Buying Strata Property

In New South Wales, land is divided into numbered lots set out in the plan deposited with the Department of Lands. When buying a house the contract will specify which lot is being purchased, for example, Lot 23 in Deposited Plan 5612. Land can also be divided horizontally, that is, by stratum. This is achieved when a plan of the land shows horizontal lots, formed by the creation of strata property. A plan registered in this manner will be a Strata Plan.

Today most home units, apartments, townhouses and even duplexes are registered as Strata Plans. By buying one of these units a buyer is simply purchasing all of the air space between the walls, floor and ceiling of the unit, as defined in the Strata Plan. In most instances the rest of the property, being the actual walls, garden, driveway (collectively called the ‘Common Property’) is owned by the ‘Owners Corporation’.

Because the Owners Corporation is responsible for the maintenance of the Common Property the Owners Corporation needs to raise funds to pay for the maintenance, both short term and long term. To do so the Owners Corporation holds meetings of the owners of the lots in the Strata Plan and resolves to pass levies which are then payable by the owners of the lots in the Strata Plan. The day to day expenses are paid from the Administration Fund and the longer term expenditure, like structural maintenance, is paid from the Sinking Fund.

The Owners Corporation will also make rules, called by-laws, for the operation of the Owners Corporation, for example the keeping of pets. Owners vote at meetings for or against these rules and generally a proposal will need 75% of all votes to be passed.

Buying a property means that you have a vested interest in the Owners Corporation (each owner is allocated shares in the Owners Corporation called ‘unit entitlements’ according (usually) to the size of their respective unit), which also means you are indirectly buying into any problems of the Owners Corporation. For instance, a structural defect affecting townhouse number 4 will need to be repaired from the funds of the Owners Corporation. If there are insufficient funds a special levy must be raised which all owners are obliged to pay, even those living in townhouses which have no defect.

When buying a Strata Property the best place to start is with a Strata Report compiled by a Strata Inspector. Prime Lawyers has a network of trusted strata inspectors who will investigate the records of the Owners Corporation to ascertain the status of the Administration and Sinking Fund, together with any complaints, defect notices and records of recent meetings. By having this information you can minimise the risk of buying into a strata property with defects, lack of funds or disharmony between owners in the scheme.

If you are thinking of buying a strata property then get in touch with our property lawyers by contacting your nearest Prime Lawyers office. You can also obtain a no obligation quote by visiting our conveyancing website by clicking here.

We have property and conveyancing lawyers located at Sydney, Parramatta, Sutherland and Wollongong.