Finding a strata property you like on the outside is just the first step to ensuring it’s the right one to invest in. Whether you are looking for somewhere to live yourself, or to grow your property portfolio for the future, it pays to be on top of the legal considerations involved in strata management.  

Strata management resides under complex regulations which tend to vary across the country. Various strata laws have developed over the past 60 years to address the numerous local challenges and changing landscapes as they emerged. Even the language used when describing strata differs between jurisdictions, for example the collective body that manages the apartment complex is known as the Owners Corporation in Victoria, NSW and ACT, but Body Corporate, Strata Corporation, Strata Company or simply Corporation in other states and territories.  

No matter where you are in the nation, there are several important investigations you should undertake prior to purchase to ensure your investment is secure.  

There are three sets of documents you should gather before making your decision to buy, each with a different purpose, but each holding valuable information and insight into what lies behind the apartment building’s walls. Overall, you are looking at the property’s current standing in terms of finances, insurance and safety, tenancy, as well as projected changes. 

The first essential step is to have a Strata Inspection Report completed, which will answer many of your legal considerations in one document. This is best completed by an independent strata inspector; one who is highly trained and experienced in real estate matters and can advise objectively and openly, and who will be able to decipher the complex legal landscape of your geographical area.  

The other report to request is a building report, which will detail structural issues you need to be aware of, and the third set of useful documents is the latest Annual General Meeting Minutes, Extraordinary General Meeting Minutes and Executive Committee Meeting Minutes. 

Take your time to sift through the information to gain a clear picture of the true value of your proposed investment. We have put together a checklist of important legal considerations when it comes to purchasing strata. 

  • Ownership 

Check your strata scheme to determine exactly what you will own. For example, you may own and be responsible for the contents and air space within your apartment, but not the external walls, stairwells, gardens and amenities. 

  • Fees 

Ongoing fees need to be worked into your own budget prior to signing on the dotted line. Find out what fees and levies apply to your strata living, both for you as the owner as well as any that may impact your tenant if you are investing. 

  • Finances 

It is wise to look back at least three years into the financial state of the strata, so you have a solid understanding of the financial management process, as well as any proposed or projected spending. You should be able to find a capital fund (previously known as the sinking fund) forecast too, which details projected levy contributions and maintenance over the next 10 years. 

  • Upcoming capital works 

Find out if there are any upcoming capital works on your building, as this could significantly increase your costs and tenancy. In most states and territories, if 75 per cent of the owners agree to works (or sale of the property), the other 25 per cent are forced to agree. 

  • Tenancy and occupancy 

What proportion of apartments are occupied at any one time? Is your building popular with families, or are young couples and singles the predominant tenants? This will help you market your investment, should you wish to lease it, as well as give you valuable insight into the overall feel of the place. 

  • Neighbourhood report 

The value of a property can be markedly impacted by the surrounding area, so check out if there are any major developments that could impact your investment, either positively or negatively. It is also helpful to know the demographics and transiency of the area, especially if you are looking to rent out your strata apartment. 

  • Insurance 

Uncover what exactly is insured by the strata management and what you need to insure yourself. It is also a good idea to determine if the property is adequately insured in the case of disaster or theft, as underinsurance will leave everyone out of pocket. 

  • Safety 

Thoroughly investigate whether your building complies with state or territory mandated fire safety, health and safety obligations, as well as asbestos management. Not adhering to these can result in complicated and costly legal proceedings down the track. 

  • Current and past legal matters and defects 

Find out if there are any current legal matters pertaining to your building that may impact costs, value and tenancy. A property inspection report will also highlight any past or present building defects you should be aware of before spending your money.  

  • Voting rights 

As an owner, what are your voting rights? The rules and structure of the AGMs vary between jurisdictions in terms of quorums, voting processes and how meetings are chaired.  

  • By-laws 

It is important to know the individual by-laws pertaining to living in your strata. These cover issues such as parking, noise, renovations and pets. Every state has slightly different by-laws, and the legislations can be quite complex, so it pays to obtain a full copy of those relevant to your area and become familiar with what’s included. 

  • Know who to contact 

Last but not least, know who your body corporate or strata management contact is. This person will be your go-to in a building emergency, as well as the main contact for arranging meetings.  

If all of this sounds overwhelming, there are many professionals available to assist in requesting, preparing and deciphering the necessary documents. Don’t skip over your due diligence – ensuring you have the right property will pay dividends for years to come. 

About the author

Debra Beck-Mewing is the Editor of the Property Portfolio Magazine and CEO of The Property Frontline.  She has more than 20 years’ experience in buying property Australia-wide and has extensive experience in helping buyers use a range of strategies including renovating, granny flats, sub-division and development. Debra is a skilled property strategist, and a master in identifying tailored opportunities, homes and sourcing properties that have multiple uses.  She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business. As a passionate advocate for increasing transparency in the property and wealth industries, Debra is a popular speaker on these topics.  She is also an author, podcast host, and participates on numerous committees including the Property Owners’ Association.

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Disclaimer – This information is of a general nature only and does not constitute professional advice.  We strongly recommend you seek your own professional advice in relation to your particular circumstances.