If you’re buying or renting a property, you’ve undoubtedly heard of the term ‘strata title’, but what exactly is it and what are the pros and cons of owning a strata title property?
When you purchase a house, you purchase the land title or the entire block of land. However, if you buy a property that is part of a strata title, you not only own the unit, apartment or townhouse (called the lot), but you also share the ownership of what’s called ‘common property’ which includes areas like foyers, lifts, fences, gardens and swimming pools. These areas are the shared responsibility of all property owners of the building.
Strata title properties come in a variety of forms, with residential apartments and townhouses the most common, but they also exist in commercial property, serviced apartments, retirement villages and retail.
According to Canstar “there are more than 270,000 strata schemes across Australia, making up over 2 million lots”. In other words, strata title properties represent a significant part of our real estate landscape.
Understanding what your responsibilities are when you buy a property with a strata title is important. As a lot owner you are responsible for:
An owner’s corporation or body corporate in a strata building maintains the common property. This is a legal entity and is usually made up of all lot owners (not tenants). In some cases where the property has a mix of commercial and residential lots, it may have multiple committees to divide responsibilities and costs. In many cases, the owner’s corporation may vote for lot owners to form a committee and give them specific responsibilities to make decisions.
An owner’s corporation can make rules which are binding on the owners and tenants regarding the use of common property. They can also introduce by-laws that suit the residents of the strata scheme. A by-law must not be too harsh or oppressive and may include allowing pets or sub-letting, for example. Any by-laws must be formally adopted by the owner’s corporation and legally registered.
Strata levies are collected on behalf of the owner’s corporation quarterly with the amount calculated and agreed on at the Annual General Meeting. The finances are used for the management and operation of the building with money put aside for ongoing maintenance and repairs. It is in the interest of all owners to keep the building well maintained for increased capital gain and enjoyment of the complex.
Each owner is required to pay their fees and face interest penalties if they remain unpaid within one month of the due date. If an owner has outstanding levies when selling their property, the fees will be deducted from the final settlement amount.
When working out whether a strata title property is right for you, you need to consider your responsibilities as a lot owner. Here is a look at some of the key advantages to owning a property with a strata title.
Torrens title means you are the sole owner of your property and can choose to make any changes or maintain the property at a time that suits you. With strata, any maintenance to common property is outsourced by the owner’s corporation and covered by strata fees.
There are no rules (within reason) restricting owners of a Torrens property such as owning a dog or cat, having a BBQ on your veranda or hanging washing over the balcony. A strata managed building can see less disputes between residents due to the fact there are some rules in place outlining the expectations of occupants.
The owner’s corporation can hire a managing agent for their block of units, known as the strata manager. Not only does this person need to know how to carry out their role but also deal with a number of different personalities.
Some of the skills a strata manger needs are, managing finances and budgets as well as paying bills on time. They are also responsible for collecting the strata levies from the property owners. A broad knowledge of the rules and regulations that govern a strata building, and any compliance requirements is essential.
A manager should engage and retaining reliable and trustworthy contractors and tradespeople and liaise directly with them for any jobs.
It is possible to self-manage a strata, which has the benefits of residents retaining more control over project management and strata levies, but it comes with a lot of work.
Having good strata management is essential to ensure a property is maintained to a good standard. The quality of the property’s maintenance can impact the long-term value of the property and impact the liveability of the property for its residents.
Frustrated tenants, unable to contact strata management, badly organised or irregular meetings, fees in arrears, bad financial management and neglected maintenance are all glaring signs of poor strata management.
A good manager will take a proactive approach to maintenance through regular inspections to avoid problems forming. The complex should be clean with all facilities in good working order at all times.
Check that repairs for your property are being well managed by reading over previous meeting minutes to see how long it takes repairs to be done. Having a walk around common areas and noticing any problems that have gone unchecked is a good way to measure the effectiveness of a manager.
A strata manager also needs to be good with people and work out conflict between resident in a professional and considerate way.
If you’re thinking of buying into a strata property having an understanding as to what this means and what your obligations are is important. We hope this article has helped shed some light on what it means. If you want to talk about this in more detail connect with your local Ray White Property Manager.
Ray White and its subsidiaries, together with their directors, officers, employees and agents have used their best endeavours to ensure the information passed on in this document is accurate. However, you must make your own enquiries in relation to the information contained in this document and seek advice from your financial advisor, broker or accountant to ascertain its application to your circumstances.