Struggle with strata fees? Here's an explainer

Buying your first property is one of the most exciting moments in your life.

For most first homebuyers, they will be hatching plans to renovate or make cosmetic improvements so their first apartment feels like their own home.

The price of property – plus current interest rates – has forced many young buyers to modify their original plans to buy a house and instead look for a flat that's within budget.

While this may not be their ideal journey, it's certainly wise to get on the first rung on the property ladder.

One niggling concern for first-time buyers is the rules and regulations around strata fees and their administration.

This is understandable. It's quite a complex issue.

It is important to appreciate that while you might pay strata fees on an apartment, you'd likely spend similar amounts on the maintenance of a detached house.

Also, cheap strata fees are not necessarily a good idea. Why? Because you want to ensure there's plenty of cash in the kitty to pay for required maintenance and improvements.

Below, we've highlighted a few key points about strata fees, and how they are spent, to alleviate some of your concerns. We hope you find them helpful.

It's Not Scary: Buying strata property should not be a threatening experience, but you need to do your due diligence. We'll explain as we go.

What's a Strata: Typically, a strata suggests land is subdivided into smaller lots to represent each apartment owner's share. Therefore, a strata block will be made up of units, each separately owned with land value applied.

Common areas: Not every square metre is included for ownership because there has to be common areas, such as a staircase, driveway, and so on.

Building Management: Not all strata blocks are managed by a 3rd party company, although this is common. There will be a strata committee, made up of the owners. Some owners participate, some do not.

Committee's Purpose: The committee's job is to manage the building and land, and administer the pool of strata fees available to ensure the upkeep of the property. It also has responsibility for ensuring public liability insurance and other general property-related issues.

The Funds: Strata funds are set aside to maintain the building. If you're buying in a block with a low level of funds, this is a concern. Once you become an owner, you are liable for your share of any work required, so you want the strata fund to be healthy.

Investigate Records: You should commission your conveyancer to study the strata committee meeting minutes to better understand the financial position, and whether the strata funds can cover all the works that are planned and foreseen.

Level of Fees: Most buyers want cheap fees, but that can spell trouble in the long-term. Fees should be sufficient to ensure ongoing maintenance. That way, you won't get hit by a special levy – in other words, a huge bill for work unforeseen or not included in the budget.

Gary Engelbrecht

Head of Strata Management

CONTESSI PROPERTIES