Key Things to Know About Purchasing Strata Property in Perth, Western Australia

Purchasing a strata property in Perth can be a rewarding investment, whether you're a first-time buyer, downsizing, or looking for a low-maintenance lifestyle. However, buying into a shared ownership scheme comes with its own set of responsibilities, rules, and financial considerations. often, buyers are not given all the information to make an informed decision. Here’s a comprehensive guide to help you navigate the process.

Understanding Strata Title and Ownership

What is a Strata Property?

Strata is where individual owners hold a title to their unit or apartment while also sharing ownership of common areas, such as gardens, hallways, and facilities. There are different levels to the ownership available - sometimes you only own the space inside your unit, other times it is the building or, in the case of survey strata, you own the plot of land, and the driveway is all that is shared. To know what you own, you need to refer to the strata plan for your property.

It is important to understand when you buy in strata; you don't only purchase a building, you also purchase a share of a company - the strata company. Realising this is a huge change in the understanding of your investment and how people behave when dealing with the strata company compared to a strata manager.

Strata Company is called Body Corporate or Owners Corporation in other states of Australia. They are the same idea, but all work under different legislation and rules.

Strata Company vs. Strata Management Company

The most common mistake that causes huge confusion for many people, including 'property professionals'.

The strata company is owned by the owners of the property it is often called "The Owners of ....(John Court/12 High Road)" This company is where the funds are and who makes the decisions for your property. If you own a unit then you own part of this company.

The Strata Management company is a company that is engaged to assist with the administration duties of the strata company. They are a conduit for information and fund management but don't have any control or rights over the property and the funds.

Think of strata managers like a property manager and Strata Companies like the landlord. Then it is a much more familiar framework to understand the chain of command.

Legal Framework

The Strata Titles Act 1985 and the associated regulations are the legislation that defines the rules for your strata company in Western Australia. These rules determine how disputes are handled, the responsibilities of the Strata Company and owners, and the decision-making process about common property and the use of your lot.

Financial Considerations

Strata Fees and Levies

Ongoing Fees: As a strata owner, you’ll be responsible for regular contributions toward the running costs of the strata company. These fees can vary widely depending on the property’s facilities, size, and overall condition, but also what the funds cover such as utilities. This makes it very hard to compare the value of your levies compared to another company.
Special Levies: Sometimes, unexpected repairs or upgrades require additional funding. Ensure you understand the financial health of the strata scheme and review the minutes from recent meetings to identify any upcoming special levies.

Reserve Fund

The Reserve (AKA sinking fund) is designed for long-term maintenance and projects. Think of this as the piggy bank/ savings account so levies can stay consistent. A well-funded reserve fund indicates that the strata company is proactively managing the property’s upkeep. A 10-year maintenance plan is often available to designate what these funds might be needed for in the upcoming budgets.

Setting Levies

It is a common complaint that the levies are too high. As you are now learning, the owners decide on all aspects of the Strata Company, not the strata manager.

The levies are determined by looking at how much it costs to maintain the property for the year. To find out where the funds go for your strata look at your budget and financial statement, which is provided to you every year at the Annual General Meeting.

You can reduce the levies, but how will you continue to pay for the costs to keep your property functional and maintained? You can always volunteer your time if you want to reduce the costs. This must be agreed upon by the majority of owners at a general meeting.

Not Paying Levies

If an owner decides they don't want to contribute or pay their levies, this will cause the lot to fall into arrears. If the owners have decided on an amount to be paid by all of the owners at a general meeting, it is a legal requirement that it is paid. Failing to make these payments will result in interest charges and debt collection and can allow the strata company to have the unit sold to recover the costs. If a property is sold, the strata company is paid all money owing or the debt transfers to the new owner, hence the importance of a good settlement agent. The requirements are set out in Section 100 of the Strata Titles Act.

Decision-Making & General Meeting

By-Laws and Rules

Each strata scheme has its own set of by-laws that dictate everything from pet ownership to the use of common areas. These are legally required to be given to a purchaser at the time of a sale. The by-laws can be registered uniquely for your property, or the Standard By-laws set out in the Strata Titles Act 1985 can be used. All by-laws are registered and available on Landgate and are noted on the Strata Plan document.

Changing the Rules & By-laws

To alter any formal by-laws, a vote at a general meeting must occur where at least a majority vote in favour of the change occurs. Then the change is registered with Landgate. Due to the importance of the by-laws, it is recommended a lawyer write them for you. If the rules are broken, a matter can end up in the State Administration Tribunal (SAT) where a poorly worded by-law can be very costly.

General Meetings and AGM

At least once a year the strata company is required by law to hold a general meeting for the owners, known as the Annual General Meeting or AGM. This is where the financials are confirmed, budgets set and important confirmations such as insurance policies and council members are decided. Any formal decision needs to be made with a vote of the owners but this can look different depending on the preference of the owners.

In-Person Meetings - this used to be the only way to have a decision made but as times have changed there are more options available to owners. But in-person allows for discussions, more in depth knowledge sharing and decisions to be based on more voices being heard. A virtual or hy-bird meeting is the same concept but allows for online attendance to an in-person meeting.

Online Voting or Vote Outside a General Meeting (VOGM) - This is a great option for matters that come up throughout the year. A decision requiring the input of all owners can be sent via email to the owners and the vote is emailed back. This is still as formal and binding as a general meeting vote but is often used for issues that require less input from the group. Items like structural changes for a lot or an alteration to the budget for an urgent repair.

Community and Management

The Role of the Strata Company

The Strata company is responsible for managing and maintaining common property. Keep in mind common property is not the same as shared property or facilities and can include the windows and roof of individual units. The overarching decisions are made at general meetings but all of the owners, but the day-to-day decisions often come to a small group of owners elected each year by the owners, they are known as the council of the strata company. This small group means that decisions can be made faster and ensure that the owners of the property remain in control of how money is spent and what your property looks like. A well-organized and communicative strata company can significantly enhance your living experience.

Dispute Resolution

While most communities run smoothly, disputes can occur. It is the role of the council of the strata company to decide how these matters are managed but any owner can escalate an issue to mediation and the State Administrative Tribunal. The by-laws and Strata Titles Act will outline the boundaries that all owners and residents must behave and what can occur for breaches.

A breach can be dealt with as a warning, breach notice and fine, if the issue requires it can need mediation or a court order to resolve. In the worst case, the government can issue fines or prison sentences.

Legal and Professional Advice

Given the complexities of strata law and the financial implications of your purchase, don't always assume and trust the sale agent and conveyancer to be experienced in strata properties. When purchasing a strata property, make sure you are comfortable with the information provided to you and ask to speak to the strata manager or council member if you are unsure of any rules or financial aspects of the property. Remember not all strata properties are the same.

Conclusion

Purchasing a strata property in Perth offers a unique blend of private ownership and shared community living. By understanding the legal framework, carefully reviewing the financial and physical condition of the property, and engaging the right professional advice, you can ensure that your investment is sound and that your new home meets your lifestyle needs. Whether you're drawn to the convenience of low-maintenance living or the vibrant community atmosphere, being well-informed is key to making the best decision for your future.

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