If you’re thinking about buying into a strata title building, then make sure you fully understand what you are getting into. This article answers some common questions associated with purchasing into a strata title building, including certain things you should look out for if you’re a prospective purchaser.
What do I actually own when I buy a strata title unit?
An owner in strata title does not get exclusive ownership of the apartment or the land. Instead, common areas (such as hallways, court yards, external walls etc) are ‘collectively used’ by all lot owners and maintained through the owners corporation. In addition, the lot owner gets the exclusive legal ownership of the cubic airspace within the lot, and anything that is included in that air space. You don’t own the walls or floor!
What does this mean for owners?
Well, this unique style of ownership is designed to reflect communal living. You have responsibility to maintain the inside of your lot, while at the same time ensuring you don’t adversely impact the common property used by others. You also can’t just do things to your lot or the common areas of the building. All minor renovations are subject to the approval of the owners corporation. Likewise, all major renovations are also subject to approval of the owners corporation, but in this case, by way of a special resolution – which requires more owners to approve. This means you can’t just go ahead and replace pipes or install an air conditioning system without obtaining the appropriate level of consent from the owners corporation.
However, the benefits are also mutual. The owners corporation (the legal entity that combines all lot owners) is responsible for ensuring that the common property is kept in a good and serviceable repair. This is not your sole responsibility, but a collective one between you and the other owners. The owners corporation is also responsible for what’s between your walls, like plumbing and electrical services.
Do I have to pay levies to the strata title corporation?
Lot owners are required to pay quarterly levies to the owners corporation. This contribution is calculated based on each lot owners ‘unit entitlement’ and is a contribution to common expenses associated with the building, including expenses attached to major capital works. Some investors are deterred from purchasing in a strata title building, fearing that levies may be excessive, erratic and cannot be planned with any certainty.
However, the Owners Corporation is required to prepare an annual budget as well as a ‘ten year major capital works plan’. This means that most levies can be forecast with reasonable certainty if the building is well run.
What are strata title by-laws and do I have to follow them?
Each strata title building is governed by a set of rules known as ‘by-laws’. These rules are registered on the common property title of the owners corporation and regulate the behaviour of owners, the approval process for major and minor renovations, noise restrictions, pet policies, short-term leasing, dispute resolution procedures and other such matters.
These rules are legally binding on all owners. If the rules are contravened on a frequent basis by a lot owner, the owners corporation (or another lot owner) can apply to the NSW Civil and Administrative Tribunal for an order. The order may require the owner to comply with the by-law, as well as impose a penalty on the owner for the breach. (Note the penalty is payable to NSW Fair Trading not to the owners corporation.) It’s important to be aware of the by-laws governing your strata scheme and to comply with them.
Conducting a search of the owners corporation books and records
The owners corporation has a legal obligation to maintain the books and records of the scheme. The records consist of financial accounts, minutes of general meetings, any applications commenced with the NSW Civil and Administrative Tribunal, complaints made by owners and correspondence from owners to the strata manager, and financial records such as invoices and receipts. Essentially, all records that flow within the owners corporation and with other parties forms part of the open record of the scheme. The only records that may not be available are those subject to ‘legal professional privilege’ or are ‘commercial in confidence’.
This strict record keeping obligation means that all information relating to an owners corporation is publicly available. A potential purchaser can get the following things from a comprehensive search:
- The financial position of the owners corporation,
- The amount of any upcoming levies,
- The state of the building and whether there are any major building defects,
- The type of community in the scheme and whether there are owners that are constantly in dispute,
- Whether the owners corporation has been or is subject to litigation, and
- Most importantly, where the building is well run.
Before buying into a strata building it is critical that you, or expert (such as us!) does a proper search of the records. We know what type of information to look out for and can also pick up on any ‘red flag matters’ that may not be obvious on face value.
What to do next
If you’re planning on purchasing into strata title building, make sure you know what you’re getting into, and do your homework. Almost everything can be ascertained through a search of the books and records of the strata scheme. Buying into a poorly run building can be an expensive investment decision.
If you are looking at buying a strata title unit, give us a call on 1300 88 23 86 for a no-obligation chat. We can do a search for you and get you off on the right track.
- Contact John Morrissey on 0407 069 507 or
- Mariam Chalak on 0410 914 128
Both John and Mariam are available to help you out.
If you would rather get in contact through email, send your question through to Mariam at firstname.lastname@example.org.