What you need to know about strata fees
Whether you’re looking to buy a strata titled property as your own home or for an investment, it’s important to understand what strata is, how it works, and most importantly what costs are involved.
Strata titled properties are generally apartments, townhouses and units, and these are usually referred to as ‘lots’. A strata scheme can be made up of as few as two lots or it can be 100’s.
You own your individual lot (your apartment, townhouse or unit), and you also own part of the building and common areas. These could include entrances and lobbies, lifts, gardens, car parks and any recreational facilities such as pools and BBQ areas.
Strata schemes have an owner’s corporation. Consisting of all the lot owners, the owner’s corporation effectively run and manage the strata scheme. It is responsible for maintenance, addressing issues and ensuring the scheme adheres to legislation such as the recent requirements for window and pool safety.
While some corporations self-manage, many prefer to use a licensed strata managing agent and some employ a building manager.
Of course, these will need paying for! This is why each individual lot owner in the strata scheme will incur strata fees.
In the excitement of looking at a property, the strata fees are sometimes overlooked. Here’s what you need to know about strata fees.
What do strata fees cover?
The strata fees cover a number of costs, including, but not limited to:
- Building maintenance, such as cleaning gutters
- Common area maintenance, such as gardening
- Shared water and electricity
- Building insurance
- Strata managing agent (if there is one)
The corporation has to adhere to strict rules about record keeping, such as accurately recording meetings and finances, having accounts audited by an independent agent, so fees may also cover admin costs associated with these.
What don’t strata fees cover?
As a lot owner, you will still be responsible for the costs associated with running your property, such as utilities, council tax and contents insurance.
Generally, too, you are responsible for any internal maintenance, such as plumbing and any internal wear and tear.
If the property is being used as an investment property, you will also need to pay for landlord insurance.
Different strata fees categories
There three different categories of strata fees:
- Administrative fund
These are generally for regular expenses such as cleaning and gardening costs and any shared utility bills (eg lighting in communal areas). They will also cover body corporate insurance, admin, and any general repairs or maintenance.
- Sinking fund
This fund aims to cover larger one-off expenses, such renovations. This could be for the repainting of walls, replacing fencing or repairing roofs.
- Special levies
If there is a large expense, and the sinking fund doesn’t cover it, the corporation may decide the works should be paid for by a special levy. This maybe for something such as installing individual water meters or building a retaining wall.
When are strata fees collected?
Generally, strata fees are collected quarterly or biannually, so you will need to budget for this cost accordingly.
Special levies will be decided as a special resolution at the Strata AGM or another strata meeting, and there will usually be a schedule of payments.
How much are strata fees?
These will vary according to the strata scheme. For instance, a strata scheme with a large number of communal amenities, such as swimming pools, BBQs, elevators and extensive gardens, are likely to be higher, than those without.
What happens if I can’t pay my strata fees?
The fees are part of the agreement of buying a property in a strata scheme. If you don’t pay your strata fees on time, the corporation may apply interest and reminder fees to your account. If you continue not to pay, the corporation may take Debt collection action against you or, in instances of long-term arrears, Court action.
It’s also worth noting, if your levy is overdue, you lose voting rights at your strata meetings (except on decisions requiring a unanimous vote). This means that you are losing your voice when it comes to decision making in the strata scheme.
Communication is key; if you cannot pay your levy for hardship, or other genuine reasons, it is important to contact the Strata Manager or Committee for your group so you can work together to get you back on track.
Are strata fees tax deductible?
Strata fees are usually tax deductible, but it is imperative you keep a record of what the strata fees are for.
For example, if the fee is in the administrative or sinking fund category, you can probably claim a deduction on your tax return. However, if a cost is for a special levy, and is considered to for a capital expenditure, it may not be tax deductible. Talk to your accountant who can apportion the cost accordingly.
If you’re thinking of buying an investment property in a strata titled scheme and would like to know more or would like to know how our property management services can help, our talented and experienced team would love to share its knowledge with you.
We are one of Newcastle’s longest established real estate offices, so give us a call on 02 4956 9777, send us an email to mail@newcastlepropertymanagement.com.au or pop into our Cardiff office for a chat.
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