Owners corporations and strata costs

Understanding the financial and legal obligations of living in a shared property.

What is an owners corporation?

In Victoria, when you buy a property that shares common property with others, such as a driveway, roof, or gardens, you automatically become a member of an owners corporation. This body is responsible for managing and maintaining the common areas and ensuring the building is adequately insured. The owners corporation is governed by the Owners Corporations Act 2006. As a member, you have a say in how the property is managed, but you also have a legal obligation to pay fees and follow the rules, or by laws, that govern the community living environment.

The owners corporation typically appoints a committee of owners and often a professional manager to handle day to day tasks. These tasks include arranging repairs to common property, managing the annual budget, and ensuring compliance with fire safety regulations. Before buying into a strata scheme, you must review the owners corporation certificate included in the Section 32 statement. This document provides critical information about the financial health of the corporation, current fees, any outstanding debts, and whether there are any planned special levies for major works.

Understanding strata fees and levies

Owners corporation fees, also known as levies, are paid by all owners to cover the cost of maintaining the property. These are usually divided into an administrative fund for day to day expenses and a maintenance fund for long term repairs. The amount you pay is based on your lot liability, which is defined in the plan of subdivision. It is important to budget for these ongoing costs, as they can increase over time. High fees might indicate luxury amenities like a pool or gym, while very low fees might suggest that the building is not being properly maintained.

• Administrative fund levies for daily costs
• Maintenance fund for future capital works
• Special levies for unexpected major repairs
• Building insurance for common structures
• Rules regarding pets, parking, and noise

Reviewing the history of the corporation

One of the best ways to understand how a building is run is to read the minutes of the Annual General Meetings (AGM) from the past two or three years. These documents will reveal any ongoing disputes between neighbours, recurring maintenance issues like water leaks, and the general attitude of the owners towards spending money on upkeep. If the minutes show a history of deferred maintenance, you could be facing significant special levies in the near future. Conversely, a well managed building will have a clear maintenance plan and a healthy financial balance.

You should also check the insurance policy held by the owners corporation. In Victoria, the corporation must insure the building and common property, but this usually does not cover your internal contents, carpets, or curtains. You will still need your own contents insurance. Ensure the building is insured for its full replacement value, especially given recent increases in construction costs. A lack of adequate insurance is a major red flag and can make it difficult to obtain a mortgage on the property.

Finally, consider the impact of the owners corporation rules on your lifestyle. If you have a dog, you must ensure the rules allow pets and understand any conditions attached. If you plan to renovate your kitchen or bathroom, you may need permission from the committee if the work affects common property or other residents. Understanding the balance between individual rights and collective responsibilities is key to successful strata living. A proactive and transparent owners corporation is a sign of a healthy property investment and a harmonious living environment for downsizers.