A quick guide to Owners Corporations

What is an Owners Corporation?

An Owners Corporation, also known as a Body Corporate, is a legal entity created by state-based legislation that governs multi-unit property and new development such as a strata-titled buildings, townhouse complexes, or gated communities.

The Owners Corporation represents the owners of individual units in the development and is responsible for managing common property and facilities, enforcing by-laws, and maintaining the overall appearance and functionality of the development. Owners Corporations typically have a committee made up of owners who are elected to manage the day-to-day affairs of the Owners Corporation, and they have the power to make decisions on behalf of all unit owners. The fees paid by owners to the Owners Corporation (or strata fees) are used to cover the costs of maintenance, insurance, and other expenses associated with managing the development.

What are the risks of buying into an Owners Corporation?

When buying an apartment that is part of an Owners Corporation, there are several risks to consider:

1. Maintenance and repair costs: The Owners Corporation is responsible for maintaining common property and facilities, and as an owner, you may be required to contribute to the cost of these repairs and maintenance.
2. Disputes with other owners: Living in a multi-unit development can sometimes result in disputes with other owners over the use of common property or the enforcement of by-laws.
3. Financial mismanagement: If the Owners Corporation is not properly managed, it can result in financial mismanagement and a lack of funds for necessary repairs and maintenance.
4. Levies: The Owners Corporation may impose levies on owners to cover the costs of maintenance, insurance, and other expenses. These levies can be substantial and can increase over time.
5. Poor building maintenance: The Owners Corporation is responsible for maintaining the overall appearance and functionality of the development, and if this is not done properly, it can result in a decline in the value of your property.
6. Restrictions on use: The by-laws of the Owners Corporation may impose restrictions on the use of individual units or common property, which can impact your ability to make changes or improvements to your property.

What are typical fees for an Owners Corporation?

Strata fees in Australia can vary greatly depending on the size and location of the property, as well as the services and amenities provided by the strata scheme. As a guide, expect to pay between 0.3 per cent to 1.2 per cent of a property’s value in strata fees, and schemes with more amenities (such as gyms and pools) will be in the upper end of this range.

Always do your homework on strata fees by requesting information on recent and current strata fees before purchasing a property, including any details on recent, current or potential future special levies.

What are Owners Corporation special levies?

A special levy is an additional charge imposed by the Owners Corporation of a strata-titled property for a specific purpose, usually for unexpected or unplanned expenses. The Owners Corporation may impose a special levy if there are not sufficient funds in the operating budget or the sinking fund to cover unexpected costs such as emergency repairs, major renovations, or legal fees. Special levies are typically imposed on all owners in the strata scheme and are based on the owner’s unit entitlement.

The amount of the special levy and the purpose for which it is being imposed must be approved by a majority of owners, either at a general meeting or through a vote. It’s important to understand that special levies can impact the financial obligations of ownership in a strata-titled property and should be considered when making a decision to purchase or invest in a strata property.

Researching an Owners Corporation

It is important to thoroughly research the Owners Corporation and the development before buying an apartment to ensure that you are aware of these risks and that you are comfortable with the level of responsibility and financial commitment involved.

1. Review the strata plan: The strata plan is a legal document that outlines the boundaries of individual units, common property, and the responsibilities of the Owners Corporation. You can obtain a copy of the strata plan from the relevant government authority, such as the Land and Property Information office in New South Wales, Australia.
2. Read the by-laws: The by-laws of the Owners Corporation outline the rules and regulations governing the use of common property and the responsibilities of individual owners. You can obtain a copy of the by-laws from the Owners Corporation or from the strata managing agent (this may also be available via the listing agent in some states).   
3. Ask for a copy of the financial statements: The financial statements of the Owners Corporation show the financial health of the organisation and provide information on any debts or liabilities. You can request a copy of the financial statements from the Owners Corporation or the strata managing agent.
4. Attend Owners Corporation meetings: Attending Owners Corporation meetings can provide valuable insight into the management and operations of the organisation. You can request to attend a meeting or ask for minutes from previous meetings.
5. Talk to current owners: Speaking with current owners and residents can provide valuable information on their experiences living in the development and their interactions with the Owners Corporation. You can also ask for their opinions on the management of the development and any potential issues they have encountered.  
6. Hire a strata inspector: A strata inspector can provide a comprehensive report on the condition of the common property, the building structure, and any potential issues with the Owners Corporation. This can be expensive but in some states (e.g. Victoria, Qld) specific information on the Owners Corporation must be supplied with the Contract of Sale. In NSW you can ask if a strata report is already available or try a service like Beforeyoubid.com.au.

By conducting thorough research, you can gain a better understanding of the Owners Corporation, the development, and any potential risks involved in purchasing an apartment within the development.

Researching an Owners Corporation in Victoria

In Victoria, Australia, an Owners Corporation certificate (also known as a section 32 certificate) is a legal document that provides information about a particular strata-titled property and its Owners Corporation. The certificate is required to be provided to a prospective buyer of a strata-titled property as part of the sale process and must be provided by the vendor of the property. The certificate includes information such as the rules and regulations of the Owners Corporation, details of any current disputes, and information about the financial health of the Owners Corporation, including any outstanding debts or liabilities. The certificate is an important document for a prospective buyer to review as it provides information about the responsibilities and obligations of being a member of the Owners Corporation, and it can help the buyer make a more informed decision about purchasing the property.