How Does Strata Work in NSW?

With the number of Strata Schemes now surpassing 100,000 in NSW alone, Strata Title properties are a rapidly growing property type. Many Australians are choosing to live in Strata as they are often in the best locations, including waterfronts and dining precincts.

Strata Schemes involve dividing a building, or a number of buildings, into units or ‘Lots’. A Lot typically consists of the dwelling (eg an apartment, villa or townhouse) or a utility area (eg an extra parking space or storage room). Investors own their Lot as well a percentage stake (called a ‘unit entitlement’) share in the common property, proportionate to the market value of their Lot in comparison to other Lots in the Strata Scheme.

Collectively, all Lot Owners combine into an entity called an Owners Corporation (previously referred to as a Body Corporate). The Owners Corporation appoint a Strata Committee at their Annual General Meeting each year to run the Strata Scheme on a day to day basis. The Owners Corporation will often appoint a Strata Manager to assist the Strata Committee in taking care of all the legalities, administration and management associated with Strata Schemes.  

What You Own

Unlike owning an entire house, only certain aspects of a unit or Lot in a Strata Scheme are property of the owner, namely the ‘airspace’. Whilst each Strata Plan will have its own unique property boundaries, the Lot airspace is generally taken to be a cubic area inside the external walls of the unit.

A Lot owner doesn’t generally own the perimeter or boundary walls themselves, nor the floor and ceiling – these form part of the common property. It is generally said that the Lot owner has ‘from the paint in’ in a cubic shape.

Usually in a Strata Scheme an individual Lot owner owns:

  • The interior of the unit
  • The interior walls of the unit
  • Fixtures including benchtops, cupboards, baths, sinks and toilets
  • Removable flooring such as carpet or vinyl however fixed floor coverings such as tiles are generally common property provided they were in place at the time of registration of the Strata Plan.

The maintenance of common areas (ie areas that are not part of a Lot) is the Owners Corporation’s responsibility. A Lot owner generally cannot make changes to common property areas without permission from the Owners Corporation.

Your Responsibilities

As a member of a Strata Scheme you are part of a common collective and there are certain expectations you must meet. These include:

Maintaining your Lot – Your Lot must be kept neat and tidy and good repair and condition so as not to detract from the appearance of the property as a whole.

Pay levies – As a Lot Owner, you are required to pay levies, generally on a quarterly basis, to cover things like building insurance, common area repairs, common utilities, to fund maintenance contractors and to build up funds to meet the long term maintenance of the building (called a Capital Works Fund).  

Abide by By-Laws – By-laws are a set of rules established by the Developer at the time of registration of the Strata Plan and are administered by the Owners Corporation and Strata Committee. The by-laws are essentially behavioural guidelines, and will differ between Strata Plans but generally cover such things as pet ownership, noise, behaviour, smoking and common property use.

Things to check

Before investing in a Strata Scheme, it’s important that you do your due diligence to ensure you can be as informed as possible before proceeding with the purchase. Some of the most important are:

Obtain a building report – This would be generally only detailing the condition of the Lot you are looking to purchase, however it is advisable to ask your building inspector to take a cursory inspection of the perimeter walk of the building as part of their inspection and point out any obvious signs of issues you should be aware of as they may be items you could be jointly responsible for in the future.

Inspect records – the Owners Corporation can make records available for you to view including Strata rolls, plans, financial statements, meeting minutes, correspondence, insurance policies and other information pertaining to the Strata Scheme. It can be very important for you to be aware of any disputes between residents within the scheme or upcoming Special Levies before you begin to negotiate a purchase price.

Obtain a section 184 certificate – this certificate provides information on levies, strata committee members, by-laws, the 10-year capital works plan and other important information regarding the scheme.

Strata schemes can be complex, so it’s wise to seek professional advice.

For expert advice and strata management services talk to the friendly team at Lake Group Strata. We have more than 25 years’ experience providing Strata Management services in the Hunter Valley and greater Newcastle area. Contact your local office in Charlestown or East Maitland to find out more.

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