Strata Equity

frequently asked question

BACKGROUND

Prior to strata title, many flats were sold as either company title, where shares in a company that owns a building entitle a shareholder to the exclusive use of a particular residential unit, or the land on which a building was constructed was sold to make the owners Tenants In Common. This is a type of co-ownership where two or more people own separate interests in a parcel of land. Legal documentation ensured that a purchaser obtained exclusive use of their residential unit.

However, these forms of land title do not confer separate ownership on individual occupants, and banks and building societies weren’t then keen on lending money to such purchasers, with the interest rates generally higher than for houses.

With pressure on the New South Wales government to make it easier to borrow money for these types of residential units rising, the NSW Parliament devised the first version of strata title. The Conveyancing (Strata Titles) Act, 1961 came into force on 1 July 1961.

The first strata titled building in the world was Lindsay Gardens, a block of 18 units at 189 Liverpool Road, Burwood, Sydney, whose plan was approved by Burwood Council, following its construction, on 28 July 1961.

In 1973 the NSW Strata Titles Act and Regulations meant that the area of individual lots in strata plans had to be shown far more precisely than under the 1961 Act. The first community title legislation was enacted in 1989, again by NSW.

The concept of strata title was gradually adopted by other Australian states.

50 years on and Australia has strata complexes like the Gold Coast’s Q1, which contains 526 apartments, plus resort pools, a day spa, meeting and conference facilities and retail and dining areas.

The development of larger and more complex strata developments has brought the management challenges of operational complexity, rising costs, ageing infrastructure, owner engagement, tenant responsibilities, and the need for appropriate support services.

A strata scheme is a system of multiple ownership of a building or collection of buildings. Each owner owns a portion (called a ‘lot’), which is usually an apartment or townhouse, but every owner shares ownership of any common property (e.g. foyers, driveways, gardens) if it is indicated on the title.

The multiple ownerships are combined in a legal entity called the owners corporation — or body corporate, strata company or community association, depending on your state or territory of residence. Although the term for an owners corporation varies across Australia, the role of an owners corporation is essentially the same in every state and territory.

The multiple ownerships are combined in a legal entity called the owners corporation — or body corporate, strata company or community association, depending on your state or territory of residence. Although the term for an owners corporation varies across Australia, the role of an owners corporation is essentially the same in every state and territory.

Some strata schemes also manage the day-to-day financial, maintenance, and other administrative duties themselves, but given these are complex, most choose to use the services of a professional strata manager.

Strata title is actually an Australian innovation in property law that has been copied around the globe.

Strata title allows individual ownership of part of a property (called a lot’ and generally an apartment or townhouse), combined with shared ownership in the remainder (called ‘Common Property’ e.g. foyers, driveways, gardens) through a legal entity called the owners corporation — or body corporate, strata company or community association, depending on your state or territory of residence and the type of scheme.

The concept only came into being 50 years ago and there are now more than 270,000 such schemes encompassing more than two million individual lots across Australia. In Sydney strata now accounts for more than half of all residential sales and leases because of its popularity with investors. An increasing number of commercial and retail properties are also strata titled. In Western Australia there are even strata-titled vineyards.

Developments that can exist under strata plans can be:

  • residential
  • commercial
  • retail
  • mixed use – i.e. retail and/or commercial and/or residential
  • serviced apartments
  • retirement villages
  • caravan parks
  • resorts

COMMITTEE

Positions on the committee are obtained through election at the Annual Meeting of lot owners. You don’t have to nominate yourself for a position. You also don’t have to attend the meeting. However, given you are a part owner, it is in your best interests to participate as much as possible.

By attending the Annual General Meeting where you can be voted in. All owners corporation committees must hold an annual meeting which is open to all lot owners.

Due to privacy laws you only have the legal right to obtain the postal address of lot owners, which you can request from the strata manager, or if the scheme is self-managed, the committee.

Records of the committee (which include the postal addresses of lot owners) must be made available for inspection by lot owners. If the strata scheme is managed by a strata manager, the committee (not the lot owner) may be charged a supervisory fee by the strata manager for arranging this. That’s because they need to supervise the viewing to ensure privacy laws aren’t breached in terms of allowing you to view the email addresses and phone numbers of other lot owners without their permission.

