With units and apartments an increasingly popular choice among home buyers and investors, understanding strata schemes is becoming more and more important.
A strata scheme allows individual ownership of one part of a property, i.e. an apartment, combined with shared ownership of the rest of the property.
The shared ownership is in the form of a legal entity known as the body corporate or owners’ corporation (or occasionally some other title), depending on where you live and the type of scheme adopted by the owners.
While there are also some multi-dwelling properties with company titles, where individual owners have shares in a company which owns the building, strata schemes have become the most common form of multi-dwelling property ownership.
Buying into a strata scheme typically means you will own the internal walls, fixtures of your apartment and the air space within your walls, but everything else – windows, external walls, foyer, gardens and so on – is owned collectively.
Your interest and rights in those collective aspects of the property will usually depend on your proportion of ownership within the building.
While it might sound complicated, don’t let the idea of a strata scheme scare you. So long as you make yourself aware of your rights and responsibilities as being part of the strata and conduct a thorough inspection of the property’s strata standing, a unit or apartment can be a great investment.
It is incredibly risky to go into a multi-dwelling property without having done your due diligence. Failure to investigate and assess a strata scheme could see you wind up with costs you never anticipated.
So, for a successful strata purchase, keep the following key points in mind:
The rules: Each strata scheme will have its own by-laws dictating everything from pet ownership to floor coverings and balcony use. Know what these are before making any purchase commitments.
Regular costs: A strata scheme will include quarterly levies, which can vary enormously from property to property, so it is important to account for these in your budget.
Sinking fund: A sinking fund is a pool of money set aside for major capital expenses. Be careful of buying into a dwelling with a miniscule sinking fund – it could mean the building will be neglected, or you could be in line for substantial costs in order to build the fund back up or to cover unexpected maintenance.
Strata report: A great tool for buyers, a strata report provides details of all collective aspects of the property. From levies, by-laws, lot entitlements, past meeting minutes to details of the sinking fund, a strata report will provide an invaluable overview of the multi-dwelling environment.