What you need to know about strata and living collectively

A businessman holding his hands around a paper crown of people

What you need to know about strata and living collectively

by Bianca Dabu | 30 January 2017
1 minute read

What you need to know about strata and living collectively

January 30, 2017

Many property investors are looking into strata to move their investment journey further forward, but with any investment venture, it takes education and good mentorship to succeed in the area.

ClarkeKann Lawyer Ian McKnight has witnessed the change in the world of strata over the course of his long legal career.

"When I first started in the area, some well decades ago... [investors] were concerned with buildings that were essentially top story, three stories. Now, of course, you can go up as far as 90 stories and you can get all these permutations. Stratas within stratas, almost. Various bits of the building, hived off to one owner. All sorts of variations," the lawyer told Smart Property Investment.

He, together with his fellow lawyer James Nickless, discussed the ins and outs of strata with Smart Property Investment's Phil Tarrant—what investors must remember when they sign up to "live collectively":

What changes in the world of strata have you witnessed?


Ian McKnight: You've got a community title regime now, that's a sub-division in the horizontal plane. Strata, of course, is concerned with sub-division in the vertical plane, so it's changed quite dramatically. And even more dramatically, the government [in New South Wales] just recently... introduced two new acts, which have updated what had been, I suppose, the practice for some 20 years.

Can you explain these "dramatic changes" more thoroughly?

Ian McKnight: Put simply... if you own a freestanding house, obviously, you've got what's called a Torrens Title property. Strata is a little different—it's still [a] Torrens Title, but in a sense, you only own the air space. You own air space within a building and other owners own bits of air space as well. You've got this entity called a body corporate or owners’ corporation, which basically manages the building.

Owners, I suppose, take the advantage of living collectively. They've got the benefit of this thing called an owners' corporation to look after the building maintenance, insurance, fire services, management, [and] all of those sorts of things.

How can this kind of set up affect the owners?

Ian McKnight: Owners, I suppose, are trading off in one sense. They lose some degree of independence because they've got to work with a whole lot of other owners. But they've got the benefit of... [having] the ability of everyone to work together for [the] specific end maintenance of the building, upgrading where [ever] necessarily, [and developing a] general ease of living.

Do same principles apply whether the strata is residential or commercial?

Ian McKnight: Yes, it is... I suppose, how you would differentiate it is that the rules can be slightly different. You've got, as I said, the owners' corporation responsible for the management of the building. It has to comply, obviously, with the legislation. We won't go through all of that because... that can be a little technical, but you've got these rules for the day-to-day operation of the building. They're called by-laws.

These by-laws relating in a residential situation—they can relate to pets or parking, [or] garbage. Now, in a commercial block, the rules would be slightly different. Obviously, they're not concerned about pets. They're, no doubt, still concerned about parking and garbage. Hanging washing out on balconies is obviously something not relevant to commercial stratas, but hey, it certainly is in relation to residential strata. They're the essential differences, if I can simplify it.

What would your best advice be for investors looking into strata as the next step in their journey?

James Nickless: [Get] the right team around you... You'd hate to come in, rely on yesterday's information, [then] do a row of townhouses and find out you could have gone 30 stories high. You've lost a significant uplift. [Get] a good town planner on board, and, obviously lawyers, engineers and everybody else.

The other one that everyone seems to leave out is the strata manager. The humble strata manager, who's going to be running this after it's in creation. If you get them on board early on and go, "This is what I'm looking at building. Where do you see problems?" They'll say, "Well, parking issues here because I've got a scheme like that, over in North Ryde and this is the issue that they're facing." Or you know, "You've set this up in a particular way and looking at the way that expenses are going to run through this, that's not quite fair, given that this is how these things operate in existence."


Tune in to Ian McKnight and James Nickless' episode in The Smart Property Investment Show to know more about the rules behind strata, the politics involved with the owners' corporation, as well as their tips and tricks to ensuring buyers receive the right advice at the right time.

What you need to know about strata and living collectively
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Bianca Dabu

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