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Buying a strata titled property
Before you purchase a strata titled property, it is important that you are aware of what you will own and what areas are common property, what levies are charged by the strata company, and what the by-laws of the complex are. you may also want to know whether the other lots in the scheme are owner-occupied or mainly tenanted, whether a strata manager is employed, and whether the strata company has sufficient funds to cover maintenance of the complex.
The seller of the property is required to provide you with information relating to the lot and the strata scheme. you should receive:
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a 'disclosure statement: sale of strata titled lot or proposed strata titled lot', which states what information the purchaser should receive prior to signing a contract and their rights if they do not receive this. |
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a form entitled 'buying and selling a strata titled lot'(form 29) which sets out their rights and obligations should they purchase a strata titled property. |
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a copy of the strata plan including information on the lot which is for sale and any information relating to that lot. |
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a copy of the by-laws of the strata scheme. |
You will need to sign the disclosure statement to show that you have received and read the relevant information. this is not an offer to purchase or a contract, simply an acknowledgement that you are aware of pertinent information relating to the property for sale.
You can make enquiries to the strata company about the amounts and due dates of levies but you will need the written authority of the seller. this information may already be available from the seller or the seller's agent when the property is listed for sale.
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Selling a strata titled property
Before a purchaser makes an offer to purchase your property, you are required by law to provide them with information relating to the property and the particulars of the strata plan. this information must include:
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a 'disclosure statement: sale of strata titled lot or proposed strata titled lot'. (form 28), which states what information the purchaser should receive prior to signing a contract and their rights if they do not receive this. |
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a form entitled 'buying and selling a strata titled lot' (form 29) which sets out their rights and obligations should they purchase a strata titled property. |
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a copy of the strata plan including information on the lot which is for sale and any information relating to that lot. |
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a copy of the by-laws of the strata scheme. |
It will also help to expedite the sale of your property if you give the purchaser as much additional information as you can on matters such as strata fees payable and how often maintenance or general upkeep is performed on areas of common property. by providing pertinent information early on in the process, purchasers will be fully informed before making an offer and the offer and acceptance process may become easier for all involved.
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What is a strata title?
Strata schemes, or strata plans, are the original forms of strata title. they are not completely dissimilar to the concept of traditional or 'green' title, in that the owner of a strata-titled property is the proprietor of everything within their property's boundaries. the main differences emerge in how a single property's boundaries are calculated within a strata complex, and that strata title allows for areas of 'common property' outside a single property's boundary, for which individual owners are jointly responsible. the main difference between a traditional title and a strata title is that strata titles can have horizontal boundaries meaning there can be several strata properties above each other. this is the basis for the term 'strata', which emanated from 'stratum' meaning layer.
There are many forms of strata property including duplexes, triplexes, villas, townhouses and unit complexes which are all strata or survey-strata schemes. duplexes that have no common walls, for example where a stand-alone home is built next to or behind another stand-alone home, can be strata titled, survey-strata or green titled.
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What is owned under a strata title
In traditional or 'green' title, a property's boundaries are generally defined by the side and rear fencing and to the front road boundary. the ownership of that property extends to everything within those boundaries, including the home, any outbuildings, the gardens and pathways. the boundaries of the property, in theory, also extend infinitely above and below the ground. the height ownership is effectively limited by laws forbidding owners to mine their property or to construct buildings that exceed stated height limitations.
Strata title on the other hand is not as easily defined as having boundaries that extend between the edges, or the fence lines of a block of land. the boundary of the strata lot will usually extend to the wall, floor and ceiling of the unit. it may be measured to the inside edge of the structure, specifically the upper edge of the floor to the inside edge of the walls and the underside of the ceiling. where there is a common wall between two units the lot boundary of each would be measured to the centre plane of the wall. by this theory, each owner would be responsible for the half of the wall that is on their side. the exterior walls of the building however are common property in this case.
Strata titles can also have the lot boundaries extended to the outside wall of the unit, which gives ownership of that portion of the building structure as well as attachments such as air-conditioners and water heaters to the individual owners. this came into effect automatically on 20 july 1997 for all single-tier strata schemes of five lots or less existing at that time.
It is also possible to create part lots outside of the building structure which allows for individual ownership of areas such as car parking bays, carports, balconies and courtyards. in order to determine exactly what you own, you will need to look at the actual registered strata plan as each plan is different.
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Common property
Within the block of land upon which the strata complex has been constructed, there are areas that are not divided into or assigned to individual ownership. these can include driveways into the complex, gardens, visitor car parking bays, and facilities that are available to all owners such as laundries or entertainment and recreational areas. these areas are known as common property. the use of these areas is available to all owners within the complex, and likewise the responsibility for maintaining or improving areas of common property is shared.
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Unit entitlement
A proportional share of rights and responsibilities within the complex is calculated relative to what an owner owns outright within their own boundaries. this is known as unit entitlement which must be set by a licensed valuer. unit entitlement also gives weight to a proprietor's voting rights at strata meetings and defines the proportion in which the proprietor shares ownership of common property areas.
In a strata scheme, the unit entitlement of strata lots is calculated taking into account the capital value of any buildings on the land plus the value of the land.
In a survey strata scheme the unit entitlement of lots is calculated on the unimproved site value of the lots and ignores the value of any buildings on the lot.
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Strata company
A strata company, once known as a body corporate, is responsible for enforcing the by-laws of a strata plan and for the management and maintenance of common property areas for the benefit of all owners within the strata complex.
The strata company must keep records of all of its dealings, including:
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a roll (list) of proprietors including the particulars of the proprietor, details of mortgagees, tenants or lessees and mailing addresses for all parties. |
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a record of all notices served on the strata company, for example, local council notices. |
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financial records including all income received and expenditure for the financial year. |
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minutes of meetings including all motions and resolutions. |
These records must be kept for a period of seven years.
