Understanding Body Corporate and Strata in Australia

Strata title is a form of property ownership that divides a building (or group of buildings) into individual lots and common property. When you buy a unit, apartment, or townhouse under strata title, you own your individual lot (the interior of your dwelling) and share ownership of the common property (lobbies, driveways, gardens, pools, lifts, roofing, external walls) with all other lot owners.

Each lot is assigned a **unit entitlement** (sometimes called lot entitlement), which is a number reflecting the relative value or size of the lot compared to others in the scheme. Your unit entitlement determines your share of levies (fees) and your voting power at general meetings.

The collective group of lot owners forms the **body corporate** (QLD, TAS) or **owners corporation** (NSW, VIC, ACT, SA, WA, NT). Despite the different names, the function is the same: managing the common property, collecting levies, enforcing by-laws, and maintaining insurance for the building.

Strata schemes are governed by state legislation: - NSW: Strata Schemes Management Act 2015 - VIC: Owners Corporations Act 2006 (replaced by the new Act from 2021) - QLD: Body Corporate and Community Management Act 1997 - WA: Strata Titles Act 1985 - SA: Strata Titles Act 1988 and Community Titles Act 1996

The scheme is usually managed day-to-day by a **strata manager** (a professional firm) appointed by the owners corporation. The strata manager handles levy collection, arranges maintenance, manages insurance, organises meetings, and maintains records.

Lot owners pay regular levies (sometimes called strata fees or body corporate fees) to fund the operation and maintenance of common property. These levies are typically split into two funds:

**Administration fund (operating fund)**: Covers day-to-day running costs — strata management fees, cleaning, gardening, common area electricity, lift maintenance, pest control, basic repairs, and building insurance premiums. These costs are relatively predictable year to year.

**Capital works fund (sinking fund)**: Covers major capital expenditure and long-term maintenance — roof replacement, repainting, lift refurbishment, waterproofing, driveway resurfacing, and other large repairs. A well-managed scheme builds this fund over time so that when major works are needed, the money is available without requiring a special levy.

Typical combined levies range from $2,000-$4,000 per year for a townhouse in a small scheme to $8,000-$15,000+ per year for an apartment in a large complex with a pool, gym, and concierge. Older buildings tend to have higher levies due to increased maintenance needs.

**Important**: Levies are set annually by the owners corporation based on a budget. The strata manager proposes a budget, and lot owners vote on it at the Annual General Meeting (AGM). If you are considering buying, review the levy history over the past 3-5 years to see whether levies are increasing faster than expected.

Low levies are not always a good sign. Schemes that keep levies artificially low often have an underfunded sinking fund, which can lead to special levies when major works arise.

Before purchasing any strata-titled property, you should obtain a **strata inspection report** (also called a strata search or body corporate records search). In most states, the vendor must provide certain records, but a professional strata search gives you a more comprehensive picture.

Key things to look for in a strata report:

**Financial health**: Check the balance of both the administration fund and sinking fund. A healthy sinking fund should have a balance that reflects the age and condition of the building. A 20-year-old building with a sinking fund balance of $5,000 for 30 lots is a red flag.

**Capital works fund plan (sinking fund forecast)**: Most states require schemes to have a 10-year capital works plan prepared by a qualified quantity surveyor. This plan estimates when major components will need repair or replacement and how much it will cost. Review whether the current sinking fund balance and levy contributions are tracking to the plan.

**Meeting minutes**: Read the last 2-3 years of AGM and committee meeting minutes. These reveal disputes between owners, recurring maintenance issues, planned works, noise complaints, and any threatened or active litigation.

**By-laws**: Review the by-laws carefully. They govern pet ownership, renovation approvals, noise restrictions, parking allocation, short-term letting (e.g., Airbnb), and use of common facilities. Ensure the by-laws align with how you intend to use the property.

**Insurance**: Check that the building insurance is adequate and current. The owners corporation must insure the building for replacement value. Review whether there have been any recent insurance claims and whether the excess is reasonable.

**Defects and legal proceedings**: Look for any active defect claims (especially in buildings less than 10 years old), litigation, or disputes with builders, other lot owners, or third parties.

In NSW, you can order a strata report from services like Before You Bid or Strata Reports Online. In Queensland, a body corporate records search is available through the body corporate manager.

By-laws (called rules or articles in some states) are the regulations that govern how lot owners and occupiers must behave within the strata scheme. They are legally binding and enforceable.

Common by-laws cover:

- **Pets**: Many schemes restrict pet ownership or require committee approval. Some prohibit certain breeds or sizes. New legislation in some states (NSW, VIC) has limited the ability of schemes to impose blanket pet bans, but conditional approvals are still common. - **Renovations**: Any work that affects common property (e.g., installing air conditioning on an external wall, modifying plumbing, changing flooring) typically requires a special resolution or by-law approval. Internal cosmetic work (painting, replacing fixtures) usually does not. - **Noise**: By-laws typically prohibit noise that interferes with the peaceful enjoyment of other lots. Many schemes specify quiet hours (e.g., 10 PM to 8 AM). - **Short-term letting**: Some schemes have by-laws restricting or prohibiting short-term rentals (Airbnb, Stayz). In NSW, specific legislation allows schemes to restrict short-term letting in some circumstances. - **Parking and storage**: By-laws define how car spaces and storage cages are allocated and used. Some car spaces are on the title (lot property), while others are common property with exclusive-use by-laws.

Before buying, confirm that the by-laws permit your intended use. If you plan to have a pet, rent the property on Airbnb, or undertake renovations, check the by-laws and recent meeting minutes for any restrictions or precedents.

A **special levy** is an additional one-off payment demanded from lot owners to cover unexpected or unbudgeted expenses — typically major repairs or remediation work.

Common triggers for special levies include: - Waterproofing failure requiring remediation ($50,000-$500,000+ for a building) - Fire safety upgrades mandated by council or fire authority - Concrete spalling and structural repairs - Lift replacement - Building defect rectification (especially common in buildings constructed 2000-2020) - Cladding replacement following post-Grenfell audits

Special levies are divided among lot owners according to their unit entitlement. In a scheme of 30 lots facing $300,000 in waterproofing costs, each lot owner might pay $8,000-$15,000 depending on their entitlement share. For larger buildings with extensive defects, special levies of $50,000-$100,000+ per lot have occurred.

To protect yourself, always review the sinking fund balance and capital works plan before buying. Buildings less than 6-10 years old with active builder defect claims may have special levies pending. Ask the strata manager directly whether any special levies have been raised, are under discussion, or are anticipated.

*This guide provides general information only. Seek independent legal advice before purchasing strata-titled property.*