If you’re considering buying a property in a strata scheme, whether it’s a townhouse, apartment, or unit in a shared building, there are some unique factors you need to know about. Strata living offers a range of benefits, but it also comes with its own responsibilities. Let’s explore everything you should consider before making the leap.
What Is a Strata Property?
A strata property refers to a complex of buildings or land that is divided into individual units or lots. These could be apartments, townhouses, villas, or even duplexes. When you buy a strata property, you purchase the ownership of your unit or lot, but also share ownership of the common areas with other residents. Common areas typically include things like hallways, lifts, shared gardens, parking areas, swimming pools, and other shared amenities.
You own your unit or lot outright, but you have a shared responsibility for maintaining the common property and managing the building’s affairs. This is typically managed by the body corporate or the owners’ corporation—a group made up of the individual owners of the units. The role of the body corporate is to make decisions about the management of the building, and enforce rules and by-laws that govern how the property is used.
What Do You Own and What Do You Share?
Understanding the difference between what you own and what is shared is crucial in a strata setting:
- Private Property (Your Unit/Lot)
This is the portion of the property that you own outright. It could be an apartment, townhouse, or villa, and you have full control over what happens inside it, subject to any applicable rules and regulations. You can make decisions about your interior space (renovations, interior design, etc.), but you must comply with the strata’s guidelines.
- Common Property
This includes any area or space that is not individually owned. For example, shared hallways, exterior walls, roof, gardens, lifts, and stairwells are considered common property. All the owners in the strata jointly own these areas, and together they’re responsible for maintaining and managing them.
As an owner, you contribute to the upkeep of common property through strata fees, which are mandatory payments that go toward the maintenance and management of shared areas.
Understanding Strata Fees
Strata fees are regular contributions paid by owners of properties within a strata complex. They are essential for funding the management and upkeep of common areas. These fees are typically charged quarterly, but they can vary depending on the size and complexity of the building or complex.
The money you pay in strata fees is placed into a fund that is managed by the body corporate. It is used to cover the day-to-day costs and larger-scale maintenance projects. The amount you pay is often calculated based on the size of your property (e.g., the number of square meters your unit occupies) and the proportion of the building that it represents.
There are three primary types of strata fees:
1. Administration Fund Levies (Operational Fees)
The administration fund is primarily used to cover the ongoing day-to-day costs associated with running the strata complex. These are the operational costs required to ensure that common areas are clean, safe, and well-maintained. Some of the most common items covered under this fund include:
- Building Cleaning: Regular cleaning of common areas such as hallways, lifts, entryways, and outdoor areas.
- Gardening and Landscaping: Maintenance of communal gardens, lawns, and green spaces.
- Utilities: The cost of providing services like electricity, water, and gas to common areas (lighting, lifts, and pools).
- Building Insurance: Premiums for building insurance that covers common areas against damage or destruction (e.g., from fire, storms, or vandalism).
- Routine Maintenance and Repairs: Everyday repairs and small upkeep tasks, like fixing a broken light or cleaning a clogged drain in a shared space.
The administration levy ensures that the essential services that benefit all owners are maintained regularly without unexpected financial strain. Typically, this is the most common levy owners will pay, and it ensures the complex runs smoothly on a day-to-day basis.
2. Capital Works Levies (Sinking Fund Levies)
Capital works levies (often referred to as sinking fund levies) are used to save up for significant maintenance and repairs that arise less frequently but are nonetheless essential. These funds are meant to cover larger expenses that come up every few years and that cannot be paid for out of the administration fund.
Some of the major expenses covered under this levy include:
- Roof Restoration or Replacement: If the roof is nearing the end of its lifespan, funds will be set aside to replace it.
- Exterior Painting: Buildings require regular repainting to maintain their appearance and to protect against weather damage.
- Major Repairs and Upgrades: These include repairs or replacements for aging plumbing, electrical systems, or structural issues that affect the integrity of the building.
- Building Improvements: Adding new features like an elevator, or upgrading shared spaces such as the lobby or gym.
Capital works levies help avoid large, unexpected financial burdens by creating a savings pool for future repairs. Without these funds, the owners might be asked to contribute extra money (via special levies) when a large repair is required.
3. Special Levies (One-off Levies)
Special levies are additional fees that may be charged to owners if there’s a sudden need for repairs or upgrades that were not anticipated during the normal budgeting process. Special levies are typically imposed in the case of:
- Emergency Repairs: For example, if a storm causes significant damage to the building’s exterior or a lift breaks down unexpectedly, special levies may be needed to fund the repairs.
- Unforeseen Major Works: Sometimes, a problem that wasn’t foreseen during the annual budget process can arise, requiring immediate attention. For example, significant structural issues might be discovered that need urgent repairs, necessitating the imposition of a special levy.
