Strata living has become a cornerstone of urban life, offering convenience and potentially more affordable housing for many Australians. Living in a strata scheme provides benefits such as shared amenities and a sense of belonging within a community. However, owning a strata unit differs from owning a freestanding house. It requires shared responsibilities and collective contributions to maintain community spaces. Due diligence and careful consideration help potential buyers move forward confidently when purchasing a strata unit.
This article outlines key considerations to help buyers investigate a proposed strata purchase. The information does not constitute legal advice, which should be sought from an experienced professional. Strata schemes, terminology, and regulations may vary between jurisdictions.
Understanding Strata Schemes
A strata scheme divides a property development into individual ‘strata lots’ and ‘common property’. A strata lot includes the interior surfaces of walls, ceilings, floors, and usually a balcony. Common property covers shared areas such as stairways, lifts, gardens, driveways, and swimming pools.
The legal title of a lot belongs to the owner, who may sell, lease, or mortgage it. The owner also holds an interest in the common property with all other owners in the same scheme.
The Owners’ Corporation
The ‘owners’ corporation’ (or ‘body corporate’) is a legal entity made up of all unit owners. It follows regulations in the relevant jurisdiction. A unit owner automatically becomes a member after purchasing a lot.
The owners’ corporation manages common property and assets for the mutual benefit of owners. Its functions typically include:
- financial management and record-keeping
- organising public risk and building insurance
- administering service and facilities management contracts
- managing repairs and maintenance of common property
- appointing managing agents
- implementing and enforcing by-laws
Strata Living
Strata living means being part of a small community. The culture and community within the building can impact the experience. As a member of the owners’ corporation, a lot owner must follow by-laws. These rules may affect a prospective purchaser’s lifestyle.
The committee’s functioning and its members’ activities influence the enjoyment and daily operations of the complex. Committee members are elected annually and hold significant responsibilities. Owners have voting rights according to unit entitlements.
Resolutions passed by the committee affect all unit holders. Potential conflicts may arise, as with any committee.
Due Diligence
If you are considering a strata purchase, gather as much information as possible about the lot, common property, and scheme management, including finances. These inquiries complement standard inspections of the building’s structure and condition.
Pre-purchase reports provide financial details, levy information, maintenance history, building defects, insurance, and recent by-laws. Reviewing past meeting minutes may reveal disputes or ongoing projects.
Have a professional review the contract to explain lot inclusions and common property boundaries.
Practical Considerations
- Building and amenities: Assess the condition, appearance, and quality of the building and amenities. Repairs may incur extra costs. Pools, gyms, and shared amenities should be evaluated for condition and usage.
- Parking and storage: Check availability, allocation, and restrictions on parking and storage spaces, including visitor parking.
- Noise and privacy: Consider potential noise from neighbours and common areas.
- By-laws: Review rules covering renovations, noise, parking, pets, and hanging washing. Restrictions may impact future plans.
- Common property: Rules for using and maintaining common property may affect owners. For example, you may need permission to prune trees shading your balcony.
Financial Considerations
Factor current and potential future levies into the purchase price and ongoing costs.
- Strata levies/fees: Regular payments cover maintenance, insurance, and administration. Review financial statements to understand calculations and future increases.
- Special levies: One-off payments for major repairs or upgrades. Evaluate the likelihood of future special levies.
- Sinking fund/capital works fund: Reserves money for major repairs. Review the forecast to ensure adequacy.
- Insurance: The owners’ corporation insures the building. Buyers should also hold personal contents insurance.
Conclusion
Demand for strata title properties has grown, offering a convenient, contemporary lifestyle with many benefits. Informed decision-making ensures a positive purchase experience.
Thorough due diligence and the assistance of an experienced conveyancing professional help protect your interests and support informed decisions.
If you or someone you know needs more information or advice, call (02) 4987 3344 or email [email protected].