What you need to know about buying a strata unit
Strata title is very common for units and apartments across Sydney. But what does it mean? And do you need to worry about buying a strata property?
What’s different about buying into a strata complex?
The conveyancing process for buying into a strata complex is basically the same as any other property purchase. However, there are all the little things you need to be aware of outside the contract itself. For strata properties, that means looking at the strata committee and how it functions.
I describe it as buying into a little company. The strata scheme owns the various units in the complex, and all the common infrastructure. It levies fees to maintain or improve the common property of the complex. When you buy, you buy the entitlement to your unit, and you also receive a unit entitlement in the strata scheme.
Just as in a normal sale, you get a building inspection and confirm that everything looks great. But you also need to check out the strata company.
- Is it financially sound?
- Is everything running correctly?
- Who are your neighbours?
- Who are the other owners in the property?
The impact of owner occupiers versus tenants
Notice that your neighbours are not necessarily the owners – the other units in the complex may be rented out.
Generally, owner occupiers are more emotionally invested in the strata company and have more interest in how it's run.
We dealt with one case which was a smaller complex – just four strata units.
Three units were owned by investors and one by an owner occupier. The investors didn’t turn up to strata meetings, the tenants had no say. So that single owner occupier was making all the decisions and doing what she wanted. Essentially, she was running the strata as if she was the sole owner.
It was a very attractive complex and our client was buying into it intending to live there. The existing owner occupier was already upset by that, because she would no longer have complete decision authority, but would have to ask someone else. To make it worse, with an even number of owner occupiers, there was risk of a stalemate on decisions.
Fortunately, our client was very professional and practical. She took a long-term view and decided to make it work. So she still went ahead and bought, but it was a consideration at the time.
How can you find out about the strata company and committee?
When you're purchasing a strata unit, we always recommend getting a strata report.
The strata report includes all the details on how the strata is run.
- Financial position
- Annual budget
- Annual strata levies
- Minutes of strata meetings, including the annual general meeting
- A building defects report and any associated records if there are any defects
- Information and records about any litigation
While the numbers are important, there’s often more to be found from the minutes of the meetings.
- You can get an idea of how many people (and who) attend the meetings. These people are actually running the complex, since they’re voting and making decisions.
- Are there any repeat issues in the minutes? For example, maybe something needs repair, but approval to spend money has been squashed a number of times because no one wants to spend the money. That’s something to be aware of. Not only does it make the strata committee less effective, it also means there’s backed-up need for money. At some point, the strata is going to ask for more from you to sort out the problems it has been leaving to drag.
- The minutes are polite and formal, but you may find a particular name comes up again and again. That’s a cause for further investigation.
If reviewing reports isn’t your thing, there are specialist strata inspectors who can examine them in detail, and who know what to look out for. Just make sure someone looks at the strata records before you commit to buying.
Overall, buying a strata unit is the same as any other property purchase. The most important things are often not the ones actually written in the contract. It’s easy to review the contract and identify any issues. It’s the things which fall outside the contract which matter. At KLH Conveyancing, we pride ourselves on understanding those – the risks and pitfalls – so that we can help our clients navigate them safely. So if you’d like help with buying your strata property, just get in touch.