UK leasehold flats vs Australian strata

[Philip]

The UK leasehold system has been described as "medieval" / "the last remnant of feudalism". Many people say that because of this they would never buy a UK flat, not to mention leasehold houses.

Having owned a UK flat in the past, I have experienced this first hand, with no end of problems / overcharging / lack of communication, by the property management company as well as the freeholders.

 

Detractors of leasehold in the UK have told me that strata ownership "works much better" in other countries. Now that our move is becoming a reality, I am trying to learn more about this.

Obviously there must be a way to recognise that blocks of flats have communal areas that require maintenance to be shared. But I am struggling to understand whether Australian strata title is materially different from how leasehold flats work in the UK?

[rammygirl]

It does vary a bit by state but this is a useful guide to start you off. 
https://www.canstar.com.au/home-loans/strata-title/

[BendigoBoy]

3 hours ago, Philip said:

The UK leasehold system has been described as "medieval" / "the last remnant of feudalism". Many people say that because of this they would never buy a UK flat, not to mention leasehold houses.

Not all of the UK.  Whilst there are still some outliers, for the most part - and as far as any "normal" person buying a flat would be concerned with now, Scotland did away with leaseholds in the last twenty years or so.

Then again, there are plenty of other reasons for not wanting to buy a flat in Scotland...

[Blue Manna]

3 hours ago, Philip said:

The UK leasehold system has been described as "medieval" / "the last remnant of feudalism". Many people say that because of this they would never buy a UK flat, not to mention leasehold houses.

Having owned a UK flat in the past, I have experienced this first hand, with no end of problems / overcharging / lack of communication, by the property management company as well as the freeholders.

 

Detractors of leasehold in the UK have told me that strata ownership "works much better" in other countries. Now that our move is becoming a reality, I am trying to learn more about this.

Obviously there must be a way to recognise that blocks of flats have communal areas that require maintenance to be shared. But I am struggling to understand whether Australian strata title is materially different from how leasehold flats work in the UK?

They do have leasehold in Australia for retirement flats and so forth. I think they have the same in the UK. I would avoid any thing like that. I thought strata meant that the ground and externals were owned collectively?

[Philip]

10 minutes ago, Blue Manna said:

They do have leasehold in Australia for retirement flats and so forth. I think they have the same in the UK. I would avoid any thing like that. I thought strata meant that the ground and externals were owned collectively?

Ah ok, so strata is more like UK "share of freehold"?

[shaunfreo]

Generally the way it works is you pay quarterly fees which pay for maintenance of communal areas, building insurance,  liability insurance, and  repairs. The amount payable can vary depending on many factors, for example if there is a pool, gym , the size and age average here in Queensland is around $4000 up to $10,000 + per year

There is what is known as a body Corporate Committee which is made up of owners who decide on all mattes , agree budgets ect, most are run by strata management companies (who charge a fee) who will communicate via the Body Corporate.There is usually a general meeting every year.

The key thing when buying a strata property is to check recent minutes of annual meeting, look at the financial records to check sink fund payments ect this gives an indication on how well run the development is. If you buy via a real estate agent they have to disclose this information to you, its usually on display at a home open.

So the key difference is you are an active participant and not just giving money to a leasehold company for whom its about making money.

[InnerVoice]

2 hours ago, shaunfreo said:

Generally the way it works is you pay quarterly fees which pay for maintenance of communal areas, building insurance,  liability insurance, and  repairs. The amount payable can vary depending on many factors, for example if there is a pool, gym , the size and age average here in Queensland is around $4000 up to $10,000 + per year

There is what is known as a body Corporate Committee which is made up of owners who decide on all mattes , agree budgets ect, most are run by strata management companies (who charge a fee) who will communicate via the Body Corporate. There is usually a general meeting every year.

The key thing when buying a strata property is to check recent minutes of annual meeting, look at the financial records to check sink fund payments ect this gives an indication on how well run the development is. If you buy via a real estate agent they have to disclose this information to you, its usually on display at a home open.

So the key difference is you are an active participant and not just giving money to a leasehold company for whom its about making money.

Thanks, that's a great explanation.

14 hours ago, Blue Manna said:

They do have leasehold in Australia for retirement flats and so forth. I think they have the same in the UK. I would avoid any thing like that. I thought strata meant that the ground and externals were owned collectively?

