Strata Schemes 101: What are they?

Beware of DogI came across an article recently that spoke about reasons not to buy a property. One reason not to buy was if you did not know what strata title or a strata scheme was. In NSW there are over 80,000 strata schemes and an estimated 30% of the population either live or work in strata with that figure soon predicted to be 50% . Yet alarmingly many people don’t know what a strata scheme is and are confused as to what their rights and responsibilities are. This is a brief, back to the basics look at strata schemes.

Chances are if you live in an apartment or townhouse you are part of a strata scheme or possibly a community title scheme. Strata title varies between the states and territories however the broad concept remains the same. This blog looks at strata schemes; with community title schemes to be considered in our next blog.

Strata title is a means of developing a block of land so that components of the building on that land can be owned by different owners with one representative body, the owners corporation (also known as the body corporate), being responsible for all the common property. Generally, the owners corporation owns the building itself (including all the structural elements of the building such as load bearing walls) and the surrounding land.

If the owners corporation generally owns the building and the surrounding land what are you buying when you buy a strata lot? You must look at the strata plan to determine what the lot is comprised of. The strata plan will define the lot and contain notations that also limit what is and isn’t lot property. In NSW, due to legislative changes, the age of your strata plan will also affect what you do and do not own. Generally however, if you buy a strata lot you are not buying the external bricks and mortar but only the airspace within the boundary walls of your lot minus any structural elements. Where you have an uncovered balcony or terrace area, then a notation on the strata plan will generally limit your ownership to a cubic space defined by upper and lower limits. Class B units in the ACT are the exception with the strata plan setting out a footprint on the land within which everything is generally owned by the unit owner.

Understanding what is and isn’t lot property is important as you may have to ask for permission of the owners corporation to see your plans for the property come to fruition. The basic rule is, if you don’t own it you can’t alter it. If for instance, you have a strip of common property garden beside your lot and you would like to use it for a private garden then you would need to formally obtain the permission of the owners corporation to have the exclusive use and enjoyment of that area. Otherwise, you would not be able to alter the strip or prevent other lot owners from using it.

Aside from the question of ownership, the nature of community ownership and management of strata schemes is often misunderstood. Decisions of an owners corporation must generally be made either at a general meeting of lot owners, by the strata committee or, if the scheme has a strata managing agent and the power has been delegated to them, by the strata manager. Note however that some decisions can only be made at a general meeting of lot owners. This means that decision making can be slow as strict notice requirements apply to meetings.

At general meetings, lot owners have voting rights in accordance with their lot’s unit entitlements (as allocated on the strata plan). Your voting rights may not be the same as other lot owners. For instance, if the strata scheme has four lots with three lots on the ground floor and one lot comprising the entire first floor you would expect the first floor lot to have a larger share of unit entitlements and therefore more votes. This is because unit entitlements are set on the respective lot valuations and the value of a larger penthouse lot would generally be higher than the other lots. Importantly levy contributions are also calculated on the lot’s unit entitlements. The more unit entitlements, the more your contribution towards the levy will be. Levy contributions fund the management of the strata scheme and must be paid otherwise your voting rights are affected.

As always, the devil is in the detail. It is strongly recommended that you ask your conveyancing solicitor or conveyancer to go through the strata plan with you so that you clearly understand what you would own, what your unit entitlements are and what your levy contributions will be until the next annual general meeting.




2 responses to “Strata Schemes 101: What are they?

  1. Strata titling is really interesting to me, if I understand correctly, you own the property but legally do not manage it. I think that this would be an easier way to get into real estate. I am sure that this would require a fee of some sort but I am not sure.

    • Hi Michael, generally you own the air space that comprises your lot and any items within that airspace such as internal non structural walls and you have an equitable (i.e. a legal interest) interest in the common property which is generally the building façade and all structural items. Of course, this is subject to notations on the specific strata plan. Your ownership of the lot is regulated by both legislation and the scheme’s by-laws so, yes you do own the lot but your ownership comes with rules and limits. If you think of a standard home on a quarter acre block, it too will have limits under planning legislation and any notations on its title. It is up to the members of the scheme (the lot owners voting at a general meeting) to determine if they want to pay a strata managing agent to manage the scheme or if they want to be self managed. Most schemes pay for strata management in my experience. I hope this answers your query. Allison

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