If you’re considering purchasing an apartment, townhouse, or unit, chances are you’re no stranger to the concept of strata fees. In the simplest of terms, strata fees are regular payments made by strata owners to cover the costs of maintaining and operating a building and its common areas.
However, these fees can be confusing for many new homebuyers, which is why it's important to understand exactly what you're paying for before making any major purchasing decisions. This way, you will be able to ensure that you don’t commit to anything that you may be financially unprepared for down the line.
Today, we explore everything you need to know about strata schemes and fees in a bid to demystify exactly what your strata levies are actually paying for. Read on to find out more.
What Is Strata?
Strata refers to a type of ownership model commonly used in multi-unit buildings such as apartments, townhouses, or units. Under a strata scheme, each individual unit in the building or complex is owned by a separate person or entity, while the common areas (such as corridors, lifts, amenities, and the exterior of the building) are owned jointly by all the unit owners.
In addition to owning individual units, strata owners are also members of an owner's corporation, which is responsible for managing the common areas and ensuring that the building is properly maintained. This includes (but is not limited to) tasks such as cleaning and maintenance of common property and amenities, security, maintenance of fire sprinkler systems, and enforcing building rules and regulations.
What Are Strata Fees?
As a strata owner, you are responsible for paying strata fees or levies. But what exactly are these fees? Strata fees are essentially a way of sharing the cost of maintaining and repairing common property within a strata scheme.
The amount of strata fees you pay will vary depending on the size and location of your property, as well as the overall expenses of the strata scheme. Fees are commonly paid quarterly into a fund managed by the body corporate but may differ depending on individual circumstances.
Before purchasing a property, it's important to research the strata fees associated with it and factor them into your budget. So, what exactly are you paying for when you pay strata fees? In the next section of this article, we explore some of the common expenses that strata fees cover in Australia.
Strata Fees: What Am I Paying For?
Strata fees typically cover various expenses associated with the maintenance, management, and operation of a strata-titled property or condominium complex. Here's a breakdown of what you might be paying for:
1. Building Maintenance & Repairs
One of the biggest and most notable aspects of what your strata fees cover is none other than building maintenance and repairs. Strata fees are used to pay for the upkeep and repair of the building's structure, such as the cleaning of external windows and common areas, including lifts, lobbies, stairwells, and corridors/hallways.
Depending on the property, these fees may also cover the maintenance and repairs of shared amenities such as swimming pools, saunas, gyms or fitness centers, community gardens, parking areas, rooftop spaces, and more.
2. Building Safety Amenities
Another vital component that your strata fees contribute to is building safety amenities. The security amenities that strata fees pay for can vary depending on the specific strata property.
Some common building security amenities that strata fees may cover include security cameras, access control systems, security guards, alarm systems, intercoms, and the maintenance of fire sprinklers, fire extinguishers, and smoke detectors.
3. Utilities
To keep your strata scheme running smoothly and in good condition, your strata fees help to cover the costs associated with utilities for common areas or shared facilities. Some common examples include costs associated with rubbish and recycling, sewage, heating or cooling of shared areas, electricity to run lifts, or lighting of common and external areas.
Do note that strata fees only cover the costs associated with shared utilities, and if your property is 'separately metered,' you will be responsible for your individual electricity, gas, and water bills.
4. Compulsory Residential Strata Insurance
Strata fees help to cover compulsory residential strata building insurance which is required by law in Australia. This type of insurance is designed to protect strata owners and the strata corporation from financial losses due to damage or destruction to the building or common property. Insurance typically covers a range of risks, including fire, storm damage, theft, and vandalism, and covers liability for injury or damage caused to others on the property.
5. Administration Costs
Strata fees may also cover the cost of managing the strata scheme, including day-to-day administrative costs. Day-to-day expenses might include any or all of the following but are not limited to:
- Cleaning
- Gardening
- Hiring a strata manager
- Hiring a building concierge
- Holding Annual General Meetings
- Small maintenance and repair tasks
- Facilities management fees
- Legal fees
- Bank charges and incidentals
It is important to understand that strata fees do not cover your annual council rates. Individual lot owners still need to pay council rates directly to your local council.
6. Body Corporate Sinking Fund
Last but not least, strata fees contribute to your body corporate’s sinking fund. But what exactly is a sinking fund? A sinking fund, also referred to as a reserve fund, is used to cover the costs of major capital expenses and repairs in the future.
The sinking fund is intended to help the strata corporation save money over time for larger and less frequent expenses, such as replacing the roof, replacing lifts, or repainting the entire building. By requiring strata owners to contribute to the fund, owners are spared from the need for sudden and unexpected special levies when these expenses arise.
The amount of the sinking fund levy can vary depending on a number of factors, including the size of the building, the age of the building, and the expected lifespan of major components such as the roof or HVAC systems. The levy is typically calculated as a percentage of the unit owner's share of the common property.
What Is The Average Strata Fee?
Average strata fees vary depending on the location and type of property you decide to purchase. Other things that can influence this sum include the age of the property (older buildings often require more maintenance) and the number of units, amongst which to divide the annual costs.
As a guide, you can expect to pay a modest sum of anywhere between $1,200 to $2,200 annually for a small-scale body corporate in Victoria or New South Wales. On the flip side, the annual strata levy for an apartment in a large-scale development could very well be in the order of $8,000 to $10,000 or more.
It is also worth noting that strata fees for townhouses are often lower than those for apartments, which can be useful information when shopping for a property. To ensure you are not getting in over your head, it is important to gather as much information regarding strata fees as possible prior to making your purchase.
How Can I Avoid High Strata Levies?
Generally, high strata fees are typically associated with properties that have a range of shared facilities and services, such as security, maintenance, landscaping, and amenities. If you are planning on purchasing a strata property and are looking to avoid exorbitant levies, here are a few ways that could help you reduce or manage them:
Look for properties with fewer amenities:
Properties with fewer shared facilities and amenities typically have lower strata levies or body corporate fees. While it may be tempting to opt for properties with an abundance of luxurious facilities, it's equally important to consider the long-term costs.
Get involved in the decision-making process:
If you're a member of the body corporate, you can get involved in the decision-making process and have a say in how the fees are spent. This can help you ensure that the funds are being used efficiently and effectively.
Keep track of expenses:
It's important to keep track of the expenses incurred by the body corporate to ensure that you're not being charged for unnecessary or inflated costs. You can request financial reports and audits to ensure transparency.
Negotiate with the body corporate:
If you believe that the fees are unreasonable or you're struggling to pay them, you can always try negotiating with the body corporate. They may be willing to work out a payment plan or reduce the fees in certain circumstances.
And there you have it everything you need to know about strata fees and exactly what you are (or will be) paying for when you purchase a strata property. All in all, strata fees are an important aspect of owning a property in a strata scheme in Australia.
By having a thorough understanding of what you're paying for, you will be better able to budget for the ongoing costs of owning your strata property. We hope that this article has provided you with some valuable insight into the matter.