Our next move will most likely be into a residential retirement complex, or 'over-50s living' as they like to call it here. Some of the accommodation is superb and nothing like 'old folks places' they have in the UK. As a sweeping generalisation based on the one's we've looked at, you pay a weekly rent or site fee of around $200/week (although this is about $140/week if you're on an Aged pension and can get a rebate). Although this works out at $10k/annum, you don't usually pay for water, council rates, or body corporate fees, so there's several thousand you're saving straight away. There isn't usually any stamp duty on the purchase either, so that's another big saving. They say that sometimes they can be hard to sell on, but less face it, that's probably going to be someone else's problem. All in all they seem like a pretty good deal when the time is right.

[Blue Manna]

46 minutes ago, InnerVoice said:

Thanks, that's a great explanation.

Our next move will most likely be into a residential retirement complex, or 'over-50s living' as they like to call it here. Some of the accommodation is superb and nothing like 'old folks places' they have in the UK. As a sweeping generalisation based on the one's we've looked at, you pay a weekly rent or site fee of around $200/week (although this is about $140/week if you're on an Aged pension and can get a rebate). Although this works out at $10k/annum, you don't usually pay for water, council rates, or body corporate fees, so there's several thousand you're saving straight away. There isn't usually any stamp duty on the purchase either, so that's another big saving. They say that sometimes they can be hard to sell on, but less face it, that's probably going to be someone else's problem. All in all they seem like a pretty good deal when the time is right.

All I can say is go in with your eyes fully open. They can be great places to live. But sometimes you can get issues. Living close to alot of people isn't everyone's cup of tea, and if conflict arises, it can be difficult to resolve. But if you are a people person and will make use of the facilities they can be fantastic. As you say, they can be hard to sell, and the leasehold may take a chunk if you do. You're children may also be obliged to pay the fees after you die until the sale, although I believe the laws around this have changed recently. There have been some news stories over the last few years, so probably worth catching up on those. 

[InnerVoice]

2 hours ago, Blue Manna said:

All I can say is go in with your eyes fully open. They can be great places to live. But sometimes you can get issues. Living close to alot of people isn't everyone's cup of tea, and if conflict arises, it can be difficult to resolve. But if you are a people person and will make use of the facilities they can be fantastic. As you say, they can be hard to sell, and the leasehold may take a chunk if you do. You're children may also be obliged to pay the fees after you die until the sale, although I believe the laws around this have changed recently. There have been some news stories over the last few years, so probably worth catching up on those. 

The retirement properties we've looked at so far have been on reasonably-sized plots, which although much smaller than the average Australian house are still pretty comfortable for two people. They were also advertised as having no entry or exit fees, although I'm sure others do. Listings tend to be pretty comprehensive about what is and isn't included, and my gut instinct is that if the listing is incomplete then the agent is probably hiding something. The possibility of dodgy neighbours is a cause for concern wherever you live, although I'd suspect it's less of an issue in an over-50s community - and there's a process to address it in Queensland.

https://www.qld.gov.au/housing/buying-owning-home/housing-options-in-retirement/retirement-villages/steps-to-resolve-dispute-retirement

[InnerVoice]

8 hours ago, shaunfreo said:

Generally the way it works is you pay quarterly fees which pay for maintenance of communal areas, building insurance,  liability insurance, and  repairs. The amount payable can vary depending on many factors, for example if there is a pool, gym , the size and age average here in Queensland is around $4000 up to $10,000 + per year

Another couple of factors that can affect the strata fees significantly are whether the building has elevators (they are expensive to maintain), and if for any reason it's a high insurance risk. One of my colleagues bought a fabulous apartment with sea views right on Cairns Esplanade, but after Cyclone Yasi struck her fees went up to $12,000/year. She really wanted to sell the place but couldn't because no one was interested. In the aftermath of a Cat 5, waterfront living can suddenly lose it's appeal.

[ramot]

4 hours ago, InnerVoice said:

Thanks, that's a great explanation.

Our next move will most likely be into a residential retirement complex, or 'over-50s living' as they like to call it here. Some of the accommodation is superb and nothing like 'old folks places' they have in the UK. As a sweeping generalisation based on the one's we've looked at, you pay a weekly rent or site fee of around $200/week (although this is about $140/week if you're on an Aged pension and can get a rebate). Although this works out at $10k/annum, you don't usually pay for water, council rates, or body corporate fees, so there's several thousand you're saving straight away. There isn't usually any stamp duty on the purchase either, so that's another big saving. They say that sometimes they can be hard to sell on, but less face it, that's probably going to be someone else's problem. All in all they seem like a pretty good deal when the time is right.

