Strata Title Properties: What to Consider Before Buying

Purchasing a property is an exciting milestone, but when it comes to strata title properties, there are unique considerations to keep in mind. Whether you’re eyeing an apartment, townhouse, or a unit in a larger complex, understanding the intricacies of strata living can help you make an informed decision. Here’s a comprehensive guide to what purchasing a strata title property means and what you should be aware of.

What is a Strata Title Property?

A strata title property refers to a type of property ownership where individuals own a specific unit or lot within a larger complex while sharing ownership of common areas. Common areas can include facilities like gardens, pools, gyms, hallways, and driveways, which are collectively managed by the owners corporation (or body corporate in some states).

Key Features of Strata Title Properties

Individual Ownership: In most circumstances, you own the interior of your unit, but external structures and shared spaces are owned collectively.
Owners Corporation: All unit owners are automatically part of the owners corporation, which oversees the management and maintenance of common areas.
Strata Fees: Owners will contribute to the upkeep of common areas through regular strata fees, which fund services like cleaning, landscaping, and building repairs.
By-Laws: Strata properties operate under a set of rules (by-laws) that govern residents’ conduct and use of common areas.

Things to Consider Before Buying a Strata Title Property

Understand the Costs-Strata fees are ongoing expenses that can vary significantly based on the property’s facilities and maintenance requirements. Luxury complexes with amenities like pools and gyms typically have higher fees. Review the financial statements of the owners corporation to assess its financial health and whether there are any upcoming special levies for major repairs or upgrades.
Review the By-Laws-By-laws outline what is permissible within the complex. These can include rules about pet ownership, noise levels, parking, and renovations. Ensure the by-laws align with your lifestyle to avoid conflicts after purchase.
Inspect the Strata Records-Request a strata report or inspect the minutes of recent corporation meetings. This will provide insight into how the property is managed, any ongoing disputes, planned maintenance, or major repairs.
Assess the Property’s Condition-Pay close attention to the condition of common areas and facilities. Poor maintenance can indicate potential future costs or ineffective management by the owners corporation.
Know Your Rights and Responsibilities-Strata living involves shared responsibilities. Familiarise yourself with your rights as a lot owner, including voting at meetings, participating in decision-making, and raising concerns.

Benefits of Owning a Strata Title Property

Shared Amenities: Access to facilities like pools, gyms, or landscaped gardens without the full cost of maintenance.
Community Living: Strata living can support and foster a sense of community and shared responsibility.
Lower Upfront Costs: Strata properties are often more affordable than standalone houses in the same area.

Potential Challenges

Limited Autonomy: Potential restrictions on renovations, pets, or other activities may not suit everyone.
Ongoing Costs: Strata fees and special levies can add to the financial burden.

When purchasing a strata title property, insurance is a key consideration to ensure both your property and the shared common areas are protected. Here are the main insurance factors you should keep in mind:

1. Strata Insurance (Building Insurance)

The owners corporation typically arranges insurance for the entire building, covering the structure of the property, communal areas, and common facilities (e.g., hallways, lifts, pool, and gardens). This type of insurance protects against risks like fire, storm damage, or vandalism. However, it’s important to confirm that the strata insurance is up to date and provides adequate coverage for the building's replacement value.

2. Contents Insurance

As an individual property owner, you'll need your own contents insurance to cover the interior of your unit, including your personal belongings (furniture, electronics, etc.). This will protect your possessions in case of theft, fire, or water damage within your unit. Contents insurance does not cover damage to the building or communal areas, as this is the responsibility of the strata insurance.

3. Public Liability Insurance

Public liability insurance is generally covered by the owners corporation to protect against accidents or injuries occurring in common areas, such as hallways, gardens, or shared facilities. However, it’s worth confirming that the policy covers all potential risks, especially in areas with higher foot traffic or additional amenities like a pool or gym.

4. Building and Liability Coverage for Renovations

If you plan to renovate your strata property, you should check whether the building insurance covers any potential damage caused during renovations. You may need to arrange additional renovation insurance to cover the work and any risks during the renovation process. Additionally, some strata schemes require owners to get approval before making structural changes, so make sure your renovations align with the strata by-laws.

5. Excess Strata Insurance

Be aware that there may be an excess (deductible) on the strata insurance policy, which could be passed on to individual owners if a claim is made on common property. For example, if a storm damages the roof and causes leaks into several units, the owners corporation might claim on the building insurance, but each owner might be required to pay a portion of the excess.

6. Loss of Rent Insurance

If the property is rented out, loss of rent insurance might be necessary. This coverage compensates for lost rental income if the unit becomes uninhabitable due to damage covered by the strata building insurance, such as fire or flooding. This is an important consideration for investors purchasing strata title properties.

7. Review the Strata Insurance Policy

Before finalizing the purchase, it’s recommended to review the strata insurance policy to ensure it covers the necessary areas, is sufficient for the property’s needs, and that premiums are being paid regularly. You may want to request a copy of the policy from the owners corporation or the property manager and check for any exclusions or gaps in coverage.

Final Thoughts

Purchasing a strata title property can be a fantastic choice for those seeking convenience, community, and access to shared amenities. However, it’s essential to thoroughly research the property and understand the responsibilities that come with strata living. By considering the costs, reviewing by-laws, inspecting strata records, and understanding your insurance needs, you’ll be well-equipped to make an informed decision.