Strata Schemes – Part 1

What is a Strata Scheme?

A strata scheme is a building or collection of buildings, where individuals each own a small portion (a lot) but where there is also common property (eg. external walls, windows, roof, driveways etc) which every owner shares ownership of. 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.

Whilst strata living can provide for a friendly community environment, it is very different to living in a freestanding Torrens title home. According to the Office of Fair Trading, the key features of living in a strata scheme are:

• You own your unit or apartment as well as share 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.

Purchasing a Strata Titled Unit or Townhouse

Like buying any property, there are things that need to be taken into consideration.

One of the most important things for you to do is find out where the common property boundaries are for your lot entitlement. This information is available from the strata plan, which shows the layout of the strata scheme and the common property details.

Other things you need to consider are as follows:

• What are the quarterly levies?
• Are there any special levies on the horizon?
• Are there any outstanding issues with the owners corporation which will require a special levy? We heard of a situation in a strata scheme where the roof of an underground car park was constantly leaking. To rectify the issue, all landscaping on top of the roof had to be removed, the waterproofing re-done and then re-landscape. The cost of this exceeded $1,000,000, which was passed onto the Owners as a special levy.
• What facilities are present in the strata scheme which will require major repairs in the future?
• How many units comprise the strata scheme?
• What is the unit entitlement of the unit you want to purchase in the strata scheme? This determines the levy that will be paid.
• Is the strata scheme professionally managed by a strata agent?
• Is there potential for the strata scheme to sell or rent part of the common property? We have heard of a situation where the owners corporation sold roof space to the owner of a top floor unit, who then put in a set of stairs and transformed their unit into a two story unit.
• Is my pet allowed in the unit or townhouse? Do I need to seek special approval from the owners corporation?

What do I actually own in a Strata Scheme?

One of the major differences between owning a house and owning a unit (known as a ‘lot’) in a strata scheme is that the external walls, the floor and roof do not usually belong to the lot owner. These areas are usually common property and the maintenance and repair of these parts of the building is usually the responsibility of the owners corporation. As it is common property, the lot owner is not able, without permission of the owners corporation, to alter or renovate these areas, or install services such as cable television.

The internal walls within the lot (eg. 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. While it is sometimes a hard concept to envisage, a lot owner effectively owns the airspace (and anything included in the airspace) inside the boundary walls, floor and ceiling of the lot. This “airspace” can sometimes include balconies and courtyards.