We have quite a few  friends who live in retirement villages, and to be honest the ones who are sadly on their own, aren’t too unhappy, they do benefit from the companionship,. The couples we know vary from acceptance that it’s the sensible thing to do, some quite happy, to others who hate the regulations, and have left as a result.

there is no way we will live in one, unless we have no choice but to move from our house.

The rules would drive us mad. You have to get permission if you have guests to stay for more than 3 days, guests can’t stay even for one night in your house unless you are there, they can’t park overnight in your drive, have to use visitor car spaces,  you are reported if you drive over the speed limit,  we laugh when we visit and say  watch out for spies!!! You have an obvious visit from management if you break any of the above rules, and there is always someone willing to report you!! 

The  standard of the houses are excellent, as are the facilities,  but all the activities are run entirely by volunteers living there,  the management is not involved at all  , so activities like the cinema, social events, the bar, can grind to a halt. 

Around here there quite a few villages, run by different companies, and there seems quite a lot of differences between them as regards the conditions of buying and selling. You really need to do your homework to find what suits you, and what all the restrictions are.

Edited September 22, 2023 by ramot

[can1983]

3 hours ago, InnerVoice said:

Another couple of factors that can affect the strata fees significantly are whether the building has elevators (they are expensive to maintain), and if for any reason it's a high insurance risk. One of my colleagues bought a fabulous apartment with sea views right on Cairns Esplanade, but after Cyclone Yasi struck her fees went up to $12,000/year. She really wanted to sell the place but couldn't because no one was interested. In the aftermath of a Cat 5, waterfront living can suddenly lose it's appeal.

Yep lovely to visit the sea, less lovely for the sea (and its contents) to visit you.

We live 500m from the beach but 50m up. Yep its a hard walk home but the sea isn't going to visit us

[Marisawright]

8 hours ago, InnerVoice said:

They say that sometimes they can be hard to sell on, but less face it, that's probably going to be someone else's problem. All in all they seem like a pretty good deal when the time is right.

Not necessarily. What if one of you needs to go into a nursing home or dementia care? You'll need to sell up then, and there is often an exit fee to pay, as well as the difficulty of selling. 

The other issue is that unlike a strata apartment, you get no say in what the annual fee is. The company running the complex can charge what they please. In Melbourne, there are some complexes where the annual "service fee" for a 2-bedder is more than we pay in annual rent for our strata unit.  There have been news stories about residents struggling to afford the fees, but reluctant to sell because they'd be left with so little capital after paying the exit fee.

 

[Amber Snowball]

36 minutes ago, Marisawright said:

Not necessarily. What if one of you needs to go into a nursing home or dementia care? You'll need to sell up then, and there is often an exit fee to pay, as well as the difficulty of selling. 

The other issue is that unlike a strata apartment, you get no say in what the annual fee is. The company running the complex can charge what they please. In Melbourne, there are some complexes where the annual "service fee" for a 2-bedder is more than we pay in annual rent for our strata unit.  There have been news stories about residents struggling to afford the fees, but reluctant to sell because they'd be left with so little capital after paying the exit fee.

 

It’s obviously a while ago now, but one lady I dealt with in Victoria had moved into a nursing home, but found she couldn’t afford it because when they sold her retirement unit, they discovered the exit fee was about 25% of the sale price. I couldn’t believe it, that was just obscene. It was a real issue for her and the family, with the care home clamoring to get paid.

I hope it is better regulated now, but beware that the big print giveth and the small print taketh away.

[Marisawright]

11 hours ago, Amber Snowball said:

It’s obviously a while ago now, but one lady I dealt with in Victoria had moved into a nursing home, but found she couldn’t afford it because when they sold her retirement unit, they discovered the exit fee was about 25% of the sale price. I couldn’t believe it, that was just obscene. It was a real issue for her and the family, with the care home clamoring to get paid.

I hope it is better regulated now, but beware that the big print giveth and the small print taketh away.

There was a huge scandal about it, maybe ten years ago? But no, it's not much better regulated now, sadly 

[Parley]

12 hours ago, Amber Snowball said:

It’s obviously a while ago now, but one lady I dealt with in Victoria had moved into a nursing home, but found she couldn’t afford it because when they sold her retirement unit, they discovered the exit fee was about 25% of the sale price. I couldn’t believe it, that was just obscene. It was a real issue for her and the family, with the care home clamoring to get paid.

I hope it is better regulated now, but beware that the big print giveth and the small print taketh away.

What do you mean they discovered?