Nevertheless, in smaller self-managed schemes, it’s not uncommon for owners to agree to share their phone numbers and/or email addresses, but this should not be expected.

Yes, except in South Australia and Tasmania where it is optional, and in Victoria where it is optional if there are 12 lots or less.

If you are unhappy with the way the rules are being applied you can talk to a committee member, raise it at a general meeting, or contact either Consumer Affairs Victoria or Dispute Settlement Centre of Victoria for assistance.

The administration of an owners corporation may be undertaken on behalf of all the lot owners by a committee. This consists of a group of owners elected at each Annual General Meeting who represent all the lot owners of the strata scheme, and is charged with making decisions on all matters which confront the owners corporation. These include the control, maintenance and repair of the common property. The committee also has the responsibility of enforcing the bylaws, and has the ability to make new ones.

Depending on the state or territory, the committee is called an executive committee, managing committee, committee of management, the committee, or council.

GENERAL

Generally speaking where there is multiple ownership within a single structure or plan there will be a strata scheme. That said, there are still a smattering of company titles – the main multi-owner legal form before strata – where residents and investors hold shares in a company that owns the whole building. Strata is usually preferred because company titles require the approval of the whole company to buy or sell an individual holding.

It depends on the type of decision and the legislation in your state or territory – routine matters are usually delegated to committees and/or a professional strata manager. Levies and annual budgets are usually approved by general meetings and spending outside those budgets may also require a general meeting. Major decisions such as changing by-laws can require a three-quarters majority of owners, depending on state/territory legislation.

A strata scheme may be either managed by a professional strata manager or self managed.

If managed by a strata manager — they implement the decisions of the owners corporation, which consists of all the lot owners. The decisions are usually made on their behalf by a committee (a group of elected owners, or their proxies). However, some small strata schemes may not have a committee. In such cases, decisions are typically made by all owners, with one or more elected owners performing the duties of Chairperson, Treasurer and Secretary.

If self-managed — this is usually through a committee of elected owners, working on behalf of the owners corporation. However, as previously mentioned, some small strata schemes may not have a committee, with the management decisions typically made by all owners, with one or more elected owners performing the administrative duties.

If the strata scheme is managed by a strata manager (who may be either a self-employed person, or someone who works for a strata management company), their name, their company and contact details will be on the minutes of the committee meetings. If you are a lot owner you must be sent these, and a copy of the minutes will be also attached to Contract of Sale of your lot. If you have any issues with your strata scheme the strata manager should be your first point of contact.

If the strata scheme is self-managed, the names and contact details of the committee titleholders (Chairperson, Secretary, Treasurer) will be on the minutes. If there is no committee, and no meeting minutes, you will need to ask the other owners in your strata scheme who the go-to person is.

If you are renting and have an issue concerning the management of the block, you should contact the office of the real estate agent from whom you are renting, or your landlord if renting directly. They may contact the management on your behalf.

First talk to your strata manager or committee members. The scheme’s governing legislation will include specific provisions on calling meetings but it’s not something to be done lightly as it can inconvenience your neighbours. If it’s not urgent, wait for the next general meeting.

This depends upon your relevant state or territory legislation. Generally speaking, you will need the approval of the owners corporation when you intend to make significant structural alterations to your lot, or any alterations to any part of the common property. You will also need the approval of the owners corporation if you plan on engaging activity that contravenes your scheme’s by-laws — for example, the keeping of a pet may be prohibited. You should consult your by-laws to determine whether approval is necessary.

Strata owners are levied by the owners corporation to cover many of the expenses faced by all home owners, such as council charges, insurance, cleaning, general maintenance and utilities such as power and water. It should also include an amount to be saved for long-term expenses as the building ages, such as painting, tiling, plumbing, carpet, plant and equipment, etc for the Sinking Fund. The amount is usually calculated in proportion to an owners lot entitlement as it relates to the total number of lot entitlements in the strata scheme.

It’s in everyone’s interests to be actively involved in your strata scheme. If you can’t attend a general meeting of the owners corporation in person, you can appoint a proxy to vote in your place.

