What is a strata scheme?
A strata scheme is a system of multiple ownership of a building or collection of buildings. Each owner owns a portion (called a 'lot'), which is usually an apartment or townhouse, but every owner shares ownership of any common property (e.g. foyers, driveways, gardens) if it is indicated on the title.
The multiple ownerships are combined in a legal entity called the owners corporation — or body corporate, strata company or community association, depending on your state or territory of residence. Although the term for an owners corporation varies across Australia, the role of an owners corporation is essentially the same in every state and territory.
The owners corporation is responsible for the good management of the strata scheme. All owners can vote on management decisions at an Annual General Meeting (AGM), but decisions are usually made on behalf of the owners corporation by a committee of owners who are elected at the AGM.
Some strata schemes also manage the day-to-day financial, maintenance, and other administrative duties themselves, but given these are complex, most choose to use the services of a professional strata manager.
1. Do Some Sleuthing
Have a professional search of the books and records of the owners corporation to view the finances and any issues the owners corporation is facing.
2. Don’t Forget the Levies
Remember that you’ll have to budget for levies to fund the annual running expenses of the owners’ corporation and its long term maintenance. Ultimately, this protects the value of your financial investment.
3. Know What You’re Buying Into
Check that the car space or garage you were shown is correctly allocated to the apartment – the strata plan will usually detail this. Your lawyer should also take you through the contract to ensure you understand each step of the purchase process.
4. Know Your Rights
Acquire a full copy of the by-laws that are specific to your owners corporation, so that you understand the rules that you will be required to live by.
5. Show Me the Money
Have a good look at the condition of the building and make sure that the funds in the sinking fund match long term maintenance planned for the next few years.
6. Love Me, Love My Pet
Before you buy, check whether the owners corporation will welcome both you and Fluffy into the building. Don’t necessarily take the word of the selling agent when he tells you the block is pet friendly.
7. Be Informed
Educate yourself about your rights and responsibilities when living in a strata title property. Some of the state SCA organisations offer free consumer seminars. In NSW you can also do some free online training. Check out the website for your state.
8. Know Who To Call
Find out what emergency arrangements are in place or who to contact on your executive committee if something goes wrong in the building.
9. Be Active
Take an active interest in what goes on in your building. Attend the annual general meeting so that your voice is heard and consider becoming a member of your building’s executive committee.
10. Love Thy Neighbour
Remember that in an apartment building, your neighbour is usually just on the other side of the wall. Live next to them as you would have them live next to you.
Generally speaking where there is multiple ownership within a single structure or plan there will be a strata scheme. That said, there are still a smattering of company titles – the main multi-owner legal form before strata – where residents and investors hold shares in a company that owns the whole building. Strata is usually preferred because company titles require the approval of the whole company to buy or sell an individual holding.
You cannot buy into a strata scheme without buying into the owners corporation. The two elements of your property rights are separate but not separable.
Generally speaking all you own in a unit is the air space and its contents, including internal walls and fixtures. Everything else – outside walls and the roof, hallways, stairs, foyers, lifts, gardens, carparks etc etc — is collectively owned by all of the owners in equal shares as tenants in common.
Your interest and voting rights (at general meetings of the owners corporation), which are known as lot entitlements, will be spelled out either in the original strata plan for the building or, in some states, by a formula based on market value. These should be spelled out in your purchase documentation and you should take the time to understand them.
What costs are involved in owning a strata apartment and how are the costs set? Does everybody pay the same amount?
Strata owners are levied by the owners corporation to cover many of the expenses faced by all home owners, such as council charges, insurance, cleaning, general maintenance and utilities such as power and water. It should also include an amount to be saved for long-term expenses as the building ages, such as painting, tiling, plumbing, carpet, plant and equipment, etc for the Sinking Fund. The amount is usually calculated in proportion to an owners lot entitlement as it relates to the total number of lot entitlements in the strata scheme.
If I buy into a strata scheme building what are my obligations, apart from costs? What are my rights?
You must pay your levies and comply with the scheme’s by-laws, which can cover everything from renovations to pets. You have the right to contribute to your community's decision making, to stand for a position on your committee and generally be heard. As an owner, you also have a share of an unlimited liability for anything that goes wrong, which is why strata insurance is compulsory in every state and territory.
Will I need to attend regular meetings? What happens if I do not live in the property, or live close by, or live in another state?
It's in everyone's interests to be actively involved in your strata scheme. If you can't attend a general meeting of the owners corporation in person, you can appoint a proxy to vote in your place.
By attending the Annual General Meeting where you can be voted in. All owners corporation committees must hold an annual meeting which is open to all lot owners.
If there is something I want addressed, can I call for a meeting, regardless of whether the strata scheme is due for one?
First talk to your strata manager or committee members. The scheme’s governing legislation will include specific provisions on calling meetings but it’s not something to be done lightly as it can inconvenience your neighbours. If it’s not urgent, wait for the next general meeting.
This depends upon your relevant state or territory legislation. Generally speaking, you will need the approval of the owners corporation when you intend to make significant structural alterations to your lot, or any alterations to any part of the common property. You will also need the approval of the owners corporation if you plan on engaging activity that contravenes your scheme’s by-laws — for example, the keeping of a pet may be prohibited. You should consult your by-laws to determine whether approval is necessary.
Does majority rule or does each and every member of the strata scheme need to agree to any proposals?
It depends on the type of decision and the legislation in your state or territory – routine matters are usually delegated to committees and/or a professional strata manager. Levies and annual budgets are usually approved by general meetings and spending outside those budgets may also require a general meeting. Major decisions such as changing by-laws can require a three-quarters majority of owners, depending on state/territory legislation.
If you are unhappy with the way the rules are being applied you can talk to a committee member, raise it at a general meeting or contact for advice the government authority responsible for regulating strata issues in your state or territory.
