What is a strata title and how does it work?

What is a strata title and how does it work?
Before you purchase an apartment or townhouse, understanding what a strata title is and how it all works is highly important.
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Before you purchase an apartment or townhouse, understanding what a strata title is and how it all works is highly important.

What is a strata title?

When you purchase and move into an apartment/townhouse, you of course own your individual living space (called a ‘lot’). But there will also be ‘common property’ - areas such as the garage, foyer, gardens, or even a pool - that are shared between occupants. This is managed by a legal entity known commonly as the body corporate.

Depending on where you live, the legal entity might be known as the owners corporation, strata company, or community corporation. Whatever the name of the legal entity, they all do the same thing - look after the common property.

What is a community title?

Similar to strata titles, community titles apply to properties that share a common area (like a driveway), but each property usually has its own specific land allotments with clearly defined boundaries. Unlike strata titles, free-standing houses may fall under a community title, such as in a gated community. While properties that fall under a community title are managed by a body corporate/community corporation, the insurance setup may be different.

Under a strata title, insurance is set up for all lots and the collective owners are responsible for their portion of the insurance - this is typically paid in body corporate fees. How this looks should be clearly set out on the disclosure statement. For example, larger lots may be required to contribute more in applicable fees, and smaller lots may be required to contribute less.

On the other hand, under a community title, individual owners might be responsible for their own lot, but the community corporation/body corporate is responsible for insuring the common property (which they will likely need to contribute towards financially).

How does a body corporate/owners corporation work?

A body corporate, also known as an owners corporation, is the legal entity responsible for managing and maintaining common areas of a strata-titled property. There is typically a committee made up of lot owners that can vote on certain issues/bring issues to attention. There might also be a body corporate manager responsible for things like keeping the gardens groomed, maintaining the pool, keeping the driveways clean, or any other general administrative duties necessary.

As well as upholding all the rules and by-laws of the property, body corporates are responsible for managing insurance; maintenance and repairs of common property; keeping records; and handling complaints or disputes between lot owners/tenants.

What are lot owners' responsibilities?

Owning a strata title property comes with a few additional responsibilities you won’t find when purchasing a house on an individual plot of land. Some of the responsibilities you, the individual lot owner, would have will likely include:

  • Obeying by-laws set by the body corporate

  • The ability to participate in annual general meetings

  • Notifying the body corporate if the lot changes ownership/tenants change in the lot

  • Paying fees and levies on time, as agreed. These could include covering maintenance and repairs, and contributing to a ‘sinking fund’.

As you would with any stand-alone property, you’re responsible for your lot’s maintenance and upgrades, as well as all possessions inside your home. Meaning, you might still need to purchase contents insurance to secure yourself in the case of damaged property/robbery. However, you shouldn't need home insurance - this should be covered by your body corporate.

Additionally, if you’re thinking about upgrading your property, you may need to ask permission from your strata management/adhere to certain rules when making structural changes. If you live in an apartment, for example, making renovations to the bathroom might become difficult/not possible. Before you purchase a strata property, make sure to ask these questions if a renovation project is on the cards.

Pros and cons of owning a strata title property

There are some significant pros and cons of owning a strata title property that should be weighed up before going through with any purchases.

Pros:

  • Typically, strata title properties are cheaper than houses, making them an affordable way into the property market

  • You won’t need to look after common areas; you’re only responsible for the inside of your unit/apartment/townhouse

  • Facilities such as pools, gyms, secure parking, or BBQ areas are often additions to strata properties. You won’t need to maintain these as the body corporate manager should take care of this

  • You might feel that the property is more secure than a house, for example, if there’s an intercom system and secured garage requiring permission to enter

  • Strata properties are usually smaller than homes, which can mean less cleaning and upkeep on your end

Cons:

  • Generally, you’ll need to pay strata levies. These costs will usually be more expensive in newer/fancier strata complexes (e.g. if there’s a pool, lift, gym, an onsite manager, or any other high-end facilities)

  • You’ll likely have less space as your property might border another person’s home

  • You can be restricted in what you can do to the property, where people can park, and so on.

  • If you need approval to make any changes, this can take time. Meaning, you have less freedom to make quick decisions

  • Your property will likely be worth less than a stand-alone home, due to smaller land size and restrictions for renovating

  • You might not be allowed to own a pet, or if you want one, you’ll need to ask permission. As mentioned, these decisions can take time

What should be considered before buying a strata property?

Before you seal any deals on a strata property you have had your eye on, make sure to get a few questions answered. This way, you won’t be caught off guard by high fees or strict regulations that would impact you financially. Questions you may like to ask could include:

  • How much are the body corporate fees?

  • Are there any structural issues with the property I need to be aware of?

  • What are the rules on common areas and parking arrangements?

  • Will I need to ask permission or be restricted if I choose to complete renovations or cosmetic improvements?

  • Can I have any pets?

  • Can I smoke inside the property, or outside on the balcony?

  • Are there any neighbourhood disputes within the complex I should be aware of?

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Tags: buying an investment property | investment property

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