MANAGER

Yes. However, you need to understand that the strata manager works for the strata scheme and not for individual property owners or tenants. If you have an issue that you raise directly with the strata manager they are obliged to pass it on to the owners committee for review.

The first thing to establish is whether the strata manager has a good working knowledge of the relevant legislation. Look also at how the strata management company communicates and consider whether they have the depth and experience to service the building.

A lot of strata schemes choose their strata manager based on price but this is not necessarily the best way of choosing. If the building is going to be complex then it may be best to consider on experience instead. Sometimes there may be hidden costs such as charges for stationery or archiving so it’s always best to check this out too. Strata Community Association is currently introducing an accreditation program where members in each state will be able to gain a certain level of accreditation according to the training and experience they have in the sector. This will make it easier for strata schemes to determine if their strata manager has the appropriate qualifications and experience to manage their property. By choosing an Strata Community Association accredited strata manager strata schemes are also choosing someone who adheres to a code of ethics and undertakes regular training.

Ask whether your strata manager is providing a proactive service delivery. Are they professional? Do they act in a timely manner? Do they provide the level of care you expected? If the answers are yes and if your strata manager is also Strata Community Association accredited, then you have likely found the right person for your scheme.

If you’re not on the committee, you can voice your concern at the Annual Meeting, or do so in writing to the Chairperson of the committee. However, your first step should be to talk to the strata manager themselves to explain your concerns, which may arise out of a simple misunderstanding.

If you’re a member of the committee, you can also discuss the matter with your fellow members and establish a consensus of opinion regarding the performance of the strata manager. You can also examine the terms of their contract. It may be that the committee agrees that there has been under-performance, and sets new performance benchmarks, or chooses not to renew the contract.

Strata managers are engaged by the strata scheme’s owners committee to manage the day-to-day affairs of the scheme. Strata schemes are becoming larger and more complex. Strata managers provide services and advice on:
  • Financial management
  • Insurance
  • Clerical and administrative support and follow up
  • Ad hoc maintenance and contract support
  • Ensure requirements of the relevant legislation are met
  • Advise on the legal requirements concerning the operation of the strata scheme.
The role varies depending on the size and type of property and involves people management, requires someone who is organised and is able to handle difficult clients from time-to-time.

The legislation governing owners corporations and the compliance requirements are quite complex. Self-managed owners corporations are expected to perform the role of a property manager, with the expertise of a lawyer, valuer, insurance broker and accountant on tap.

In addition, owners corporations are well advised to make short and long term plans for ongoing, periodic, routine and urgent maintenance management. For owners who may have other jobs, getting to grips with all this can be daunting.

That’s why many owners corporations are moving away from self management and turning to professional strata managers to assist with finances, insurance, administration, meetings and maintenance functions. Occasionally they are appointed to solve intractable problems, including those involving relationship breakdowns between lot owners.

Strata managers are experts in the administration of all aspects of owners corporations. They work to ensure owners corporations are compliant with their legal responsibilities and strive to protect owner assets.

OWNERSHIP

All owners corporations are required to keep a letterbox and/or a sign displaying their current contact details.

Your interest and voting rights (at general meetings of the owners corporation), which are known as lot entitlements, will be spelt out either in the original strata plan for the building or, in some states, by a formula based on market value. These should be spelt out in your purchase documentation, and you should take the time to understand them.

You cannot buy into a strata scheme without buying into the owners corporation. The two elements of your property rights are separate but not separable.

You must pay your levies and comply with the scheme’s by-laws, which can cover everything from renovations to pets. You have the right to contribute to your community’s decision making, to stand for a position on your committee and generally be heard. As an owner, you also have a share of an unlimited liability for anything that goes wrong, which is why strata insurance is compulsory in every state and territory. For more information, please visit our Resources page.

The lot boundaries can differ from one strata plan to the next, therefore there is no fixed rule that applies to all schemes. It is important that all lot owners are familiar with the strata plan for the scheme which will define the lot boundaries (and therefore, what you own as part of your lot and what is common property).

In a nutshell, strata reports provide details of the collective aspects of your prospective purchase. This should include information on levies, by-laws and lot entitlements, details of funds held for short and long term maintenance and minutes of meetings which might point to future costs. It is vital that you familiarise yourself with these before committing to any purchase to avoid nasty surprises later on.