If you’re interested in buying a strata property in New South Wales, there are a few things you should know before you go any further in the process. The limited land supply combined with a growing population has resulted in more apartments than single-family homes being built, which is one reason why more people are opting for townhouses or units which are strata titled.
We’ll look at how strata property ownership works, what you need to do beforehand, how it might affect the buying process, and whether a strata scheme makes sense for you.
A strata property is a building or collection of buildings that aren’t sold as a whole, but rather as lots or units. For instance, if the development had 20 units, you might purchase 1 unit from the 20. You own that unit, but you also share ownership of common property, which may include anything from the roof of an apartment building to the community garden or pool in a development.
In many ways, strata schemes take some of the onus off of property owners. You most likely won’t have to coordinate and schedule the repairs of community property because these responsibilities are shared amongst everyone. However, there may also be more restrictions placed on a strata property. You may have to abide by certain restrictions on anything from where you can park your car to how you can renovate your own property.
When you own a strata property, you can expect a community-style environment that has certain differences from living in your own house. The key difference is that you don’t own certain things, which gives you less power over what occurs to the building or the collection of buildings. For instance, if the owner’s corporation chooses a contractor that you don’t approve of to fix the roof on an apartment building, you might not have much power to dissuade. Your voice is one of many unless you choose to be a part of the owner’s corporation.
For the most part, strata property owners trust their fellow owners and enjoy the freedom of fewer repairs and responsibilities. Just keep in mind that you might want more say over what you are allowed to do. Strata scheme ownership can also forbid you from certain things, such as the option to knock out walls, replace locks, or install certain services, which is worth considering if you like to have the freedom to make these decisions yourself.
You first need to understand your property boundaries should you decide to buy. The NSW Land and Property Information is a registry service that will give you a definitive answer about your individual strata scheme. From balconies to garage doors, you shouldn’t make assumptions about what’s your responsibility and what is the responsibility of the owner’s corporation. If you’re uncertain, seek professional advice to learn more about the lines.
You should also look at the fees you’ll have to pay. These will go toward maintenance and administration of the strata scheme. The operational duties of the owner’s commission are usually granted an allowance, plus there’s capital works fund for larger expenditures. For instance, you might pay into this fund to save up for larger repairs that may be needed in the future.
The capital works fund is intended to be a 10-year plan. So if the roof of an apartment building is likely to last for 25 years and you buy when it’s already 20 years old, you’ll be paying into a fund that is planning for the eventual end of the roof. The actual amount to be paid by owners is agreed at each Annual General Meeting (AGM) by a majority.
Strata levies are allocated based on the unit entitlements of each lot and usually paid every three months. Levies can pay for anything from electricity in the common area to liability insurance for the building. It takes into account worker’s compensation insurance for maintenance workers, the cost of assaying the building for its total value, and litigation costs for official disputes of the strata scheme. It’s the owners who hold the legal responsibility of management and maintenance across common areas — not the tenants they might rent to.
Finally, you should be checking the by-laws of the property before you purchase to learn more about how the property is managed. For instance, you might not be able to have pets in the building. Please keep in mind that the Strata Schemes Management Act 2015 also makes it possible for the owner’s corporation to amend these laws or adopt new ones.
One of the first action items before you buy a strata property is getting a strata inspection report. This report will inform you of any major issues, such as building defects or proposed expenditure on renovations. It will also look into finer details such as whether there are any legal matters at play and what the property expenditures have been over the past 3 years.
Ultimately, a strata report will give you a good indication on whether you are getting your money’s worth for the property. The process of getting this done will entail getting a strata inspection company involved prior to the auction or purchase. Sometimes the current owners will make a report available to prospective buyers. Other times, the company will need to conduct an investigation on the current issues with the property.
In the long run, ordering a strata report will save you money, as unexpected challenges may arise when a strata property is judged prematurely, just off its facade.
Some Sydney property strata schemes are fairly lax, giving property owners all kinds of freedom to do as they see fit. Others are anything but flexible. Regardless of where you fall in what you’re looking for, it can be helpful to speak to property experts who can give you valuable property advice before you decide to buy.
Shore Financial understands the details behind buying a strata property as well as the common stumbling blocks and pitfalls, so you can go into the property purchase deal with your eyes open. Our services are built around you and what you’re looking for from the deal.
Learn more about how our Sydney property experts can help when you contact us for more information.