Didn't they read the contract when they bought the place.

All the fees are in the contract so if you don't read it you can only blame yourself.

[InnerVoice]

12 hours ago, Marisawright said:

Not necessarily. What if one of you needs to go into a nursing home or dementia care? You'll need to sell up then, and there is often an exit fee to pay, as well as the difficulty of selling. 

The other issue is that unlike a strata apartment, you get no say in what the annual fee is. The company running the complex can charge what they please. In Melbourne, there are some complexes where the annual "service fee" for a 2-bedder is more than we pay in annual rent for our strata unit.  There have been news stories about residents struggling to afford the fees, but reluctant to sell because they'd be left with so little capital after paying the exit fee.

 

11 hours ago, Amber Snowball said:

It’s obviously a while ago now, but one lady I dealt with in Victoria had moved into a nursing home, but found she couldn’t afford it because when they sold her retirement unit, they discovered the exit fee was about 25% of the sale price. I couldn’t believe it, that was just obscene. It was a real issue for her and the family, with the care home clamoring to get paid.

I hope it is better regulated now, but beware that the big print giveth and the small print taketh away.

 

The media is full of these hard luck stories, and at the risk of sounding unsympathetic you can't really complain about being ripped off if you haven't read the small print. A house is the most significant purchase any of us will ever make, so if you don't fully understand the terms and conditions of purchase then you should take professional advice. I would never consider buying a place that had an exit fee or where the rent could be increased by more than the rate of inflation, which I understand is the standard practice.

[InnerVoice]

17 hours ago, ramot said:

We have quite a few  friends who live in retirement villages, and to be honest the ones who are sadly on their own, aren’t too unhappy, they do benefit from the companionship,. The couples we know vary from acceptance that it’s the sensible thing to do, some quite happy, to others who hate the regulations, and have left as a result.

there is no way we will live in one, unless we have no choice but to move from our house.

The rules would drive us mad. You have to get permission if you have guests to stay for more than 3 days, guests can’t stay even for one night in your house unless you are there, they can’t park overnight in your drive, have to use visitor car spaces,  you are reported if you drive over the speed limit,  we laugh when we visit and say  watch out for spies!!! You have an obvious visit from management if you break any of the above rules, and there is always someone willing to report you!! 

The  standard of the houses are excellent, as are the facilities,  but all the activities are run entirely by volunteers living there,  the management is not involved at all  , so activities like the cinema, social events, the bar, can grind to a halt. 

Around here there quite a few villages, run by different companies, and there seems quite a lot of differences between them as regards the conditions of buying and selling. You really need to do your homework to find what suits you, and what all the restrictions are.

There's just my wife and I and neither of us have any family in Australia, so we'd probably be in that category of people who would benefit from the companionship in our golden years.

The rules you describe sound pretty good from my perspective. The last thing I'd want would be to find that I'd moved to a place where my neighbour's are subletting, are allowing younger family members to stay for extended periods while they are away themselves. I've nothing against noisy parties, and people having fun - just as long as I'm invited. Driving within the speed limit would seem to be a considerate thing to do, especially given that many of the residents are elderly and vulnerable. As I've spent my working life trying (not very successfully) to get people to follow rules, I would probably be one of those people who would enjoy reporting others for minor misdemeanours. I can picture myself with hard-hat and clipboard as we speak.

I'd know idea that these places had a cinema, social events, and a bar too. It just gets better and better!

[Parley]

29 minutes ago, InnerVoice said:

 

 

The media is full of these hard luck stories, and at the risk of sounding unsympathetic you can't really complain about being ripped off if you haven't read the small print. A house is the most significant purchase any of us will ever make, so if you don't fully understand the terms and conditions of purchase then you should take professional advice. I would never consider buying a place that had an exit fee or where the rent could be increased by more than the rate of inflation, which I understand is the standard practice.

I think you will find all retirement villages have an exit fee.

[Marisawright]

39 minutes ago, InnerVoice said:

. I would never consider buying a place that had an exit fee or where the rent could be increased by more than the rate of inflation, which I understand is the standard practice.

As Parley said, most retirement villages have some kind of fee payable when you sell. Not always called an exit fee. Deferred management fee is a common expression. Of course people should know it exists when they sign up, but you yourself said, "selling will be someone else's problem", and you're not the only person who would think that.

It's not a rent, it's a service fee, which means the operator is entitled to charge whatever it takes to cover their costs. There is no watchdog to ensure they don't inflate those costs or pay their management exorbitant salaries, and residents have no power to object.

