Buying a unit, villa or townhouse? More often than not, you will also be buying into a strata scheme.
It can feel daunting, so here are some of the basics about strata and what you need to know before buying in to a strata scheme.
What is strata?
Strata is a system of legal ownership for owning a portion or part of a building or structure. It is commonly used for property like units, townhouses and villas.
Individual lots or “units” are owned privately. The owners collectively form an Owners Corporation which shares ownership and responsibility for “common property” or “common areas”. This usually includes the exterior of the building (like the roof, windows, exterior walls and exterior doors), foyers, lifts and stairwells, gardens, pools, rubbish rooms, communal laundries, gyms and driveways. And the Owners Corporation elect a committee to deal with the everyday running of the building.
How is strata different to other types of property ownership?
A purchaser of a Torrens Title property owns the house and the land on which it is built. They are the sole owner, subject to any mortgage interest held by the bank. The owner is responsible for maintaining the inside and outside of the house and also the block itself.
Some units in older buildings in established areas such as Killara and Turramurra are sold under company title, but this is increasingly rare as many have converted to Strata schemes, which were introduced into Australia in 1961. Before this, company title was used to purchase shares in a building, providing buyers with exclusive use of a unit and shared used of company property.
Where a person buys a strata property, they are responsible for maintaining the inside of the property, and must share the expense of maintaining common areas. These expenses are paid for through levies which are usually paid quarterly. If there are special larger projects, such as rebuilding a driveway, or rendering exterior walls, then a special levy will often be needed to raise extra funds.
Each strata scheme is also governed by model bylaws, and these are often customised with specific bylaws for individual schemes on everyday things ranging from noise through to where you can park or hang your washing. The owner will be able to make decisions about the common areas through voting as a member of the Owners Corporation at strata meetings.
Although Strata Title properties exist across the country, strata properties on the upper north shore are governed under NSW law.
Strata Essentials: a strata inspection report
Before buying a strata titled property, it is essential to do a strata search to check the finances and administration of the strata scheme. There are specialist strata agents who conduct these searches, alternatively the information can be provided by the Owners Corporation to your conveyancer or solicitor.
The strata inspection report will tell you what the levies are, the level of funds available to maintain the common areas, any upcoming special levies, outline a 10 year budget/plan, and the scheme’s insurance, finances, bylaws, neighbour disputes or any people-related matters.
Some of the things you will want to see:
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that the strata is being properly managed
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whether there are any major projects needing to be done to the property that could require a special levy
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that there is enough money to maintain the common areas
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that there is a plan to address any major building defects
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that the scheme is planning for the future
Strata schemes can be self-run, but most strata schemes appoint a strata manager's an independent company that administers the strata scheme and does things like running the meetings, the financials and organises any repairs on behalf of the owners.
If you want to find out more about buying into strata, get in touch with us and we can point you in the right direction.
Disclaimer
DiJones Real Estate, 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.
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