There are a lot of terms in the real estate world that can be confusing at first.
Whether you're an owner-occupier in a home or a property investor, these are the words that you'll need to get used to using when making the most of your investment. One particularly common term that will appear in your life is "Strata".
Here's what you need to know about the basics of Strata.
Also referred to as strata titles or strata schemes, Strata permits the individual ownership of a single part of a property. The part of the property that you take ownership of is called a "lot," and it could be a townhouse, an apartment, a unit, or even a house in a group of residences.
Aside from owning the lot, the person with a strata title will also gain shares ownership of common properties like lifts, driveways, gardens, and more with other owners of lots in that area. All of those lot owners join the same owner's corporation, strata manager, or body corporate, depending on the state that you live in.
The "owners corporation" is responsible for maintaining the common property, dealing with the financial part of the scheme, and even making sure that the scheme is insured.
Understanding Body Corporates/ Owners Corporations
Body corporates/ owner corporations will usually meet various times during a year to manage components of the strata and building efforts on behalf of lot owners. Although you're not necessarily required to attend these meetings, it's a good idea to go. Meetings are an opportunity to impact decisions that could affect the value of the property you own.
The law requires that body corporates must always hold a general meeting each year, where annual levies can be established, and an executive committee is elected. Executive committees are responsible for making decisions on the behalf of the body corporate/ owners corporation.
What are the Costs of a Strata?
An owner's corporation in a strata will raise funds by collecting money or levies from lot owners. These are otherwise known as strata fees. Generally, you'll see strata fees advertised in materials for properties as a quarterly figure.
The fees associated with a Strata can vary depending on what you're buying. For instance, an apartment in a complex that has a state-of-the-art gym and pool is more likely to have a high strata fee than a unit in an old building without on-site amenities. Make sure you factor strata fees into your budget when you're making your investments.
Another point to note about strata fees is that they can fluctuate when a maintenance project is in the works. Special and temporary levies can be added when the property is getting a lift replaced or adding a new pool. There's also a possibility that the owners corporation will set up a sinking fund, where money can be set aside to cover future works, like repainting the building or updating décor.
Are There Downsides to a Strata?
While there are benefits to a Strata, there are downsides too. Because you share your property with other people, there will be restrictions on what can be done with the property, unlike when you own a free-standing house. You'll need to gain approval from the body corporate if you want to make any renovations or significant changes, for instance. It's important to make sure you understand the by-laws of the Strata before you invest.
You'll also need to seek assistance to make sure you're getting the most out of your Strata. For instance, conveyances and solicitors can arrange to have a strata inspection done on your behalf. This will give you plenty of valuable information that you can use to ensure you're making the right decision about your investment.