both omission and dispute.
Security including guards, equipment and systems.
Common area utilities including electricity, water and any backup fuel.
Waste collection.
Cleaning of common areas.
Landscaping and grounds.
Maintenance of common areas, infrastructure and plant.
Reserve for replacement of common assets.
Insurance of common property.
Management, whether an agent or the association’s own administration.
Statutory and compliance costs.
Governance costs including meetings, accounts and any audit.
What it does not fund should be equally clear, since the responsibility boundary the maintenance article describes determines what falls on the association and what on owners, and service charge budgeting for estates that included items belonging to individual owners has overstated the cost, while service charge budgeting for estates that omitted association obligations has understated it.
Confirm the scope against the governing documents, since they define what the association may charge for.
Budget First, Levy Second {#budget-first}
The sequence is the whole discipline.
Establish the cost of running and maintaining the estate for the year.
Add the reserve contribution.
Add contingency and an arrears allowance.
Deduct any other income.
The result is the total to be raised.
Apportion it across units.
The levy per unit is the output rather than the input.
Reversing it produces a budget that fits the levy rather than a levy that fits the cost, and service charge budgeting for estates done in the wrong order will always underfund something, since service charge budgeting for estates that started from a levy members would accept has decided the answer before asking the question.
Present the sequence to members, since a levy shown as the consequence of a cost base is easier to accept than one presented as a figure.
The Governance of the Budget {#governance}
Who approves the budget is determined by the constitution and should be followed.
Committee preparation.
Member approval where the constitution requires it, typically at the annual general meeting.
Committee approval where the constitution permits it.
The levy-setting procedure as the constitution specifies.
Quorum and notice requirements for any approving meeting, which the governance article addresses.
Documentation of the approval.
A levy set outside the required procedure is exposed to challenge, since service charge budgeting for estates that produced a sound budget approved improperly has a levy members can dispute, and service charge budgeting for estates approved through the correct process has authority.
Take advice on the procedure where the constitution is unclear.
Starting From the Cost Base {#cost-base}
The cost base is built from evidence rather than from last year’s figure.
Actual expenditure for the past year, line by line.
Contracts in place and their current prices.
Quotations for anything being re-tendered.
The asset register and its replacement forecast, which the maintenance article covers.
Known changes including new contracts, new obligations and price increases.
Inflation applied to lines where it applies rather than uniformly.
Historical variance showing where previous budgets were wrong.
Build it line by line, since service charge budgeting for estates that starts from the actual security contract, the actual electricity bills and the actual maintenance spend produces a figure grounded in evidence, and service charge budgeting for estates that starts from a total and allocates it has not budgeted.
Involve whoever manages each function, since the person handling security or maintenance knows what it will cost.
Recurring Operational Costs {#recurring}
Operational costs are the visible part of the budget and the easiest to get roughly right.
They recur monthly or on a regular cycle.
They are largely contracted, which means the contract states the cost.
They inflate, particularly where wages are involved.
They should be budgeted at the contracted or quoted figure with the known increase applied.
Each is addressed in its own section below.
They are what most levies were set to cover, and service charge budgeting for estates that covers them fully and nothing else is the pattern this article opened with, since service charge budgeting for estates that stops at operational costs has budgeted for the estate to deteriorate.
Security {#security}
Security is usually the largest line and the most wage-sensitive.
Guard contract cost including the number of guards, shifts and any supervision.
Statutory obligations on guard wages and their changes, which the security article addresses and which should be confirmed rather than assumed.
Equipment including radios, uniforms and any provided by the association.
Access control systems and their maintenance.
Camera systems and their maintenance.
Lighting for security.
Any patrol or response arrangement.
Wage-driven cost rises faster than general inflation, and service charge budgeting for estates that applied a general inflation figure to security will be short when the guard contract is repriced, while service charge budgeting for estates that budgeted the actual contract at its known renewal price is accurate.
Confirm the contract renewal date and price before budgeting.
Common Area Utilities {#utilities}
Utilities for common areas are variable and frequently underestimated.
Electricity for gates, lighting, pumps, lifts and any common facilities.
Water for common areas and any association-supplied water, which the utilities article addresses.
Backup fuel for generators.
Borehole pumping cost.
Tariff changes.
Consumption trends, since a growing or ageing estate consumes more.
Losses including unaccounted-for water, which the utilities article explains.
Budget from actual bills with a trend applied, since service charge budgeting for estates that used last year’s figure without examining the trend may be short if consumption rose, and service charge budgeting for estates that examined twelve months of bills knows the direction.
