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Understanding Strata Fees

It is important to understand what strata fees are and undergo due diligence as strata fees can vary enormously depending on the property.

 If you have been considering purchasing an apartment or townhouse, it is important to understand what strata fees are and how to navigate your way through the obligations. 

Although strata fees vary by state, the basic understanding amongst consumers is that strata are complex and confusing. However, with the right tools and research, you will come to appreciate that it exists to make your life as an owner much easier.

Below we dissect the basic points of why strata fees exist to help you understand the ins and outs of this complex scheme.

What is Strata?

A strata scheme is a system put in place to deal with the legal ownership of a portion of a building. For example, if you have purchased an apartment in a building, you share ownership of that building with other tenants. Strata fees apply for residential and commercial and include; apartment blocks, villas, townhouses, duplexes, storage units, and factories. 

When you buy into a strata scheme, you also buy into an owner’s corporate. An ‘owners corporation’ is the formal name for the people that make up the tenants in a strata building, and all share the property’s responsibility and the upkeep of the communal areas used. Whereas the owner or people that own portions of a strata building are called a ‘body corporate’ and must contribute to the strata fees. 

What are strata bylaws?

A strata scheme is governed by a set of bylaws designed to ensure residents are safe and secure, encourage harmonious communal living and protect the look and quality of the building. The contents of bylaws cover a large range of operational obligations, including garbage disposal, noise restrictions, parking and potential renovations. It is important to note that bylaws are put in place to ensure respectful and inclusive living and must not be harsh or oppressive. If a bylaw has been breached by a tenant or owner, penalties and fines will be enforced, so it is important to make sure you read through the current bylaws before moving into a strata building.

What do strata fees cover?

The strata fees essentially cover everything that will ensure your property and the building remains in good shape for use by the tenant. The management’s responsibility is to pay for these expenses, including maintenance, insurance, management fees, repairs and upkeep of utilities. There are three main types of levies that make up what strata fees cover:

  1. Administrative fund levies: daily and regular expenses in nature and would cover the cost of maintenance, gardening, shared utility bills and body corporate insurance.
  2. Sinking fund levies: for larger expenses, including the replacement of roofing or repainting walls.
  3. Special levies: designed to cover unexpected or extraordinary expenditures such as structural improvement or termite damage. 

What costs are involved with strata fees, and is it tax-deductible?

A common misconception for many is that it is the people who are renting the property who pay the strata fee. It is the owner of that property and part-owner or sole owner of the large building complex who must pay for the fees. 

Unfortunately, there is no set cost to strata fees as it depends entirely on the location, age, and price of the property. Components, including the number of communal amenities, also influence the cost for example, an apartment building with a gym and heated swimming pool will pay more in strata fees than a building without. 

Fortunately, strata fees are generally tax-deductible. The Australian Taxation Office will require a general record of expenses made on the property.

For more information on strata fees complex scheme, reach out to your local Hockingstuart office or agents today.