Taken from "Strata Living" by the NSW Office of Fair Trading, Department of Commerce
What is a Strata Scheme?
A strata scheme is a building, or collection of buildings, where individuals each own a small portion known as a 'lot' (for example, an apartment or townhouse) but where there is also common property (e.g. external walls, windows, roof, driveways, foyers, fences, lawns and gardens). Every owner shares ownership of the common property.
The original concept of strata title was to allow people to own their units in multi-level buildings. While it was originally expected that strata schemes would all be vertical blocks of flats, some strata schemes are all on the one level (e.g. townhouse and villa developments). Strata schemes vary in size - some comprise only two lots, other have more than 700 lots. In addition, strata schemes do not just apply to residential developments. There are also commercial, industrial, mixed use, hotel and retirement village strata developments.
Before strata title, the most common way of buying into a high-rise building was to buy shares in the company which owned the building, which gave the right to occupy one or more of the units. This way of organising property ownership is called 'company title'. There are still some company title buildings in existence.
There are currently around 65,000 strata schemes in New South Wales and the number is increasing steadily with five or more new schemes being registered each day. Strata schemes cover residential, commercial, industrial, mixed use and retirement village developments and they range in size from two lots to over 700 lots.
It is estimated that close to a quarter of the state's population live, own or are employed within a strata scheme.
The concept of strata title, where people own and have title to individual lots (units or apartments) within buildings or complexes, was originally devised in New South Wales in the early 1960s. The laws applying to strata schemes have been updated many times over the years to keep up with the increasing complexity and sophistication of strata developments.
The Office of Fair Trading administers the Strata Schemes Management Act 1996, which sets out a framework for the management of strata schemes by their owners and establishes a dispute resolution process.
The subdivision and registration aspects of strata developments are administered by the Department of Lands under separate legislation, the Strata Schemes (Freehold Development) Act 1973.
The Strata Lifestyle
Strata schemes are effectively small communities where the activities and attitudes of residents can have a significant impact on the satisfaction and enjoyment of others. Therefore, it is important to be aware of your responsibilities and obligations when you own or live in a strata unit.
Whilst strata living can provide a friendly community style environment, it helps to remember that it is not the same as living in a freestanding house. Some activities may be more restricted in a strata scheme, for example, where you can park your car, hang your washing or when and how you can renovate. Understanding these differences before moving into a strata scheme can help reduce the likelihood of disputes over these activities later on.
What is different about living in a strata scheme?
- You own your unit or apartment as well as sharing ownership and responsibility for 'common property'.
- If you own your unit, you are automatically a member of the 'owners corporation' which has responsibility for common property.
- Every 3 months you have to contribute to the cost of running the building through paying quarterly levies.
- You also have to pay money into a sinking fund, for future long term expenses such as painting the building or replacement of guttering.
- Compared to living in a freestanding house, there will be lifestyle restrictions in a strata scheme, for example there are rules (by-laws) that may affect you doing renovations to your unit, that state where you can and cannot park your car, where you can dry washing or whether or not you can keep pets.
Before buying into a strata scheme what should I look out for?
- Find out as much information as possible about the management of the scheme itself, for example:
- Is there a strata manager?
- Is the building properly insured?
- Are there enough funds to cover long term repairs and maintenance?
- Is there outstanding building work, or is any planned which could mean additional special levies?
- Organise to get a Section 109 Certificate which provides a good deal of information or organise a detailed strata search through a specialist company or your solicitor/conveyancer.
- Find out which parts of the unit will be included in the 'lot' and where the common property boundaries are. This information is on the strata plan, which shows the layout of the strata scheme and the common property details. Common property boundaries are usually shown on strata plans by thick black lines. Pay close attention to items such as balcony walls, railings, sliding doors and garage doors, as strata plans may differ on whether these items are part of the common property or not.
- Don't forget ongoing costs such as the quarterly levies and contributions to the sinking fund. How much are they? Can you afford these? Find out if any alterations have been done to the unit? Were these approved by the owners corporation?
- Think carefully about the impact of strata living on your lifestyle. Have you seen the by-laws (rules)? Can you keep a pet? Can you hang washing outside or will you have to buy a clothes dryer? Will it be difficult for you if there are restrictions on visitor parking or where your children can play?
- Besides looking at the unit, also have a look at the whole building. Some buildings have high quality and expensive finishes such as polished granite or marble foyers. These must be maintained along with the swimming pools, lifts and gardens and the costs will impact on your levies. Alternatively, the building may be run down and in need of repair. Find out if there is building worked planned and if it will be an extra cost to owners.
- Check if there are any restrictions on the use of the common property which could affect you, for example if you want to change the flooring, install air conditioning, or prune trees which shade your balcony. You will probably need the permission of the owners corporation.