Strata fees explained: 7 questions you've wanted to ask

Are you thinking of buying a unit or apartment? The entire process can be complicated, so it may be a good idea to familiarise yourself with any aspect that might affect your home-owning dream. Strata fees are often something people skim through and don’t fully understand. Lendi helps to break down this concept for you.

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#1 What is strata?

A strata scheme is the system that’s put in place to deal with the legal ownership of a portion of a building. It essentially means that 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:

• Apartment blocks
• Villas
• Townhouses
• Duplexes
• Office buildings
• Warehouses
• Storage units
• Factories

Together, people who make up the tenants in a strata building are called the ‘owners corporation’. They share the responsibility of the property and the upkeep of the communal areas they use.

These communal areas may include:

• Gardens
• Pools
• Driveways
• Stairwells
• Lobbies
• Lifts
• The exterior of the building

A building that is under a strata scheme is called the ‘body corporate’. As an owner of a portion of the building, you must contribute to the body corporate. These contributions are called strata fees.

#2 What is covered by strata fees?

A strata fee or levy is the contribution you make as an owner to ensure the maintenance of your 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
• Caretakers
• Cleaners
• Shared water and electricity
• Building insurance

Strata fees can be divided into 3 different categories:

#1 Administrative fund levies - These are generally daily and regular expenses. This would cover most cleaning and gardening costs, any shared utility bills, body corporate insurance, and any general repairs or maintenance.

#2 Sinking fund levies - These fees cover larger expenses. This may include renovations such as the replacement of roofing or the repainting of walls.

#3 Special levies - If a task is required for the maintenance of common property and it falls into neither administrative or sinking, it becomes a special levy.

#3 Who pays strata fees?

Strata fees must be paid by those who own an apartment or home within a larger building complex. You will not pay strata fees if you are renting. Most landlords will account for these costs by rolling them into the monthly or weekly rent charged for the property.

#4 How much are strata fees?

Depending on the property, strata fees can vary. The location, the age and price of the property will determine how much strata you’d see yourself contributing.

The number of communal amenities will influence the cost, i.e. strata fees for complexes 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. You’ll tend to find strata fees are higher the closer you get to a city centre.

#5 Are strata fees tax deductible?

Strata fees are typically tax deductible. So long as you keep a general record of expenses made on your property, you should be able to provide details on what can be claimed.

Usually, if the fee falls into the administrative or sinking fund, you can claim a deduction. However if a cost is considered to be special purpose for a capital expenditure, these fees aren’t deductable.

#6 Are there any strata laws?

As with any legality, there are laws involved to make the process of a strata scheme a smoother one. Strata bylaws encourage communal living. Someone who is involved in an owners corporation, would need to ensure the security of his or her building’s residents and the cleanliness of the building, both inside and out.

Strata bylaws can include the ruling of noise regulations, parking arrangements, any changes to the common property and the allowance of pets. By outlining rules that every contributor can agree on, living on shared property becomes easier and can save you the trouble of any disputes between tenants.

#7 What is strata insurance?

Strata covers the common property shared between residents or tenants of a strata building. Owners of strata titles share the costs of this insurance as part of their strata fees.

Make sure to check what your strata insurance covers, because typically, as with any other insurance, it’s important to know that your policy includes and excludes. Reading the terms and conditions of your strata insurance can save you money. Since strata insurance covers common property, it’s useful to remember that your personal items are not covered.

Strata works to give you the legal right and ownership to your home when you live or invest in a property that is shared between others. It’s important to know what your property rights are so both you and your property are protected.

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