Now more than even, strata living is a part of our lives. Strata describes a unique system of property ownership that can cause a great deal of confusion because of its numerous rules and levels of authority. This FAQ, the first in LegalVision’s Strata Series, tackles some commonly asked questions and key definitions to help you, the owners, navigate this area of law.
|Common Property||Strata is made up of layers of ownership, and you own a small part. There will then be aspects of the property that you own ‘jointly’ with others called common property (e.g. external walls, foyers, driveways). An owners corporation manages the common property and the owners contribute to maintenance via levies.|
|Owners Corporation Funds||The Owners Corporation has two monetary funds it uses for expenses:
The administrative fund is for day to day expenses, like the person who takes the bins out. The capital works fund is for major works to the common property, like re-painting the exterior of the building.
The Owners Corporation determines two yearly levies for these funds at its Annual General Meeting.
|Land and Property Information||The government department responsible for land titling in NSW.|
|Lot Property||A lot is the property you own exclusively (e.g. apartment or townhouse). In NSW, the general rule is that you own the airspace – the lower surface of the ceiling to the upper surface of the floor, and from the inner surface of the walls. In a standard one floor unit, this translates to an ‘airspace’ box.|
|Owners Corporation||The Owners Corporation is a legal entity that is created upon the registration of the strata plan. An owners corporation manages the common property, and the owners contribute to maintenance via levies. Strata law grants and limits its power. The Owners Corporation is primarily responsible for the management of the strata scheme and the common property. For example, repair and maintenance, levying contributions and compliance with other laws (such as council regulations)|
|Strata Law||The strata landscape is organised by some key pieces of legislation:
|Strata Plan||A surveyor creates a document known as a strata plan to subdivide the land into lots and common property. Either the surveyor, developer or owners then lodge this with the Land and Property Information for registration.|
|Strata Committee||The strata committee is an elected body that acts as the Owners Corporation’s representative in the real world. They have responsibility for the day to day functions of the Owners Corporation. The committee is usually made up of owners but can include company nominees, and other non-owner nominations.
Usually, there are 3-5 members but can be up to 9 for larger schemes. There are three primary roles, each defined under the Strata Laws:
|Strata Manager||A strata manager (a.k.a. strata managing agent or managing agent) is a person contracted as an agent for the Owners Corporation. The Owners Corporation appoints him or her at a General Meeting under an agency agreement that sets out the terms of their authority. Typically, they hold the books and records of the Owners Corporation, organise repairs and maintenance, pay bills, hold meetings and send out the levies. The strata manager must still defer to the strata committee members for many decisions.|
2. How Does an Owners Corporation Make Decisions?
Similar to a company, an Owners Corporation needs someone in the real world to make its decisions. It does this by holding meetings. The standard meetings are:
- Annual General Meetings: held once a year.
- General Meetings: held when the Owners Corporation as a whole must vote on an item, such as by-laws or appointing a strata manager.
- Strata Committee Meetings: where the committee comes together to make a decision on an item within its power.
The Owners Corporation must make decisions either at a meeting or the Strata Manager’s delegation. Otherwise, it is highly likely the decision made will be held to be invalid.
3. I’m an Owner. What is a By-Law?
A by-law is effectively a rule and has the same effect as a binding contract. By-laws can apply to both owners and occupants regarding the lots and common property.
An Owners Corporation can draft by-laws regarding the management, administration, control, use or enjoyment of the lots or the common property of a strata scheme. The by-laws cannot be harsh or oppressive. For example, a by-law that grants rights to some owners and not others like permitting existing owners to have pets but not any new owners at a particular point in time.
By-laws are also important for owners. For example, if you wish to renovate the common property, you will need a by-law to obtain consent from the Owners Corporation for that renovation. In practice, this will go further than renovations. Sometimes a by-law will detail that you have exclusive use of an area of the common property, such as a garden bed that only your lot can access. However, it’s marked as common property on the strata plan.
A by-law is only enforceable if 75% of members vote in favour at a properly convened general meeting (i.e. pass the by-law by special resolution).
Once passed, the by-law is submitted to the Land and Property Information to be registered on the Certificate of Title for the common property. As an owner, registration of the by-law gives you security. Registration on title is conclusive evidence of your rights that the by-law contains. Those rights are an asset that attaches to your ownership of the strata property and can boost its value should you sell. For example, a Pergola that you installed under a by-law that wasn’t on the property previously is a huge value-add to a new purchaser. The purchaser can take comfort knowing that the pergola was correctly installed.
Whether you are an owner or occupant, you should receive a complete copy of the by-laws. Your strata manager or leasing agent is responsible for providing these in most cases. Read these carefully to understand your rights and obligations.
4. What are Unit Entitlements?
Unit entitlements are a particular value given to a lot within strata property. The value is important because it relates specifically to how much you are charged for levy contributions and how much voting power you have on a poll vote. You can usually find the unit entitlements on the back pages of the strata plan.