Waste and Cleaning {#waste-cleaning}
Waste and cleaning are contracted lines with additional costs around them.
Waste contractor fees, which the waste article addresses in full.
Bin replacement.
Bulky and construction waste arrangements where the association funds them.
Pest control.
Cleaning contract or staff for common areas.
Cleaning materials.
Occasional deep cleaning or clearance.
Budget the whole function, since service charge budgeting for estates that covers the contractor and omits skip hire, pest control and bin replacement will be exceeded, and service charge budgeting for estates that listed every cost the function incurs knows what it costs.
Landscaping and Grounds {#grounds}
Grounds are a continuing cost with seasonal variation.
Landscaping contract or staff.
Seasonal work around the rains.
Tree maintenance and any professional arboricultural work.
Irrigation water.
Plants and materials.
Equipment and its maintenance where the association owns it.
Scope discipline, since a contract that covers mowing and not pruning will produce an additional cost when the pruning is needed.
Budget realistically, since service charge budgeting for estates can allocate a substantial sum to appearance, and the cost-against-appearance judgement should be a deliberate member decision rather than a default.
Maintenance: The Reactive Allowance {#reactive}
Reactive maintenance is unpredictable in detail and predictable in aggregate.
Things fail and are repaired.
The total over a year is estimable from history.
An allowance as a fixed sum or as a proportion of the operational budget.
Age and condition raise it, since an older estate breaks more.
History informs it, and service charge budgeting for estates that examined three years of reactive spend has a basis for the allowance, where service charge budgeting for estates that guessed will be wrong in one direction or the other.
Do not let it absorb the planned programme, since a reactive allowance that is exhausted by June will consume the planned maintenance budget for the rest of the year.
Maintenance: The Planned Programme {#planned}
Planned maintenance is the scheduled work the maintenance article describes.
Servicing of plant including pumps, generators, lifts and gates.
Periodic inspection.
Drainage clearing before the rains.
Painting cycles.
Statutory inspections and certifications.
Each item costed from its schedule and its contractor’s price.
It is a defined sum rather than an allowance, since the schedule states what will be done.
Fund it, since service charge budgeting for estates that provides for planned maintenance prevents the failures that reactive maintenance responds to, and service charge budgeting for estates that omits it will pay for the consequences reactively at higher cost.
The Reserve Fund Contribution {#reserve}
The reserve contribution is the line most budgets omit and the one that determines the estate’s future.
It funds replacement of common assets when they reach end of life.
The calculation comes from the asset register: for each asset, replacement cost divided by remaining life gives the annual contribution.
The sum across assets is the annual reserve requirement.
Clustering is the finding that surprises, since assets installed together reach end of life together and the annual contribution must be enough to fund that cluster when it arrives.
Starting late raises the annual figure, since an estate beginning contributions in year eight has fewer years to fund what year twelve requires.
Separate holding, since a reserve mixed with operating funds is spent on operating costs.
Whether the constitution provides for a reserve and how it may be held warrants qualified advice.
It is the difference between a levy and a special assessment, and service charge budgeting for estates that includes the reserve contribution has funded the future, where service charge budgeting for estates that omits it has deferred the future to whoever is on the committee when it arrives.
Never borrow from it for operating shortfalls, since the provision consumed is not there when the lift fails.
Insurance {#insurance}
Insurance of common property is a recurring cost that should be adequate.
Buildings and common structures at reinstatement value.
Public liability for common areas.
Plant and equipment.
Any employer’s liability where the association employs staff.
Premium at renewal with any increase.
Adequacy review, since underinsurance can reduce claims proportionately even on partial losses, which the asset material addresses.
Budget the renewal premium, and service charge budgeting for estates that reviewed adequacy against current reinstatement cost may find the premium should rise, which service charge budgeting for estates should reflect rather than carrying an outdated figure.
Confirm cover with the insurer rather than assuming.
Management and Administration {#management}
Running the association costs money whether or not an agent is used.
Managing agent fees where one is engaged.
Administrative costs including accounts, bank charges, communication and systems.
Audit or independent examination where required or agreed.
Legal advice where needed.
Meeting costs.
Committee expenses where reimbursed.
Volunteer time is not free in the sense that an association relying entirely on it may find the work not done, and service charge budgeting for estates should budget for whatever administration the estate actually requires, since service charge budgeting for estates that assumed volunteers would do everything has budgeted for governance that may not happen.