All states and territories have enacted essentially the same types of laws but with a wide variety of terminology, definitions and detailed rules.
In a nutshell, strata reports provide details of the collective aspects of your prospective purchase. This should include information on levies, by-laws and lot entitlements, details of funds held for short and long term maintenance and minutes of meetings which might point to future costs. It is vital that you familiarise yourself with these before committing to any purchase to avoid nasty surprises later on.
Glossary of Terms
AGM
An Annual General meeting held by the Owners Corporation.
Body Corporate
Another term for Owners Corporation.
Body corporate managers
Another term for strata managers.
By-laws
A set of 'rules' that the proprietors and occupants in a strata scheme must follow. These can be changed at a general meeting of the strata company. All by-laws are not the same so you should obtain a copy of the current by-laws for your strata scheme. Also called Articles or Rules.
Committee
Responsible for the administration of an owners corporation. They are a group of owners elected at each Annual General Meeting who represent all the lot owners of the strata scheme, and carry out the duties required. These include the control, maintenance and repair of the common property. The committee also has the responsibility of enforcing the bylaws. Also called an executive committee, managing committee, management committee, committee of management, or just the committee.
Council of Owners / Council of Management
Other terms for an owners committee.
Common Property
Common property refers to the areas of a strata building or community which every occupier or owner shares, including foyers, driveways, fences, visitors parking and gardens. The common property is the responsibility of the strata company whose obligations include maintaining and repairing the common areas.
Executive Committee
Another term for Owners Committee.
Levy
Levies are contributions paid by owners to the strata company to cover the proposed expenditure of the strata company. Levies are usually paid quarterly and are based on lot entitlement.
Lot
A portion of a property that can be separately owned and sold. In a strata scheme, a lot is generally an apartment or townhouse.
Lot liability
The proportion of the owners corporation expenses that a lot owner is required to pay.
Managing Committee/Management Committee/Committee of Management
Other terms for Owners Committee.
Owner
An owner is a person(s) or company that purchases a strata lot and is registered on the Certificate of Title.
Proprietor
Another name for a strata owner.
Reserve Fund
Another name for a Sinking Fund.
Sinking Fund
Also called a Reserve Fund. Levies paid into this fund cover the costs of future capital expenses, such as painting the building, and replacing common property items like stairwell carpeting and roofing.
Strata Manager
Professionals who administer owners corporations, and are responsible for maintaining their buildings and common areas. Also called body corporate managers, strata managing agents, managers, and agents, depending on the state or territory. They report to the owners committee.
Strata Scheme
A strata scheme is a parcel of land with a building(s), where individuals each own a portion referred to as a lot. These buildings have common property but are not limited to areas such as driveways, pathways, fences, external walls and roof. A strata scheme can have a minimum of 2 lots and can be used for residential or commercial purposes or a mixture of both. A strata scheme can be a vertical block of units (high rise) or it can be all on the one level such as townhouses or commercial offices.
Strata managing agents
Another term for owners strata managers.
Strata Plan
The plan that subdivides the land and building(s) of a strata scheme into lots and common property.
An Annual General meeting held by the Owners Corporation.
Body Corporate
Another term for Owners Corporation.
Body corporate managers
Another term for strata managers.
By-laws
A set of 'rules' that the proprietors and occupants in a strata scheme must follow. These can be changed at a general meeting of the strata company. All by-laws are not the same so you should obtain a copy of the current by-laws for your strata scheme. Also called Articles or Rules.
Committee
Responsible for the administration of an owners corporation. They are a group of owners elected at each Annual General Meeting who represent all the lot owners of the strata scheme, and carry out the duties required. These include the control, maintenance and repair of the common property. The committee also has the responsibility of enforcing the bylaws. Also called an executive committee, managing committee, management committee, committee of management, or just the committee.
Council of Owners / Council of Management
Other terms for an owners committee.
Common Property
Common property refers to the areas of a strata building or community which every occupier or owner shares, including foyers, driveways, fences, visitors parking and gardens. The common property is the responsibility of the strata company whose obligations include maintaining and repairing the common areas.
Executive Committee
Another term for Owners Committee.
Levy
Levies are contributions paid by owners to the strata company to cover the proposed expenditure of the strata company. Levies are usually paid quarterly and are based on lot entitlement.
Lot
A portion of a property that can be separately owned and sold. In a strata scheme, a lot is generally an apartment or townhouse.
Lot liability
The proportion of the owners corporation expenses that a lot owner is required to pay.
Managing Committee/Management Committee/Committee of Management
Other terms for Owners Committee.
Owner
An owner is a person(s) or company that purchases a strata lot and is registered on the Certificate of Title.
Proprietor
Another name for a strata owner.
Reserve Fund
Another name for a Sinking Fund.
Sinking Fund
Also called a Reserve Fund. Levies paid into this fund cover the costs of future capital expenses, such as painting the building, and replacing common property items like stairwell carpeting and roofing.
Strata Manager
Professionals who administer owners corporations, and are responsible for maintaining their buildings and common areas. Also called body corporate managers, strata managing agents, managers, and agents, depending on the state or territory. They report to the owners committee.
Strata Scheme
A strata scheme is a parcel of land with a building(s), where individuals each own a portion referred to as a lot. These buildings have common property but are not limited to areas such as driveways, pathways, fences, external walls and roof. A strata scheme can have a minimum of 2 lots and can be used for residential or commercial purposes or a mixture of both. A strata scheme can be a vertical block of units (high rise) or it can be all on the one level such as townhouses or commercial offices.
Strata managing agents
Another term for owners strata managers.
Strata Plan
The plan that subdivides the land and building(s) of a strata scheme into lots and common property.
Read More: http://www.stratacommunity.org.au
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