WHAT DO YOU OWN IN A STRATA SCHEME?
One of the major differences between owning a house and owning a unit in a strata scheme, is that the external walls, the floor and the roof do not usually belong to the lot owner. These areas are common property and their maintenance is usually the responsibility of the Owners Corporation. As it is common property, the lot owner is not able, without permission of the Owners Corporation, to alter or renovate these areas, or install services such as cable television.
The following is a checklist for common property:
- Floor includes a ramp or stairway
- Boundary wall includes any door, window or other structure within the wall and their working parts
- Ceramic tiles originally attached to a common property surface (e.g. the floor or boundary wall)
- Pipes in the common property or servicing more than one lot
- Electrical wiring in the common property or servicing more than one lot
- Parquet and floor boards originally installed
- Vermiculite ceilings, plaster ceilings and cornices
- Magnesite finish on the floor
- Balcony doors are usually common property if the strata plan was registered after 1 July 1974
- The slab dividing two storeys of the same lot or one storey from an open space roof area or garden areas of a lot (e.g. a townhouse or villa), is usually common property if the strata plan was registered after 1 July 1974, unless the registered strata plan says it is not.
Before purchasing a strata lot, it is essential that the prospective buyer is clear on where the common boundaries are. The information is available from the strata plan, which shows the layout of the strata scheme and the common property details.
YOUR LOT IN A STRATA SCHEME
In most strata schemes, the lot owner owns the inside of the unit but not the main structure of the building. The internal walls within the lot, floor coverings such as carpets and fixtures such as baths, toilet bowls and benchtops are all the property of the lot owner. While it is sometimes a hard concept to envisage, a lot owner effectively owns the airspace (and anything included in the airspace) inside the boundary walls, floor and ceiling of the lot.
For more information, please contact the NSW Branch of Strata Community Australia.
OWNERS CORPORATION AND EXECUTIVE COMMITTEE
The Owners Corporation is the body made up by all the owners in the strata scheme.
It has the responsibility for:
- Maintaining and repairing the common property of the strata scheme
- Managing the finances of the strata scheme
- Taking out insurance for the strata scheme
- Keeping records and accounts for the strata scheme
- Administering the by-laws for the strata scheme.
The Owners Corporation also has an executive committee which can make many of the decisions on its behalf.
EXPENDITURES BY THE OWNERS CORPORATION
The Owners Corporation has the same type of expenditure as a conventional householder. There are council rates, water and electricity charges for common areas, building and public liability insurance, repairs/maintenance of common areas. In a strata scheme there is also additional expenditure such as workers compensation insurance, building valuations, the resolution of any disputes which may arise within the scheme and any other matters related to the running of the scheme.
Please note that as a lot owner, you will be required to make regular contributions to the Owners Corporation to cover the maintenance and administration of the strata scheme. You should pay close attention to the quality and finishes of a building as everything the scheme has to offer must be maintained (e.g. swimming pools, lifts, tennis courts etc.).
To carry out its role, the Owners Corporation must set up two funds:
- An administrative fund (day-to-day operation expenses)
- A sinking fund (long-term future expenditures)
The Owners Corporation must estimate how much money is needed each year for the funds to cover all the expenses and needs of the strata scheme. The amount to be paid by owners is decided at each annual general meeting by a majority of vote.
The levy to be paid by owners is decided at each annual general meeting by a majority vote. All levies must be worked out based on the unit entitlements of each lot. Levies are usually paid every 3 months.
WHAT TO DO BEFORE PURCHASING A STRATA UNIT?
At GMH Legal we recommend that you seek professional advice about the complexities involved in buying a strata unit.
If you are interested in buying a strata unit, it is essential you look at the records of the Owners Corporation and know as much as you can about the maintenance of the building. Particularly you should consider how much it may costs and whether there are signs that money may need to be spent soon.
Before you buy into a strata scheme, you should get a Section 109 Certificate from the Owners Corporation.
A Section 109 Certificate gives information about the strata scheme including:
- The names and addresses of the executive committee members, the managing agent and caretaker (of there is one)
- The levies to be paid by the owners
- Any outstanding levies
- The address where the records and financial statements can be viewed
- Any special by-laws made by the Owners Corporation in the past 2 years.
Please note that if a levy is outstanding before the Certificate is given and it is not shown on the Certificate, the purchaser is not responsible for the payment. However if any money becomes outstanding after the Certificate is given, the new owner and the old owner are both liable for payment.
You can inspect the records yourself (upon pay of a fee) or ask your Solicitor to hire a specialist.
The Owners Corporation must make the following records available:
- Includes: List of each unit owners, mortgages and others who have an interest in lot, general info about strata scheme, name of managing agent, insurance details, the by-laws, unit entitlement for the scheme.
- Includes: notices served about disputes or required by legislation, minutes of meetings, accounting records, financial statements, correspondence received and sent.
- Plans, specifications, certificates, diagrams and other documents if supplied by the original builder at the first annual general meeting.
- Certificate of title for the common property
- Last financial statements
- Current insurance policies and the receipt for the last premium paid
- Other records held by the Owners Corporation
- Records or books of accounts kept by a strata managing agent.
The conditions of the Contract should be closely checked. We encourage you to seek legal advice regarding the benefits or the restrictions provided by the terms of the Contract.
- Can I make changes to the finishes in the kitchen and the bathroom?
- Can I select appliances such as the stove and dishwasher and items such as floor and wall tiles?
- Can I visit the site during construction?
- If the building is finished earlier than expected, has finance been suitably managed?
BUYING A STRATA UNIT OFF THE PLAN
Sometimes strata units are advertised for sale even before the building has been constructed. The design of the building and sketches of its final appearance may be included in advertising material well before occupation is possible.
Usually a contract to purchase is signed, but the date for completion of the contract will not be until the building is completed and the strata plan is registered. The purchaser usually pays a deposit and the balance is paid when the contract is ‘settled’ upon the building’s completion.
There may be substantial demand for apartment accommodation in popular areas of NSW and it is sometimes easy for developers to market such strata units months before building work is completed.
There are a number of issues that people need to be aware of when buying off the plan, as they may effectively be entering into contractual arrangements without the customary benefit of being able to view and assess the finished product.
Please do not hesitate to contact GMH Legal if you wish to further discuss the process of buying a strata unit off the plan. Our team of experienced property lawyers can assist you through every step of the transaction.
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