Strata stories?

[richev]

We've been in Aus a couple of years now, and are looking to buy (Sydney area - gulp!). One of the things we're learning about is Strata, which we understand exists for basically all properties that aren't a standalone house. Our take on it is that it's similar to how the share of freehold arrangement works in the UK, which we had before in a flat that was one of three in an old house that was converted in the 1980s.

We're looking at buying a townhouse, in a block of 10, that has a shared entrance pathway between the properties and a shared underground car park.

If we go ahead with a purchase, we're keen to ask as many relevant questions as possible, in order to avoid any "nasty surprises" further down the line about any potential restrictions the Strata arrangement might present.

So this is sort of an open question - what experiences (good and bad) have you had with Strata? What do you know now that you wish you'd known sooner?

(Aside: yep, we're concerned that the Sydney property market may be in freefall, so we may just renting for the time being!)

[Marisawright]

I very much doubt the Sydney market is in freefall.  They've predicted that many times before.  What happens is that the market falls a few percent, but nowhere near enough to wipe out past rises, then a few years later it starts its upwards march again.  If you are planning to stay in the home for the long term, I would buy now.  If you can see yourself moving in five to ten years, then rent and buy an investment property instead, so you have a foot in the market.

Sydney is limited by the mountains and water, so land will always be in short supply.

Anyhow, strata. Before you buy a strata property, it's vital to check the minutes of past strata meetings - that way you'll get a picture of how well/badly the committee works and also uncover any problems with the building.  If you're buying at auction, that means you need to get your conveyancer to get those documents before the auction.  If you're making an offer, you can make it conditional on satisfactory strata searches.  

Laws exist to regulate how strata schemes work, and most strata properties have a professional manager. However, the committee is always composed of residents so it's always an unknown.  The bigger the strata, the more likely there will be squabbles, in-fighting and even outright war.  Ten properties is a nice size and small enough to allow everyone a say and still have some chance at consensus!  

[NickyNook]

Agree with everything that Marisa says.

Strata titles are as common as. They're not a newfangled thing; been around since the 60s. Most apartments/townhouses/complexes have a Strata title. Most houses whether freestanding or older semi-detached/terraced are not.

You do need to check if/what problems exist with the buildings by reading Strata meeting minutes or you can buy Strata reports prepared by a 3rd party company which cover most of this. You do have to pay a levy, of course, to cover the shared expenses of maintaining the property but you usually only need contents insurance as the building insurance is paid for by the Strata. Also all maintenance of the building itself - which includes problems with your windows, walls and balconies etc - are usually covered by the Strata.

As Marisa says, 10 properties in a Strata scheme is the ideal number. Big owners corporations/bodies corporate come with their own set of problems. One thing I would check is the ratio of owners/renters in a complex. More than 50% renters in a building usually shows. 

[VERYSTORMY]

Strata is very common and we lived in a rental for 7 years that was strata and very nearly bought there. What put us off was the changing strata fees. When we moved in, the fee was $300 a quarter. By the time we were considering buying, six years later, the fee was over $3000 and we could see it going north quickly

[rammygirl]

Also ask if there is a sinking fund.  Basically a pot for large one off expenses like roof repairs etc. New properties can be a gamble as no history to check and little idea of how much fees could rise.

As said check what you get in the fee. Some also cover gardening for common areas and some water charges as well as buildings insurance.  Obviously if there are other facilities like a pool or gym that puts the price up but if you will be using them a lot it can be good value. 

[Guest Carol from Vista Financial]

Hi @richev

An exciting (and scary) time for you both! Great that you are starting to do your due diligence early on.

Find a conveyancer before you start looking for properties so you have a go-to person from the start. They will run their own searches as applicable to the type of title if purchasing by private treaty and you can also request a copy of the proposed contract prior to any auction and run this past your conveyancer too. 

Requesting a copy of the minutes is a good idea and you will get a copy of the strata or community title agreement with the contract of sale which is the blueprint of how things work there. It won't cover all things (and sometimes not in plain English) so ask the real estate agent or run this past your conveyancer too if unsure on anything. If you have any special request that may fall outside the rules you may be able to negotiate this prior to settlement (e.g. I've had a client recently purchase on community title negotiate having 3 pets rather than 2). Remember to get any special changes in an official format - written and signed by relevant authorities.

Here are some useful links for you covering off strata schemes in NSW:

https://www.fairtrading.nsw.gov.au/housing-and-property/strata-and-community-living/strata-schemes

https://www.fairtrading.nsw.gov.au/housing-and-property/strata-and-community-living/strata-schemes/frequently-asked-questions-strata-schemes

Don't forget to:

- check the exact specific boundaries/definitions of what is common property and what is not (you will need to know this when it comes to arranging insurance)

- when you do your Friday/Saturday night drive by to suss out noise levels, also check out the parking situation - see where guests may park etc. and see if this will be an issue for you.

- check if your car parking is on the same lot/title or a different one (if applicable)

- insurance - again clarify exactly what is covered by strata and what is not. Depending on what is defined as common property (as above) you may still need building insurance. Unless you have enough funds in the piggy bank to replace everything in your house as new if it were to burn down then contents insurance is also a must to protect yourself.

Hope this helps

Cheers

Carol

 

[richev]

Thanks all for the replies really informative and useful!