Many people love the ease that apartment living provides but it’s important you know what you’re investing in when it comes to strata plans. Buying a property that’s strata titled is very different to purchasing one that isn’t, especially for those intending to live in it. There are rules and regulations by which you must behave as an owner and it’s better to know these up front before you sign any purchase contract.
What is a strata scheme?
A strata scheme is a building or collection of buildings, where individuals each own a small portion (a lot) but where there is also common property which every owner shares ownership over. The strata scheme is managed by an owners corporation (a body representing all the owners of the lots) and the owners corporation usually engages the services of a professional strata managing agent to administer the day-to-day running of the scheme.
Things you need to know
What do I own?
One of the major differences between owning a house and owning a unit/townhouse/apartment in a strata scheme is that the external walls, the floor and roof do not usually belong to the lot owner. These areas are usually common property and the maintenance and repair of these parts of the building is the responsibility of the owners corporation. Therefore, the lot owner is not able (unless they have permission from the owners corporation) to alter or renovate these areas or install services such as air-conditioning.
In most strata schemes, the lot owner owns the inside of the unit but not the main structure of the building. Usually the four main walls, the ceiling, roof and the floor are common property. The floor coverings such as carpet and fixtures are all the property of the lot owner. A lot owner effectively owns the airspace (and anything included in the airspace) inside the boundary walls, floor and ceiling of the lot.
Airspace can also extend to balconies and courtyards. You should get proper advice about ownership of courtyards and balconies as they could be in your airspace and therefore, to be maintained at your cost.
What are levies?
The role of the owners corporation is to run the strata scheme. To carry out this role, they must set up and manage an administrative fund (for day-to-day operational expenses) and a sinking fund (for long-term future expenditure). The owners corporation must estimate how much money is needed each year for the funds to cover all the expenses and needs of the strata scheme. This amount is then divided between the lot owners and becomes known as the “levies”. Levies are decided at each annual general meeting by a majority vote and vary between buildings depending on the amount of common property and up-keep. All levies are worked out based on the unit entitlements of each lot and are usually paid every quarter.
What is common property?
Potential buyers should pay close attention to the quality and finishes of a building as everything the scheme has to offer must be maintained and you will be required to contribute to the cost of upkeep (via levies). Look at the buildings exteriors, foyer area, swimming pools, lifts, tennis courts, gyms etc.
What meetings will I have to attend?
While it is not compulsory for any lot owner to attend owners corporation meetings, you may want to take an interest in the building’s affairs. There would usually be several meetings of the owners corporation each year, although the annual general meeting is the only meeting required by law, and probably the most important meeting you should attend.
While the building will be insured under the strata plan, you will need to insure your own contents under a separate plan.
By-laws are a set of rules that all people living in a strata scheme must follow and are the main way in which strata living differs from owning your own home. By-laws are made in relation to issues such as parking, noise and the keeping of pets.
Some apartment blocks and townhouse complexes will not allow the keeping of pets under their strata scheme. If you have a pet, is best to investigate this before buying.
Parking on common property is usually forbidden without the owners corporation’s permission as is parking in visitor parking if you are an owner. Therefore if you have two cars and only one car space you will have to park one car on the street or face fines.
If you’re the party-loving kind, then apartment living might not be for you — unless the rest of the building loves a party too! Under by-laws, any person wishing to entertain must take into account the peace and enjoyment of other tenants. As an owner you are responsible for the behaviour of any guests too.
Found the ideal apartment — once you rip up the old carpet and install floorboards — think again as you might be prevented from doing so under the scheme’s by-laws.
Planning on letting the unit out? No strata scheme can prevent an owner from renting out their lot but any tenant must abide by the strata scheme’s by-laws.
What to do before you buy?
Before buying into a strata scheme it is highly recommended that you conduct a strata search which will look at all the records of the strata scheme. Such a search may uncover factors which could impact on you once you become the owner.
You can opt to search the records yourself (you’ll need to make a time and date with the strata managing agent and will often have to pay a small fee) or there are companies that specialise in this service and will provide you with a report covering all you need to know. Your solicitor can often arrange this service for you, and will then go through the report to discuss any important matters.
You’ll need to investigate:
Strata roll, to ensure that all details regarding current owners are correct and up-to-date (including the payment of levies).
General documents, to look for any disputes between owners, current or proposed litigation matters involving the owners corporation or any other issues which could affect your standard of living.
Latest financial statements, in order to see that the scheme is not in debt and has enough money in the event of an emergencies or for future repairs.
Current insurance policies, to ensure the building is adequately insured.
Strata plan, to ascertain where the common property boundaries are and uncover any limitations or restrictions on the use of common property which may affect me?
Buying off the plan
When buying off the plan, no strata scheme will yet be registered for the building but you still need to do your homework. Have a legal professional look over the contract before signing or paying any deposit.
For more information on strata schemes and strata living check with the relevant governing body in your state or territory.