What Is Strata And How Does It Work

Disclaimer : Articles in this blog are just personal opinion of the author or authors. It may or may not be correct. Pls do your own due diligence and pls seek professional advice according to your own personal circumstances.

Last week, I was having tea in kitchen area of the office and came across two new joinees Jignesh and Simar (names changed due to Easter hangover). Jignesh was a first home buyer and Simar bought his first apartment few years ago and was more experienced. Jignesh said that he is looking to buy an apartment and the strata is 500 AUD per quarter. He is happy that the strata is pretty low and his family will enjoy living in apartment at such low strata for the forthcoming years. He also gave Masala Tea bag (Wagh Bakri masala tea bag) to Simar and asked him to try it out as it is strong tea and will help him to concentrate and fix software issues during the day. Simar while preparing the masala tea asked Jignesh that whether he is sure that strata will remain 500 per quarter always. Jignesh said yes that is what agent has told him. Simar figured out that Jignesh has no idea as to how strata work and what constitutes the strata payment. So Simar being more experienced tried to explain it to Jignesh. The following is what he said

  • Strata living is ‘a living with Harmony’ giving space to your neighbors besides maintaining your privacy.
  • Strata can be a residential building, a mixed-use building or a commercial setup such as shops, arcades or a block of industrial units.   Units/apartments/flats, townhouses, villas and community living are examples of residential strata set-up.
  • Owners corporation is the group of people who owns the apartment in the complex. Say for example there are 7 apartments in a building, then the 7 owners are the Owners corporation. They appoint a third party called strata management company.
  • The strata management company looks after the building and makes sure that the affairs are handled as per the government laws.
  • The strata management company operates under the instructions of the owners.
  • Strata payment per quarter has two portions. One is normal day to day money required to operate the building and common areas and the other is the sinking fund, which is to keep money for any major repairs per year. It is like a family budget, where we need money for day to day expenses and then some money for the emergency.
  • AGM known as Annual general meeting is held once a year. In this meeting budgets for next year are discussed. Any major repairs are authorized. It is generally a majority decision. Hence say for example lift repair is required and it costs 7000 AUD. If it gets passed in the meeting with majority, then all owners are liable to pay 1000 each.
  • Owners make some by-laws and get them passed in the strata meeting. It is documented in the strata records. One example is keeping pets in complex.
  • It is advised to go through the By-Laws supplied by the builder when you are looking in the contract.
  • If you are looking to buy in a block in an already set up strata building, a strata report also called as a strata search is advisable. It may cost approximately $300.00 for the report, but this report may be a major factor on deciding on buying a strata block.
  • The major points to investigate a strata report/search is the amount sitting in Capital Work Fund (previously known as Sinking Fund), any upcoming major expense or any major known building defects since the birth of the building. These in formations may not be available on contract papers or disclosed by the vendor.
  • By-Laws on pets and animals can point out if you can take your cat or dog with you or not. This may be major factor for pet lovers. It may be noted Guide-dogs are always permitted and can’t be restricted by By-Laws.
  • Other things to looks for are parking issues, smoking in balcony and common area/ exclusive use By-Laws, how to generate income for Owners corporation, Levy (increase and decrease), Admin fund, Capital Work fund.

Jignesh thanked Simar that now he understands how strata works and the strata quarterly payment is not a fixed amount but constitutes various factors and can increase or decrease every year (like a normal family budget). Both enjoyed their masala tea and went back to there seat to fix some software issues.

Special Thanks to Kamaljit Arora for co-authoring and providing strata related information for this article.

Kamaljit Arora
Licensed Strata Manager Ace Body Corporate Management (Penrith)
p:
(02) 86053394
a:
PO Box 521, Stanhope Gardens   NSW 2768 Australia
w:
www.acebodycorp.com.au   e:penrith@acebodycorp.com.au

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