Statutory and Compliance Costs {#compliance}
Certain costs arise from obligations rather than choices.
Statutory inspections and certifications for lifts, electrical and fire systems where applicable.
Registration and filing fees for the association.
Rates or charges on common property where applicable.
Compliance with data protection obligations where they carry cost.
Any licences the association requires.
Confirm what applies with the relevant authorities, since service charge budgeting for estates that omitted a statutory inspection has both a budget gap and a compliance gap, and service charge budgeting for estates that listed every obligation with its cost and date is complete.
Contingency {#contingency}
Contingency covers what the budget did not foresee.
A percentage of the operational budget is the convention.
It is not the reserve, since contingency covers unexpected operational events and the reserve covers planned replacement.
Its use should be authorised and recorded.
Unused contingency carries forward or reduces the following year’s requirement.
Include it, since service charge budgeting for estates without contingency is exceeded at the first surprise, and service charge budgeting for estates with a modest contingency absorbs the unexpected without a special assessment.
The Arrears Allowance {#arrears-allowance}
The levy set is not the levy collected and the budget should reflect that.
A proportion of members will pay late and some will not pay.
The levy arrears article addresses collection.
Budgeting on full collection means the budget is short by whatever is not collected.
An arrears allowance grosses up the requirement so that the expected collection covers the cost.
The allowance should reflect the estate’s actual collection history.
It is not a licence for arrears, since the association pursues them regardless, but it is realism about what will arrive when.
Include it, since service charge budgeting for estates that assumed every member pays every month has assumed something the collection record contradicts, and service charge budgeting for estates that grossed up for the actual arrears rate will have the cash the budget requires.
Income Other Than Levies {#other-income}
Some associations have income beyond the levy and it reduces the requirement.
Parking charges where levied.
Hall or facility hire.
Interest on reserves.
Recoveries from members for damage or works.
Fines where enforceable.
Any commercial arrangement including advertising or telecommunications equipment on the estate.
Estimate conservatively, since service charge budgeting for estates that relied on optimistic hire income will be short when it does not arrive, and service charge budgeting for estates that deducted only reliable income is safer.
Restricted income should be applied to its purpose rather than to the general budget.
Apportionment Methodology {#apportionment}
How the total is divided across units is defined by the governing documents and frequently contested.
Equal shares per unit.
By floor area.
By unit type or bedroom count.
By a schedule of units set at development.
Weighted for differential benefit, where some units use facilities others do not.
The constitution or title documents typically specify it, and the specified method must be applied.
Where they are silent, the position warrants qualified advice.
Consistency across years, since changing the method redistributes cost and will be resisted by those who pay more.
Apply what the documents say, since service charge budgeting for estates that apportioned by a method the committee preferred rather than the one the documents specify is exposed to challenge from any member who pays more under it, and service charge budgeting for estates that followed the specified method has authority.
Apportionment Disputes {#apportionment-disputes}
Disputes about who pays what share are among the most persistent in estate governance.
Members with smaller units objecting to equal shares.
Members with larger units objecting to area-based shares.
Members who do not use a facility objecting to funding it.
Owners of vacant or unlet units.
Developer-retained units and whether the developer pays.
Ground floor units and lift costs.
The answer is the governing documents, and where they are clear the dispute is resolved by reading them.
Where they are unclear or silent, qualified advice is needed rather than committee improvisation.
Changing the method requires the amendment process the governance article describes.
Do not adjust individually, since service charge budgeting for estates that gave one member a concession will face the same request from every other, and service charge budgeting for estates that applied the documented method uniformly has a position it can defend.
The Developer-Set Levy and the Low-Levy Trap {#low-levy-trap}
The levy inherited at handover is usually too low and the reasons are structural.
The developer set it to make units attractive to buyers.
It covered running costs during the selling period and nothing for reserve.
The developer may not have contributed for unsold units.
The first committee inherited it and raising it was unpopular.
Members became accustomed to it as the normal level.
The estate has been underfunded from day one.
The correction is a single honest recalculation from the cost base, presented with its basis.
The increase may be substantial, since service charge budgeting for estates that recalculates properly after years of a developer-set levy may show a figure well above what members have paid, and the handover article explains why.
Do it once and explain it, since service charge budgeting for estates that raised the levy by a small percentage annually to avoid a shock has carried the underfunding for years, and an estate deteriorates faster than a levy creeps.
Raising the Levy {#raising}
Increases are necessary and they should be handled as a process rather than an announcement.
