What is a strata title: The Pros and Cons

What are Strata Titles?

Strata title in Australia allows the individual ownership of apartments, units, townhouses, or subdivided properties, along with the shared ownership of common areas and facilities. It is one of the most common ways multi-unit complexes are owned.

The common property that is shared is then managed by the Owners Corporation, also known as the Body Corporate, which comprises all the property owners under the strata title who then share the responsibility for its upkeep and maintenance.

The Owners Corporation are responsible for a number of items such as the maintenance and repair of common property by ensuring it remains in good condition.  Another crucial aspect is efficiently managing finances, including bookkeeping and preparing financial statements when required. Additionally, they maintain appropriate insurance coverage and ensure compliance with building regulations. Conducting meetings, dealing with correspondence, and resolving disputes are also vital duties. Finally, issuing fees to owners and handling financial transactions play a significant role in the overall management of the property.

Who owns the land in a strata title?

In a strata title, the ownership structure is divided into individual lots and common property. The owners of the individual lots, such as apartments or townhouses, have ownership rights over their respective units. However, they also share ownership of the common property, which includes areas like foyers, lifts, gardens, and swimming pools. The common property is collectively owned by all the owners in the strata scheme. 

So, while individual owners have exclusive rights to their specific lots, including the interiors of their units, the land on which the strata scheme is built and the common areas are owned collectively by the owners within the scheme. This shared ownership gives the owners certain responsibilities and the ability to collectively make decisions about the management and maintenance of the common property. 

How to know if a property is part of a strata title?

There are different methods to determine whether a property is part of a strata title, but some options are: 

• Consult the title certificate or the strata plan. These documents can provide information on whether the property is subject to a strata scheme and what the boundaries and common property are. The title certificate can be obtained from the relevant land registry office, while the strata plan can be obtained from the owners' corporation or the local council.  

• Check the property listing or contract of sale. If the property is part of a strata scheme, this information should be disclosed in the listing or the contract of sale.  

• Conduct a property search. There are several online property search services that can provide information on strata titles for a fee. These services can search the relevant land registry office or other sources to find out whether a property is part of a strata scheme and what the details are.  

It's important to note that the specific methods and regulations for determining strata titles may vary depending on the jurisdiction, and it's always advisable to seek professional advice and consult the local regulations for accurate and up-to-date information. 

What are Strata Levies?

Strata levies are regular fees paid by owners in a strata scheme to cover the costs of shared expenses, maintenance, management, and administration of the common property. While the rules and regulations vary from state to state, generally, the levies you pay go towards two funds - the administration fund, and the sinking fund.

What do Strata Levies cover?

There are three key areas that Strata Levies cover, these include: 

Administration fund

The strata’s administrative fund is designed to cover budgeted maintenance, repairs, and insurance of the common areas. This includes things like gardening, cleaning, and building insurance. The administrative fund is associated with the day-to-day running of the property and is more of a short-term expenses fund. 

Sinking fund

A strata’s sinking fund on the other hand, covers the cost of emergency repairs and longer term work required - for example, repairing the pool, replacing tiles or fencing, and painting the building. Like the administration fund, the sinking fund only covers costs for the common areas of the property. 

Special levies

In some situations, if an unexpected cost arises that the appropriate fund can't cover, the Owners Corporation can approve a special levy to cover the expense.

The pros and cons of a strata title

The pros of strata titles

1. Reduced property cost

Strata titled properties are often cheaper than freestanding homes. This is because multiple strata lots can be sold from the one piece of land, so they can be sold at a lower price than a stand-alone home. Because of their lower cost, strata title properties can also be an affordable first investment property, and the rent you charge can cover the cost of the strata levies. If you’re thinking of purchasing an investment property check out these handy tips to help you get started. 

2. Reduced maintenance 

Because all the common areas of the property are maintained through the Owners Corporation, you have less to worry about when it comes to your property’s upkeep. 

3. Shared costs 

Maintenance and repair costs that would normally be yours to bear alone in a stand-alone property. In a strata title however, they are split between all the owners via the administration and sinking funds. 

The cons of strata titles

1. Close proximity to neighbours 

Owning a strata title property means that your neighbours are very close by. This isn’t such a bad thing if they’re nice and quiet, but if you get a loud bunch you may have to look into some sound proofing. And if all the properties in your strata title have residents in them, finding a parking spot could also be an issue. It might be worth finding out if you have assigned parking spaces, and or safe and convenient off-street parking. 

2. Reduced flexibility to renovations and home improvements 

Often strata titles will have restrictions when it comes to making changes to the exterior of the property. So, if you want to do some renovating or property improvements (e.g installing air conditioning), you’ll need to get it approved by the Owners Corporation first. 

3. Can be a slow process 

All decisions for the strata title have to be agreed on by the Owners Corporation, and people don’t always agree that easily. So, if you’re not happy with your current gardener for example, being able to immediately change to another one may not be possible - you’ll have to get the Owners Corporation on board first. 

4. Insufficient money in the sinking fund 

It could be property repairs are needed eg new fencing or driveway and there is insufficient money available in the sinking fund. This could mean the repairs can’t be completed (which can devalue the properties in the group) or to complete the repairs you will need to contribute money to ‘top up’ the fund. 

Things to think about before buying a strata title property

Strata titles aren’t for everybody, so it’s important to make sure you know what you’re getting into. Here are a few things to keep in mind: 

How much do strata levies cost?

The first thing to check out is how much the strata levies are, and whether you’ll be able to afford them. Strata fees are an indicator of the level of maintenance required throughout the year (gardening, cleaning of common areas, general maintenance, waste management). It’s important to account for the strata levies in your ongoing expenditures so you can make sure there is room in your budget for the added expense. 

What facilities does the strata title have?

If the property you’re thinking of purchasing is in a strata title with a swimming pool, gym, or other amenities, keep in mind that all these things attract a cost in order to keep them maintained and functioning. Which means you may have to pay more in strata levies. 

Are there rules and restrictions with a strata title?

It’s a good idea to know ahead of time what the rules for the common areas and facilities are. Sometimes strata titles have restrictions around things like where you or your guests can park, or the types of renovations/alterations you can make to your property. 

Check the age of your property

As buildings get older, they require more repairs and maintenance. If you’re looking to purchase an older property in a strata title, keep in mind that your strata levies may be higher to account for the repairs and maintenance. 

Owning a property in a strata title comes with its pros and cons, and they aren’t for everyone. It’s important to weigh up everything before making the decision to purchase a property – even one that’s in a strata title. If you think you’ve found the property that’s right for you, and believe you’ve met our eligibility criteria, why not take a look at Qantas Money Home Loans rates? You can also use our borrowing calculator to get an idea of how much you can borrow, and our repayments calculator to help work out what your repayments will be. 

^* You have to be a Qantas Frequent Flyer member to apply for the Qantas Home Loan. This information has been prepared without considering your objectives, financial situation or needs. You should consider your circumstances before acting on this information.