- Upgrades or Enhancements: If the owners decide to make significant improvements, like installing solar panels or upgrading a building’s security systems, special levies may be required to pay for these projects.
Special levies are typically one-off contributions, which can be quite large depending on the scale of the work needed. Owners may need to contribute their share in a lump sum or via installment payments.
How Strata Fees Are Determined
Strata fees are determined by the body corporate, and they are typically based on:
- The Size of the Property: Larger units usually contribute more to the overall strata fees because they occupy a larger portion of the complex and use more shared resources (e.g., electricity, water).
- The Amenities and Facilities: Properties with more extensive amenities (such as pools, gyms, concierge services, and high-security systems) will require higher strata fees to maintain and operate those facilities.
- The Age and Condition of the Building: Older buildings may require more frequent or expensive repairs, which can result in higher levies. Newer buildings, particularly those with modern, efficient systems, may require lower fees, at least initially.
- Management Quality: The efficiency and effectiveness of the body corporate and strata management team can also affect the levies. If the management is efficient and negotiates good contracts, fees may be kept lower. Poor management can lead to unnecessary costs being passed onto the owners.
- Budgeting and Long-term Planning: A well-maintained sinking fund and long-term planning for repairs and maintenance can help keep strata fees more predictable and manageable. Conversely, poor planning can result in more frequent special levies.
Pros and Cons of Strata Living
Strata living offers several benefits, but it also comes with some challenges that you should be aware of before committing to a purchase.
The Pros:
- Maintenance and Upkeep Are Taken Care Of: Strata fees cover the cost of maintaining common areas and ensuring the building remains functional. If you don’t want to worry about things like lawn mowing, roof repairs, or plumbing issues in shared spaces, strata living can be a good option.
- Access to Amenities: Strata properties often offer access to shared amenities such as pools, gyms, and security features. These are costly to maintain in individual houses but can be affordable when shared among multiple owners.
- Community Living: Strata living can provide a sense of community, where neighbors share a collective responsibility for the property’s upkeep and enjoy shared spaces together.
- Security and Safety: Many strata complexes have security systems, cameras, and controlled access to the building, which can provide peace of mind.
The Cons:
- Less Control Over Common Areas: While you have control over your own unit, you have limited say in the management of shared spaces or in the decisions made by the body corporate. Major decisions (such as repairs or upgrades) must often be voted on by the owners as a whole.
- Strata Fees Can Be Expensive: Depending on the size of the complex, the amenities offered, and the condition of the building, strata fees can be high. These fees are typically paid quarterly and can increase over time due to inflation, increasing maintenance costs, or major repairs.
- Potential for Special Levies: Special levies can be imposed unexpectedly if there is a major repair or unexpected cost. This could mean a significant financial burden at short notice.
- Rules and By-laws: Strata properties are governed by rules and by-laws that can limit what you can do with your property. For example, you may face restrictions on things like keeping pets or making certain renovations.
Due Diligence When Buying a Strata Property
Before buying a property in a strata, it’s essential to conduct thorough due diligence:
- Review the Strata Records and Financials: Ask for access to the financial statements of the body corporate and review the history of strata fees and levies. This will give you an idea of how well the building is managed financially and whether there are any upcoming costs or repairs that might affect you.
- Check the Condition of the Property: Have a building inspection done to check for any current or potential issues with the property. Look out for any deferred maintenance or repairs that may require substantial costs in the future.
- Understand the By-Laws: Review the by-laws of the strata scheme to understand what’s allowed and what’s not. For instance, if you’re planning to rent out your unit, make sure there are no restrictions on leasing or short-term rentals.
- Assess the Age and Condition of the Building: Older buildings may require more maintenance, and if a major upgrade or repair is needed, strata fees may increase.
Conclusion
Strata properties can be a great investment, particularly if you enjoy the convenience of shared maintenance and amenities, but they do come with ongoing costs that need to be carefully considered. Understanding the structure of strata fees and being aware of potential costs can help you make more informed decisions when buying into a strata complex
.
Frequently Asked Questions
1. What are strata fees, and how are they calculated?
Strata fees cover the maintenance of common areas and are based on the size of your unit and building amenities.
2. Can I renovate my unit in a strata property?
Yes, but renovations must comply with the strata by-laws. Approval may be required for structural changes.
3. What happens if I don’t pay my strata fees?
Failure to pay strata fees can result in penalties or legal action from the body corporate.
4. Are strata fees tax-deductible?
For investment properties, strata fees may be deductible. Consult a tax advisor for specific advice.
5. Can I keep pets in a strata property?
It depends on the by-laws of the strata scheme. Some properties allow pets, while others may have restrictions.