Establish the requirement from the cost base.
Calculate the levy it implies.
Compare with the current levy and explain the gap.
Present the evidence, including the asset register and replacement forecast.
Show the alternative, since a levy held down means either deterioration or a special assessment later.
Consult, which the next section addresses.
Approve through the required process.
Give notice of the new levy and its effective date.
Phase where the increase is large and the constitution permits, though phasing delays the funding.
Evidence carries it, since service charge budgeting for estates that shows members a replacement forecast with the lift due in three years is more persuasive than a request for more money, and service charge budgeting for estates presented as arithmetic rather than as a demand meets less resistance.
Member Consultation {#consultation}
Consultation before approval produces acceptance that imposition does not.
Circulate the draft budget in advance.
Explain each significant line.
Explain the reserve and why it exists.
Invite questions and answer them.
Hold a session before the approving meeting where members can examine it.
Record the consultation.
Adjust where members raise something valid.
Do not adjust to popularity, since service charge budgeting for estates that cut the reserve because members preferred a lower levy has consulted its way back into the trap, and service charge budgeting for estates that held the reserve while explaining it has done its job.
Members who understand the budget accept it, and those who were handed a figure resent it.
Approval Through Governance {#approval}
The approving meeting must be properly convened and quorate.
Notice as the constitution requires, with the budget circulated.
Quorum, which the governance article identifies as the most common failure.
The resolution approving the budget and setting the levy.
Voting as the constitution provides.
Minutes recording the approval.
An inquorate approval is exposed, since service charge budgeting for estates approved at a meeting that did not meet quorum has a levy any member can challenge, and service charge budgeting for estates approved properly is enforceable.
Use the adjournment provisions where quorum fails rather than proceeding anyway.
Presenting the Budget {#presenting}
Presentation determines whether members understand it.
Line by line with the basis for each.
Comparison with the previous year’s budget and actual.
The reserve shown separately with its calculation.
The apportionment method stated.
The resulting levy per unit type.
Plain language rather than accounting terminology.
A summary page for those who will not read the detail.
The replacement forecast as an appendix, since it is the evidence for the reserve.
Clarity persuades, and service charge budgeting for estates presented as a clear document members can follow is accepted where service charge budgeting for estates presented as a spreadsheet of totals is questioned.
Billing Cadence {#billing}
How the levy is billed affects both collection and cash flow.
Monthly is common and matches how members budget.
Quarterly or annual in some estates.
Invoices issued in advance with due dates.
The levy arrears article covers collection.
Cash flow within the year, since costs are not even and a large annual insurance premium or a planned works item falls in a particular month.
Reserve contributions transferred to the separate account as collected rather than at year end, since service charge budgeting for estates that holds reserve contributions in the operating account until year end will find them spent, and service charge budgeting for estates that transfers monthly protects them.
In-Year Monitoring and Variance {#variance}
A budget unmonitored is a document rather than a control.
Actual against budget by line, monthly or quarterly.
Variance identified and explained.
Forecast to year end showing whether the budget will hold.
Early warning of overrun while options exist.
Committee review at each meeting.
Action on adverse variance, whether reducing spend elsewhere, drawing contingency or planning a member communication.
The forecast matters more than the variance to date, since service charge budgeting for estates that projects a shortfall in September has time to address it, and service charge budgeting for estates that discovers it in December has none.
Report variance to members, since transparency about a budget going off course is better than a surprise.
Shortfalls and Special Assessments {#shortfalls}
Shortfalls happen and how they are handled matters.
Causes include underbudgeting, unexpected events, arrears beyond the allowance and cost increases.
Contingency covers modest shortfalls.
Reserves should not be raided for operating shortfalls.
A special assessment is the mechanism for a genuine shortfall the budget cannot absorb.
It requires the approval the constitution specifies.
It should be explained, since members asked for an additional sum are entitled to know why.
It should be rare, since service charge budgeting for estates that requires a special assessment most years is not budgeting, and service charge budgeting for estates with a proper reserve and contingency rarely needs one.
Members who cannot pay a special assessment are a real consequence, which is why the levy that prevents it is fairer than the assessment that follows.
Surplus Handling {#surplus}
A surplus arises where less was spent than budgeted and it should be handled deliberately.
Carry forward to reduce the following year’s requirement.
Transfer to reserve.
Return to members, which is rare and administratively awkward.
The constitution may specify.
Consistent treatment, since a surplus handled differently each year confuses.