5. Why Do I Get Charged Regular Fees?
You are charged fees to facilitate the Owners Corporation maintaining the common property. So, if the lights go out or a pest control company enters the building, the Owners Corporation is responsible for the bill.
The Owners Corporation will determine the budget for the following year at its Annual General Meeting. If you’re concerned about ongoing costs, you should attend to understand the types of things the Owners Corporation pays for year to year. Remember, your contributions relate directly to your standard of living. Better to budget effectively over the long term than be forced to raise additional cash when things in disrepair finally break.
The Owners Corporation has a strict duty to repair and maintain common property, which means things should not be in disrepair in the first place. Sometimes it just needs time to raise funds.
6. Am I Allowed a Pet?
An Owners Corporation cannot prevent owners or occupants having a dog or other animal to help with a disability (an ‘assistance animal’). However, the by-laws may require the owner to produce evidence that the animal is an assistance animal. For example, local council registration that the pet is an authorised assistance animal.
If a strata scheme has nominated the model by-laws to apply, the Owners Corporation permits animals but requires either:
- notice, or
- notice and written approval from the Owners Corporation.
Importantly, an Owners Corporation under the law can still register a new special by-law restricting occupants and owners keeping animals. It’s unclear whether such a regulation would fall foul of the requirement that by-laws are not harsh, unconscionable or oppressive. An Owners Corporation looking to restrict animals should seek advice before drafting a by-law.
7. I’m a Tenant. What Rights Do I Have in Strata?
Tenants have limited rights in strata-titled properties. Properties that have more than 50% tenants can now appoint a tenant’s representative. Tenants select this person to sit in on strata committee meetings. Although they don’t have voting rights or count as a committee member for a quorum, they will provide an insight into what is happening on the ground. This will be helpful for repairs and maintenance.
It’s important to note that tenants must receive a copy of the by-laws or a strata management statement affecting the property. This is something that the lessor or sub-lessor must provide within 14 days of the lease signing. The lessor or sub-lessor must also provide a new copy within 14 days if any changes are made to the originals.
8. Should I Bother Attending Strata Meetings?
Ultimately, this is a personal decision. As an owner, you are not legally required to attend the meetings of the Owners Corporation. However, there can be consequences if you don’t.
Attending is a good way to understand your community and to also ensure the committee hears your voice on costs, repairs and other essential decisions the Owners Corporation makes. So long as the Owners Corporation has a quorum or 75% of unit entitlements in attendance they can vote on all sorts of key items without your input. Remember, this is almost impossible to change afterwards if they voted on the issue correctly. At a practical level, this can involve situations where the Owners Corporations puts in place a far more expensive budget, raises a special levy or passes a by-law you have issues with.
9. Can I Throw Out Abandoned Goods?
In certain situations, yes, the Owners Corporation now has the power to dispose of abandoned goods (except motor vehicles or items permitted to be on common property). The Owners Corporation can dispose of goods left on the common property where:
- goods are perishable; or
- they consist of only rubbish; or
- the strata manager (or a representative of the Owners Corporation) places a disposal notice on the goods and five days has passed since that notice. In practice, it will be either the strata manager or member of the strata committee who is responsible for the notice and disposing of the goods.
The disposal notice must satisfy the following requirements:
- A4 size or greater;
- weather cannot detrimentally affect the notice;
- describe the good(s) and the date and time the Owners Corporations put up the notice;
- give details of the date at which the Owners Corporation will dispose of the goods (no less than five days since being put on the goods); and
- provide the contact details for the person responsible.
Disposing of the goods includes the ability to sell them. The Owners Corporation will need to record the details of the goods and the sale as well as the details of the purchaser. Further, the sale money must go back into the Owners Corporation’s Administrative Fund.
10. Something is Leaking, Damaged or in Disrepair - Who Needs to Fix It? This depends on whether the problem is on lot or common property.
The Owners Corporation has a strict duty to repair and maintain common property. If something on common property has broken and damaged your lot property, the Owners Corporation may be responsible for repairing the damage or paying the repair cost.
In these situations, the Owners Corporation must be careful. Generally speaking, the Owners Corporation’s liability is limited by what orders a court or tribunal can make against it. This now includes an award of damages for loss that was foreseeable. As it can raise levies for court ordered debts, it’s financial responsibility can be wide-reaching.
An Owners Corporation will commonly defer to insurance when there is something that needs repairing. However, it has a statutory duty to act. Whether or not it has insurance that will cover the damage is simply good fortune.
11. I Didn’t Get a Levy Notice. Do I Still Need to Pay My Levies?
In short, yes.
Make sure the Owners Corporation has your correct address for service of the levy notice to ensure you pay on time or set up a direct debit each year.
Generally, the levy notice is in a written form and requires you to make payment 30 days from the date of the notice. The strata manager typically sends out the notice. If you haven’t received one in a quarter, it’s best to follow it up with your manager or strata committee.
If you don’t pay, the Owners Corporation can sue you to recover the unpaid amount.