Why It’s Important To Understand Strata Schemes When Buying An Apartment Or Townhouse

Buying an apartment or townhouse in a strata scheme is exciting - but you need to know some basics first. Before you buy, learn about:
•    what a strata scheme is
•    levies that are payable pertaining to the strata scheme
•    reviewing the body corporates financials to ensure the strata scheme is viable. 
•    what comprises of common property in a strata scheme
•    considerations you should think about before buying into a strata scheme
•    recent legislation changes

Understanding these things will help you make an informed decision.

What is a strata scheme?

Owning a townhouse, apartment or unit is a type of property ownership that:

1. allows for individual ownership of certain parts of a property (known as lots), while
2. sharing ownerships of common areas

In a strata scheme, you'll own your individual lot. This is typically an apartment, townhouse or unit. But you'll also share ownership of common property with other lot owners. Sharing ownership of common property has benefits and responsibilities.

Strata laws vary from State to State. In New South Wales, two distinct pieces of legislation work together to govern strata schemes. These are the:

• Strata Schemes Management Act 2015 (the SSMA)
• Strata Schemes Development Act 2015 (the SSDA)

What is common property in a strata scheme?

Common property generally includes areas and facilities used by all residents. This can include:

• External walls, roofs, and windows
• Driveways and pathways
• Foyers, lifts, and stairways
• Swimming pools and leisure facilities
• Gardens and landscaped areas

When looking at buying a unit, you'll need to find what common property there is, as this will affect your rights and obligations as an owner.

Key considerations before buying into a strata scheme

Here are key areas to check out when looking at apartments or townhouses:

1. By-laws and Regulations. Each strata scheme has its own set of by-laws that govern the use and management of property. Review these carefully to ensure they align with your lifestyle.
2. Strata Levies. Lot owners need to pay regular levies. Levies cover the costs of maintaining common property and other shared expenses.
3. Decision-Making Process. Look at how the strata scheme makes decisions. This includes understanding the role of the strata committee and your voting rights as an owner.
4. Planned Maintenance. Check if there's a 10-year capital works fund plan in place, as required by the SSMA. This will give you insight into future major expenses.
5. Strata Report. Consider obtaining a strata report before purchasing. This will provide valuable information about the scheme's financial health, any ongoing issues, and planned works.

Recent legislative changes

The strata landscape in Australia has evolved significantly in recent years. In NSW, the SSMA and SSDA introduced several key reforms, including:

• Changes to by-law enforcement
• New requirements for capital works fund planning
• Improved dispute resolution processes
• Regulations on proxy voting

There's also the Strata Schemes Management Regulation 2016. This regulation provides further detail on implementing both the SSMA and SSDA. It covers things such as: 

• insurance requirements
• building defect reporting, and 
• the appointment of strata managing agents

Making an informed decision

Buying into a strata scheme can offer many benefits you might not get in a standalone property. But it also comes with unique set of considerations and potential challenges.
Before making your decision, you should research the strata scheme you're interested in. Review all available documentation, including the strata plan, by-laws, and recent meeting minutes. Legal advice from our property and conveyancing team will ensure you don't miss anything.

Doing your homework now helps prevent potential headaches later.