Forever asking yourself “what are strata fees” and “why do they matter to me”?
If you’re considering buying an apartment in a strata building, it’s an attractive option, but you’re likely concerned about the extra costs that come with it, especially with today’s high cost of living. One of the expenses that might be on your mind are strata fees, also known as levies or body corporate fees.
Strata fees are an essential part of owning a property within a strata scheme. They’re collected from owners to cover the costs of maintaining and managing common areas of the property.
But what exactly do these fees cover?
How are they calculated?
And are they a worthwhile investment?
In this article, we’ll address these questions and provide a comprehensive understanding of strata fees. We’ll explain what they entail, how they’re determined, and how they can benefit you as an apartment owner.
What are Strata Fees and Schemes?
Strata schemes are systems that deal with the legal ownership of a portion of a building. In these schemes, you share ownership of a building with other tenants while owning your own apartment.
These buildings can be both residential and commercial and may include the following:
- Apartment blocks
- Office buildings
- Storage units
The people who make up the tenants in a strata building are collectively called the ‘owners corporation’. They share the responsibility for the property and the upkeep of the communal areas they use.
These communal areas may include gardens, pools, driveways, stairwells, lobbies, lifts, and the exterior of the building.
A building that is under a strata scheme is called the ‘body corporate’. As the owner of a portion of the building, you must contribute to the body corporate.
These contributions are called strata fees.
What Do Strata Levies Cover?
Strata fees, or levies, are the contributions you make as an owner to ensure the maintenance of the common areas of the property. Strata laws vary between states, but typically, these fees are collected quarterly or biannually.
The financial commitments of a strata fee ensure that the following are covered:
- Building maintenance
- Common area maintenance
- Shared water and electricity
- Building insurance.
Strata fees can be divided into three different categories:
- Administrative Fund Levies: These cover daily and regular expenses, including cleaning and gardening costs, shared utility bills, body corporate insurance, and general repairs or maintenance.
- Sinking Fund Levies: These fees cover larger expenses, such as the replacement of roofing or the repainting of walls.
- Special Levies: If a task is required for the maintenance of common property and it falls into neither administrative nor sinking categories, it becomes a special levy.
Who Pays Strata Fees?
Strata fees must be paid by those who own an apartment or home within a larger building complex. If you are renting, you will not pay strata fees directly. Most landlords will account for these costs by rolling them into the monthly or weekly rent charged for the property.
How Much Are the Average Strata Fees?
The amount of the strata fees varies depending on the property. Factors such as the location, age, and price of the property will determine how much you contribute.
The number of communal amenities will also influence the cost. For example, fees for a strata property with swimming pools, elevators, and gyms are likely to be higher than those without.
Depending on the property, you could see yourself paying between $550 and $2,500 a quarter. The difference depends largely on where in a city you live, with strata fees generally higher the closer you get to the city centre.
Are Strata Fees Tax Deductible?
Strata fees are typically tax deductible, as long as you keep a general record of expenses made on your property. If the fee falls into the administrative or sinking fund, you can claim a deduction. However, if a cost is considered to be a special purpose for a capital expenditure, these fees aren’t deductible.
What Are Strata Laws?
Strata laws are in place to make the process of a strata scheme smoother. Strata bylaws encourage communal living and outline rules that every contributor can agree on, making living on shared property easier and reducing the likelihood of disputes between tenants.
These can include the ruling of noise regulations, parking arrangements, changes to the common property, and the allowance of pets.
What is Strata Insurance?
Strata insurance is insurance that a property’s body corporate (owners corporation) pays to cover the common areas and property shared by residents or tenants of a strata building.
Owners of strata titles share the costs of this insurance as part of their strata fees. It is important to check what your strata insurance covers and to remember that your personal items are not covered.
Limitations of Strata Fees
While strata fees cover many essential expenses, it’s important to understand their limitations. Here are a few aspects that strata fees may not cover:
Individual Unit Maintenance
Strata fees typically do not cover maintenance or repairs within individual units. Owners are responsible for the upkeep and maintenance of their own units, including repairs, renovations, and upgrades.
Council rates, which are charges imposed by local government authorities, are not included in strata fees. Owners are responsible for paying their individual council rates directly to the local council.
Personal Contents Insurance
While strata fees include insurance coverage for the building and common areas, owners are still advised to obtain personal contents insurance to protect their belongings within their units.
- Strata Fees: Essential for maintaining and managing common areas in a strata scheme
- Strata Scheme: Shared ownership of a building while owning your own apartment
- What Strata Fees Cover: Building and common area maintenance, shared utilities, and building insurance
- Strata Fee Categories: Administrative, Sinking, and Special Levies for various expenses
- Who Pays Strata Fees? Owners pay; renters’ fees are included in rent
- Cost of Strata Fees: Varies by property and amenities, ranging from $550 to $2,500 a quarter
- Tax Deductibility: Most strata fees are deductible, except for special-purpose fees
- Strata Laws: Rules to encourage communal living and reduce disputes
- Strata Insurance: Covers common areas, not personal items
- Limitations of Strata Fees: They don’t cover individual unit maintenance, council rates, or personal contents insurance.
Strata fees are just one of the many considerations when buying an apartment in a strata building. Navigating the financial aspects of purchasing a property can be complex, and you deserve expert guidance. If you need assistance with the mortgage side of things, we’re here to help.
Contact The Mortgage Agency for personalised advice and support to make your home-buying journey as smooth and stress-free as possible.