Strata fees are required payments made by property owners who generally own apartments, villas, townhomes, or a duplex complex. Properties can vary in the amount charged. When purchasing a property, a low levy may sound appealing, but it could mean that there won't be enough money to pay for necessary future repairs.

The team at Lands Real Estate have created a guide to help you understand what the fees will and won't cover since more Australians are expected to live in buildings with strata schemes in the future.

What are strata fees?

Each owner makes a financial contribution towards the upkeep of their building complex. These are frequently paid into a fund overseen by the body corporate on a quarterly basis.

The type of strata fees you can be expected to pay are:

Administration fund levies - These fees compensate for the regular upkeep and costs of the structure, including maintenance, utilities, energy for communal spaces, and building insurance payments.

Capital works levies (sinking fund) - This covers more expensive upkeep and repairs like roof restoration, fixture replacement, painting, updating outdoor furniture, and any other significant services.

Special levies - In the event that insufficient money is raised for the capital work levy, this will serve to cover an unforeseen expense.

Who manages the strata fees?

All of the property owners are included in an Owners' Corporation, often called a Body Corporate. When you purchase a property in the complex, entry is automatic. Attending the Annual General Meeting might seem like a chore, but it is crucial to get active and have a say in the direction your building will go.

Body Corporates are responsible for overseeing and administering the common property, collecting fees from property owners to pay debts, keeping accurate financial records, and establishing a grievance system. In order to accomplish this, they choose a strata committee, often made up of the chairperson, secretary, and treasurer. They could decide to collaborate with the committee and hire a strata manager. The daily expenses, routine maintenance, and a future capital works fund are all coordinated by this compensated employee.

Strata managers can assist in resolving conflicts and ensure that the building is appropriately insured and that owners are paying their fees on time. They also have extensive knowledge of compliance, laws, and regulations related to strata.

Who owns what in an apartment building?

The "common sections" of a building, such as the lobby, elevators, corridors, parking lot, and swimming pools, are owned by the body corporate. This means that everyone contributes to the maintenance of such sites and that it is the common obligation of all the owners.

The individual residence is referred to as the "lot owner." The airspace and everything inside the perimeter of an apartment, townhouse, or villa are the owner's responsibility.

Are all strata fees the same?

The size of a property affects the contributions to a strata plan. The strata charge for larger apartments is greater. Only the owner is responsible for paying it; tenants are not. A property's "unit entitlement" is the sum that was allotted to it based on its valuation in the strata scheme at the time of registration. Additionally, fees may be increased for homes with balconies, courtyards, storage cages, and parking spaces.

The strata fee varies depending on the age, location, and even state of the structure.

For continuous maintenance, an older complex could charge a larger tax. If there are amenities like a gym, pool, or elevators to maintain, a newer complex may also have a high strata charge.

How effectively funds are managed has an impact on compensation as well. As a result, always spend time looking over the communal rooms when viewing an apartment or townhouse. There may be unforeseen costs if the structure displays evidence of neglect.

Always inspect the financial records of the complex to ensure there aren't any pending or ongoing legal matters between neighbours or significant repairs. Typically, a strata plan is a part of the purchase agreement which your conveyancer can also obtain.

How are strata fees calculated?

As a basic guideline, strata fees range from 0.3% to 1.2% of the value of a property. The higher end of this category will have those with greater facilities.

Always do your research on strata fees by examining what comparable buildings are charging. Low levies may indicate poor maintenance. This could affect the long-term value of your property and be expensive to fix.

Is building insurance necessary if I live in a strata property?

The building and common areas must be insured by the Owners Corporation per legal requirements, and this cost is covered by the strata fees. Always read through the fine print to understand exactly what the insurer will and won't cover. To protect the interior of their property, owners must still purchase home contents insurance.

Do my strata fees cover the utility bills and include council rates?

The owner or tenant is in charge of paying the electricity, gas, and water bills if the property is "separately metered." Strata levies do not include Council rates and are based on unit entitlement. So remember to account for them in your quarterly budget.

Are strata fees tax-deductible?

Contributions given to the capital improvement or administrative funds for strata can be deducted from investors' taxes. Documentation of expenses is necessary, just like with any claim. Nevertheless, expenses that are thought to be for a "special purpose" might not be deductible. You will be able to discuss this with your tax advisor.

What are the advantages of buying a strata property?

One benefit of residing in a property with a strata title is that you pay a maintenance charge to have all the building's shared facilities maintained. You can go on holidays without worrying about the garden getting out of hand or about emptying the rubbish.

As opposed to a freestanding property in the same suburb, strata properties are more cheap. Additionally, it can give you discounted access to amenities like a pool, gym, outdoor movie theatre, or even a wine tasting room that you might not otherwise be able to afford.

Disclaimer: We strongly advise seeking independent commercial, legal, and financial advice; the information supplied is only for general guidance and informational reasons. Despite being believed to be true and accurate as of the publication date, conditions may change afterwards, which could affect how accurate the information is. Lands Real Estate disclaims all responsibility and liability for any use of the articles' content, including any reliance on it's accuracy, currentness, or completeness.