All owners within the strata scheme are automatically members of the strata company as soon as it exists, which occurs on the date of registration of the strata plan. in schemes where there a large number of individual owners, a council may be formed to operate the strata company. this council can consist of between three and seven owners, and if there are more nominations than places available on the council, the council will be elected.
Larger schemes may opt to employ a company or an individual to act as strata manager. the strata manager is under the control of the strata council and they are only able to perform duties that the strata council gives them the power to fulfill
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Strata councils
Within the strata council, there are three roles that must be filled:
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the chairperson, who chairs the meetings; |
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the secretary, who prepares minutes of meetings and who is responsible for all correspondence including notices; and |
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the treasurer, who looks after the financial dealings of the strata company. this includes the preparation and receipt of levies, all banking, and the payment of expenses for the strata company such as repairs and insurance. |
For each of these roles there is a significant commitment required, especially in strata schemes of large numbers of lots and when you consider that council members are not granted any privileges for carrying out these duties you can see why many councils opt to employ a professional third party. (see strata managers).
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Strata meetings
The act requires that a general meeting is held annually. the purpose of the annual general meeting is for financial records from the previous year to be presented, a budget drawn up for the ensuing financial year, and to make decisions for the strata scheme. annual general meetings must be held whether or not a strata manager is employed.
Minutes must be taken at each meeting and kept on file along with all other paperwork related to the strata scheme.
A meeting cannot be held unless there is a quorum present. a quorum is the presence of at least 50% of owners who are currently eligible voters. an owner will be ineligible to vote if they are not currently financial, that is, they have outstanding levies at the time of the meeting. any decisions made at a meeting where there is not a quorum present can be objected to and overruled at a later date, therefore it is imperative that an attendance is taken and the percentage of eligible voters present is calculated before proceeding with any items of special business in the meeting.
An eligible voter may choose to be represented by a proxy. the proxy may have full or limited powers in the meeting, and may be instructed to vote a particular way by the proprietor. attendance by a person who has been nominated as a proxy counts toward the calculation of the quorum, as long as the proprietor that has nominated them is financial at the time of the meeting.
If a lot is owned by more than one person, only one person can vote at the strata meetings and the owners must nominate one of themselves or a third party as proxy. if no proxy has been given, none of the owners will be able to vote at the meeting.
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Strata fees
There are several fees that the strata company will need to charge each owner. these may not apply if the boundaries of each lot within the scheme extend to all parts of the whole lot, meaning that there are no areas of common property.
The fees cover expenses such as:
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the administrative costs of the strata company. |
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the fee charged by the strata manager. |
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fees for insurance. strata schemes must have insurance for common property areas and for public liability of at least $5 million |
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maintaining the areas of common property. this may include the upkeep of gardens and lawns and maintenance of swimming pools. |
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improvements and repairs to areas of common property. |
It is wise, although not required by law, for strata companies to have a reserve fund for major repairs that could be necessary in the future. a large expenditure could be required if repairs need to be performed on any structural aspects of the building, such as roofing needing repair, the discovery of any faults in timberwork or concrete, or non-structural items such as a malfunctioning lift.
Without funds in reserve to cover such expenses, proprietors would be required to contribute large one-off sums which they may not have readily available at the time. the difficulty with a reserve fund is in deciding how to quantify individual contributions. it's advisable for strata companies to set out a plan for circumstances of major repair from the beginning, whether it is to contribute to a reserve fund or for owners to bear the cost if and when it is required. even if no contributions are agreed upon, individuals can at least plan for the possibility of being required to pay a lump sum in the future.
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Strata managers
When looking to employ a strata manager, strata companies should do some research before making a decision on who should manage their scheme. even before talking to prospective managers, however, there needs to be some discussion on what duties the strata manager will be required to perform and what responsibilities the strata company will retain.
When summarising the issues relating to the engagement of a strata manager, the assumption will be made that the strata scheme consists of more than a few owners and therefore has a strata council.
A strata manager will be employed to effectively control the day to day requirements of the strata scheme, including maintaining all financial records and employing contractors to perform maintenance and repairs as required.
There is currently no requirement for strata managers to be licensed or registered, however there are professional bodies such as the strata titles institute of western australia, who have a list of members on their website. strata managers do not have to be and are not always licensed real estate agents, although there are real estate agents and companies who offer strata management services.
The strata council should make enquiries as to the experience and knowledge of the manager, request references from current or previous clients, and ask for an outline of fees.
When a suitable strata manager has been found, there are some items to include in the contract that will make the appointment of a manager as clear and simple as possible, so that all owners will know what services they are getting for their money, and how to go about requesting services if they should need to.
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the contract should be for a definite period of time, preferably between 1 and 3 years. |
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the contract should state clearly what duties the strata manager is required to perform and what responsibilities will be retained by the strata council. |
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if the strata manager is required to perform the duties of the treasurer and secretary, this should be listed in the contract |
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a process of communication should be set out, stating how often the strata manager will report to the strata council, that all communication should be in writing, and that the strata council will be responsible for forwarding the requests of the owners to the strata manager. |
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if a strata management company is employed, the strata council may wish to stipulate that they do not wish the management of their scheme to be transferred between individual managers. |
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the fees should be listed in the contract. |
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if the council has passed a resolution for contributions to be made to a reserve fund which will be controlled by the strata manager, details of how and where this money is to be deposited and held should be included in the contract. |
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Managing your own strata scheme
Owners who wish to may manage their own strata scheme. everyone involved with the task, however, needs to be educated in relevant the strata titles acts. Owners and strata council members need to know their responsibilities in order to help build an efficient and successful strata council.
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