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Buying strata title

Buying strata title

When you’re buying property, it’s important to understand what sort of title you’re purchasing.

Most freestanding houses in Australia are sold under the Torrens title system. Units, apartment blocks and horizontal divisions, on the other hand, are usually sold under a strata title arrangement. That has implications for your ongoing costs and maintenance obligations which should be taken into account before signing on the dotted line.

What is strata?

Strata title grants the purchaser a combination of private and shared ownership. The individual ownership relates to the ‘lot’ being bought, which is generally the apartment, unit or townhouse. The shared ownership relates to the common property, which includes gardens, driveways, and common access ways in apartment buildings like foyers and fire escapes.

Residential and commercial properties can both exist under strata plans, along with mixed use properties, retirement communities and caravan parks. Strata title can exist in properties with just two duplexes all the way to large tower blocks with hundreds of owners.

All strata properties have an owners’ corporation. This can be self-managed or outsourced to a professional strata management group.

What are the pros?

  1. Strata properties are often a great starting point for people looking to make their first home purchase, as the cost is much cheaper relative to the land than for a free standing title.
  2. Because the price is so reasonable, there is a constant demand for strata properties, which makes it easier to sell on in due course.
  3. Most repairs and maintenance are taken care of via strata levies, which are paid quarterly. That means that you can run a budget with more certainty, and have the peace of mind of knowing that there is money available for repairs before they come up.
  4. The bulk of property maintenance is organised by the strata corporation and paid for via strata fees, which takes the weight of the responsibility off you. It’s a great way to discover what upkeep properties need before buying a stand-alone house.
  5. The rules that limit what individual owners can and can’t do are designed to preserve the value and comfort of the group for everyone, which lessens the risk of troublesome neighbours or unkempt buildings next to yours.
  6. If you’re buying an investment property, strata fees and associated costs are tax deductible. The various restrictions on what can and can’t be done with the property can also be an advantage if you’re renting to tenants.

What are the cons?

  1. Strata levies can be costly. This is especially so in luxury apartment buildings or large complexes, where the fees cover shared amenities such as swimming pools and gyms. The lower cost of the property makes this worthwhile for many people, but don’t forget to calculate it into your budget.
  2. There are a number of responsibilities that come with strata ownership, including annual meetings that should be attended either by the owners or by designated proxies. They’re not compulsory, but you’ll get the most out of your purchase if you stay engaged with the corporation and know what’s going on.
  3. The rules which govern what owners can and can’t do can serve to your advantage, but are also restrictive compared to Torrens title. For example, it is not uncommon for a strata corporation to require permission from the owners’ group to keep pets on the property, or to make external decorative changes to your lot. Depending on your personality, this can be a downside or a boon.

Purchasers are entitled to see the records of the owners’ corporation and know its financial state, so if you are considering a strata purchase, make sure that’s part of your due diligence.

The popularity of strata title has soared in the past fifty years, so don’t be afraid of taking advantage of it to secure a house in your dream suburb.

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