Some villages do limit increases to CPI once you sign the contract, but it's far from universal.

[InnerVoice]

1 hour ago, Parley said:

I think you will find all retirement villages have an exit fee.

 

1 hour ago, Marisawright said:

As Parley said, most retirement villages have some kind of fee payable when you sell. Not always called an exit fee. Deferred management fee is a common expression. Of course people should know it exists when they sign up, but you yourself said, "selling will be someone else's problem", and you're not the only person who would think that.

It's not a rent, it's a service fee, which means the operator is entitled to charge whatever it takes to cover their costs. There is no watchdog to ensure they don't inflate those costs or pay their management exorbitant salaries, and residents have no power to object.

Some villages do limit increases to CPI once you sign the contract, but it's far from universal.

We will have to agree to disagree on this one because I've seen many listings here in Queensland that explicitly state 'no entry or exit fees'. I am happy to PM you links to listings I have seen, or you can search for yourself on Domain or Realestate. You and Parley are in Victoria, and as we all know each state has its own rules and regulations on these matters, not to mention that Queensland is more developed as a retirement destination than other states.

I appreciate I'm the one who took the thread off on a tangent but I can't imagine this conversation is of any benefit to the OP, so we should probably wind this one up.

[Blue Manna]

5 hours ago, InnerVoice said:

There's just my wife and I and neither of us have any family in Australia, so we'd probably be in that category of people who would benefit from the companionship in our golden years.

The rules you describe sound pretty good from my perspective. The last thing I'd want would be to find that I'd moved to a place where my neighbour's are subletting, are allowing younger family members to stay for extended periods while they are away themselves. I've nothing against noisy parties, and people having fun - just as long as I'm invited. Driving within the speed limit would seem to be a considerate thing to do, especially given that many of the residents are elderly and vulnerable. As I've spent my working life trying (not very successfully) to get people to follow rules, I would probably be one of those people who would enjoy reporting others for minor misdemeanours. I can picture myself with hard-hat and clipboard as we speak.

I'd know idea that these places had a cinema, social events, and a bar too. It just gets better and better!

Often a big pool and BBQ area, gyms, bowling greens, social events, bars with snooker tables, cinema as you mention, yoga, tai chi, some have on site medical etc etc. It's can be like a holiday camp.

But the down side, (and I'll get blasted here) is that you will be living very close proximity to a lot of old people, and old people can be weird. The dementia cases go without saying, but old people can be very crotchety and set in their ways even without dementia. Very opinionated (a bit like pio tbh) and prone to arguments. Just be wary of that.

[Amber Snowball]

6 hours ago, Parley said:

What do you mean they discovered?

Didn't they read the contract when they bought the place.

All the fees are in the contract so if you don't read it you can only blame yourself.

Quite agree. My thoughts when they told me was, “oh dear, didn’t you read the paper you signed”. 
Read everything before signing was the lesson there I suppose. 
I don’t doubt @InnerVoice ‘s ability to read, was just saying these places can have dodgy clauses.

Information sharing for the greater good. It’s what the forum is for.

[Amber Snowball]

3 hours ago, InnerVoice said:

 

We will have to agree to disagree on this one because I've seen many listings here in Queensland that explicitly state 'no entry or exit fees'. I am happy to PM you links to listings I have seen, or you can search for yourself on Domain or Realestate. You and Parley are in Victoria, and as we all know each state has its own rules and regulations on these matters, not to mention that Queensland is more developed as a retirement destination than other states.

I appreciate I'm the one who took the thread off on a tangent but I can't imagine this conversation is of any benefit to the OP, so we should probably wind this one up.

It could be useful, I think stratas have lots of rules as well. Don’t think I’d buy one out of choice. That said, a new estate in Pakenham Vic (years ago now) had rules about what sort of post box you could have and no caravans on driveways, and that was freehold, detached houses. 

[Marisawright]

5 hours ago, InnerVoice said:

 

We will have to agree to disagree on this one because I've seen many listings here in Queensland that explicitly state 'no entry or exit fees'. I am happy to PM you links to listings I have seen, or you can search for yourself on Domain or Realestate. You and Parley are in Victoria, and as we all know each state has its own rules and regulations on these matters

Also the types of retirement villages are often different. I believe a common setup in Queensland is that you buy the home but not the land. That's when you see the annual fee referred to as "rent" because that's what it is. They usually don't have much in the way of free communal facilities because no one is funding that

Edited September 23, 2023 by Marisawright