A strata scheme is a building or collection of buildings that has been divided into ‘lots’. Lots can be individual units/apartments, townhouses or houses. When a person buys a lot, they own the individual lot and also share the ownership of common property with other lot owners. Common property generally includes things like gardens, external walls, roofs, driveways and stairwells.
Strata schemes have restrictions on potential activities and ways the lots interact, for example restrictions on where you can park or how you my renovate your lot. These restrictions are often dealt with through By-laws.
What do I actually own in a strata scheme?
One major difference between owning a house and a unit in a strata scheme (or ‘lot’) is that the external walls, the floor and roof do not usually belong to the lot owner. These areas are usually common property. This means that the maintenance and repair of these parts of the building are the responsibility of the owners corporation.
As it is common property, the lot owner cannot alter or renovate these areas without permission from the owners corporation. Lot owners may need permission to do things such as install services (eg. cable television, phone or internet), knock down walls or replace locks on doors or windows.
In most strata schemes, the lot owner owns the inside of the unit but not the main structure of the building. The internal walls within the lot (e.g. the wall between the kitchen and lounge room), floor coverings such as carpet and fixtures such as baths, toilet bowls and bench tops are all the property of the lot owner. Effectively, a lot owner generally owns the ‘airspace’ (and anything included in the airspace) inside the boundary walls, floor and ceiling of the lot.
Unit entitlement
The strata scheme plan determines the unit entitlement for each lot. It is important for lot owners to know their unit entitlement, as this is what is used to work out the overall interest (part-ownership) in the common property, and to calculate the levies payable, and voting entitlements. Not all lot owners have the same unit entitlement.
By-laws
By-laws are a set of rules that all people living in a strata scheme must follow. By-laws are made on issues such as safety and security measures, floor coverings, pets etc.
Strata schemes can adopt model by-laws that are set out in the Strata Schemes Management Act 2015, they can amend and adopt these model by-laws, or they can make their own.
Before buying, you should check the by-laws as they will affect the way you will live in a scheme.
Levies or Fees
Lot owners need to make regular contributions to the owners corporation to cover the maintenance and administration of the strata scheme and help maintain the life of the building.
The owners corporation looks after the management of the strata scheme. There is an administrative fund for day-to-day operational expenses and a capital works fund for short and long-term future expenditure of a capital nature.
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. An owners corporation must take into account anticipated major expenditure identified in the 10-year plan for the capital works fund. The levy amount to be paid by owners is decided at each annual general meeting (AGM) by a majority vote. All levies must be worked out based on the unit entitlements of each lot. Levies are usually paid every three months.
What do levies pay for?
An owners corporation has the same type of expenditure as a conventional householder. There are council rates, water and electricity charges for common areas, building and public liability insurance and repairs and maintenance of common areas, such as painting or re-painting parts of the common property, or renewing or replacing fixtures or fittings.
In a strata scheme, there can also be additional costs such as workers compensation insurance, building valuations, and the resolution of any disputes arising within the scheme.
Owners should pay close attention to the quality and finishes of a building as everything the scheme has to offer must be maintained eg. swimming pools, lifts, tennis courts, saunas etc.
Special levies
Owners corporations can vote to introduce a ‘special levy’ when there are insufficient funds to cover expenses such as large capital works or unforeseen work.
Do I need to attend Strata meetings?
A strata scheme operates better if you take an interest but it is not compulsory for a lot owner to attend owners corporation meetings. The owners corporation usually meets several times each year, although the AGM, when levies are set for the coming year and the strata committee is elected, is the only meeting required by law.
Before signing a contract
You should seek advice from Catron Simmons Lawyers before buying a strata unit due to the complexities. We strongly recommend ordering a strata report to determine the ‘health’ of the strata prior to purchasing.