Report it, since members who see a surplus and hear nothing about it will assume it was absorbed.
Prefer reserve where the reserve is underfunded, since service charge budgeting for estates in an estate with a thin reserve has a better use for surplus than reducing next year’s levy, and service charge budgeting for estates that built the reserve from surplus has strengthened the position without raising the levy.
Multi-Year Planning {#multi-year}
A single year’s budget is a snapshot; the estate’s obligations run for decades.
The replacement forecast shows what falls due in each future year.
The reserve contribution should be set against that forecast rather than against the current year alone.
Levy trajectory over several years can be shown, so members see where it is heading.
Major works planned years ahead, with funding accumulated.
Contract renewals and their expected repricing.
Known future obligations.
Present it, since service charge budgeting for estates that shows members a five-year view with the reserve building toward the lift replacement explains the levy in a way a single year cannot, and service charge budgeting for estates with a multi-year plan gives each successive committee something to continue rather than something to reinvent.
Transparency and Reporting {#transparency}
Members fund the estate and should see the whole picture.
The approved budget available to every member.
Periodic actual-against-budget reporting.
The reserve balance and its relationship to the replacement forecast.
Arrears position in aggregate.
Contract costs and renewals.
Any special assessment and its basis.
Annual accounts.
Transparency reduces resistance, since service charge budgeting for estates that members can examine is trusted where service charge budgeting for estates presented as a total is suspected, and an association that shows its members the figures has fewer disputes about the levy.
Systems and Costs {#systems}
Budgeting capability is typically part of estate management software.
Budget by line with prior-year comparison.
Actual expenditure recorded against lines.
Variance and forecast reporting.
Reserve tracking against the replacement forecast.
Apportionment calculation.
Levy billing and collection.
Member reporting.
Pricing commonly from around KES 5,000 monthly for a small estate to more for larger developments, frequently per unit.
The spreadsheet alternative works for small estates and breaks at scale, since service charge budgeting for estates across a large development with variance monitoring and reserve tracking is difficult to sustain in a spreadsheet, and service charge budgeting for estates in a system that connects budget, billing, collection and reporting maintains itself.
Begin with the asset register and the cost base, since a system without them has nothing to budget from.
Frequently Asked Questions {#faqs}
Why is our levy probably wrong?
Because it was almost certainly set by the developer to sell units rather than to run the estate, inherited by a committee that did not want to raise it, and increased since by round percentages rather than recalculated from cost. It covers running costs and nothing for replacement — which means it is not the cost of running the estate but the cost of running it while the bill accumulates.
What is the single most important line?
The reserve contribution. It is the line most budgets omit and the one that determines whether the estate faces a special assessment when its assets reach end of life together. Calculate it from the asset register — replacement cost over remaining life, summed across assets — hold it separately, and never borrow from it for operating shortfalls.
In what order should we build the budget?
Cost base first, levy last. Establish what the estate costs to run and maintain, add the reserve, contingency and an arrears allowance, deduct other income, then apportion and derive the levy. Starting from a levy members would accept and fitting the budget to it decides the answer before asking the question.
How do we get members to accept a large increase?
With evidence rather than a demand. Show the replacement forecast with the lift due in three years, show what the current levy funds and what it does not, explain the alternative of deterioration or a special assessment later, consult before the approving meeting, and approve properly through governance. A levy presented as arithmetic meets less resistance than one presented as a figure.
Which apportionment method should we use?
Whichever the governing documents specify — that is not the committee’s choice. Where they are silent or unclear, take qualified advice rather than improvising. Never adjust individually, since a concession to one member becomes a request from every other, and changing the method requires the constitutional amendment process.
How much contingency and arrears allowance?
Contingency as a modest percentage of the operational budget, distinct from the reserve. The arrears allowance should reflect your actual collection history, grossing up the requirement so expected collection covers the cost. Budgeting on full collection assumes something the collection record contradicts.
Should we phase a large increase?
Only if the constitution permits and only knowing that phasing delays the funding. An estate deteriorates faster than a levy creeps, and a small annual percentage to avoid a shock has carried the underfunding for years in most developments. One honest recalculation, explained properly, is usually better.
What happens to a surplus?
Handle it deliberately and consistently — carry forward, transfer to reserve, or in rare cases return — and report it, since members who see a surplus and hear nothing assume it was absorbed. Where the reserve is thin, service charge budgeting for estates that moved surplus to reserve has strengthened the position without raising the levy.