Strata Handbook Strata Handbook Page: 1
WHAT IS STRATA TITLE AND WHAT DOES IT MEAN? Strata title is actually an Australia property law innovation that has been copied by countries around the globe. Strata title allows individual ownership of part of a property (called a lot' and generally an apartment or townhouse), combined with shared ownership in the remainder (called 'Common Property' e.g. foyers, driveways, gardens) through a legal entity called the Owners Corporation ( or body corporate, strata company or community association, depending on your state or territory of residence and the type of scheme). The concept only came into being 50 years ago and there are now more than 270,000 such schemes encompassing more than two million individual lots across Australia. In Sydney strata now accounts for more than half of all residential sales and leases because of its popularity with investors. An increasing number of commercial and retail properties are also strata titled. In Western Australia there are even strata-titled vineyards. SO WHAT IS AN OWNERS CORPORATION AND WHAT DOES IT DO? As above, the Owners Corporation is a legal entity formed by the collective shared ownership of the individuals who each own a lot at the property. The Owners Corporation exists at law, has an address (the property s address), owns the common property (gardens, hallways, exterior of the building, building infrastructure etc.) and has a unique identity each Owners Corporation is brought into existence when the Plan of Subdivision is registered during development. The Owners Corporation may bring legal proceedings, may issue and collect both Annual and Special/Extraordinary Levies, is responsible for the maintenance and the upkeep of the common property and may instigate improvements of the common property. Owners Corporations have a legal responsibility to: - Maintain all common property including the structure of any buildings on the land - Insure the whole of the property for the full replacement value - Administer the finances and common funds of the group of owners - Administer the secretarial functions including the conduct of meetings of members, documentation of minutes, and dealing with all correspondence Strata Handbook Page: 2
- Resolve disputes involving members of the Owners Corporation and enforce the Owners Corporation rules. An Owners Corporation operates like any other business (/corporations) in many respects. It can make rules which are binding on the corporation, owners and tenants regarding the use of common property and the lots, providing that the rules do not contravene legislation governing strata titles or other laws. It is undeniable that the success of an Owners Corporation is dependent on committed and informed members who participate in meetings, 'own' the decisions that are taken, and are willing to resource and support the long term maintenance and management of the property. WHAT CONSTITUTES THE COMMON PROPERTY? Common property may include the driveways and parking areas, pathways, walkways and hallways, foyers, stairs, lifts, internal infrastructure such as piping and wiring, infrastructure such as lifts, car stackers, swimming pool and gymnasium, public lighting, common garden areas and lawns and of course, the building itself. The maintenance, service and upkeep of the common property are the exclusive responsibilities of the Owners Corporation. Individual lot owners are not allowed to make alterations, or perform maintenance of the common property without the agreed approval from the Owners Corporation. For example, if you are misjudge whilst driving and cause damage to the wall, or a fence or a pillar, you will not be entitled to select the tradesperson who performs the necessary repairs. The common property is for the equal use and enjoyment of all owners and tenanted residents at the property. The Owners Corporation may elect to make Special Rules regarding the use of common property for example, an Owners Corporation may create a rule to prohibit the playing of sports and games in the car park and driveways. WHAT ARE LEVIES? The sole source of funds of the Owners Corporation will be the funds that are contributed by the members of the Owners Corporation; the owners themselves. Strata Handbook Page: 3
In accordance with the Owners Corporations Act (2006) Vic, the Owners Corporation may strike both Annual and Special/Extraordinary Levies, payable by the lot owners. The Annual Levy will be determined by the Owners Corporation at the Annual General Meeting each year, as a payment from each owner that is their portion of the annual budget. At the Annual General Meeting, the Owners Corporation will agree on the budget, a list of projected expenses that include all expected costs of the Owners Corporation over the coming financial year (12 months). These projected expenses will be categorised, and will include areas such as: - Maintenance - Gardening - Cleaning - Administration - Management fees - Insurance - Utilities; Gas Electricity Water - Lift maintenance - Essential services maintenance - General maintenance THE ANNUAL BUDGET AND LOT LIABILITIES In accordance with the Owners Corporation Act (2006) Vic, owners are required to pay a proportion of the total cost of the Owners Corporation, determined by their lot liabilities and entitlements. An owners lot liability is effectively the % of the Owners Corporation owned, or attributed to each individual lot. The terms lot liability and entitlements and will sometimes be used interchangeably, as they are of the same value. For example, if the total lot liability of the Owners Corporation at a property was 120, and there were forty lots each with equal lot liability, then each individual lot liability would be 3/120, or 1/40 th of the whole. If the annual budget for this property were $100,000, each lot would be responsible for 1/40 th of that amount; $2,500. Strata Handbook Page: 4
Naturally, in reality, not all lots have the same lot liability. A lot with two bedrooms is likely to have less liability than a lot with three bedrooms. A top story apartment with bigger living areas will usually have greater liability than a 2 nd floor apartment with less space. The lot liabilities are struck by a surveyor during the initial stages of development and cannot be changed by the Owners Corporation unless there is a unanimous resolution, that is, all lot owners agree to the change. It is against the law for lot owners to refuse to pay their levies, even if they do not agree with them. Lot owners who do not pay their levies will be entered into formal debt collection, and/or taken to VCAT by the Owners Corporation and liable for all recovery costs as well. Owners who do not pay their levies by the due date jeopardise the well-being of their fellow owners and the common property and may incur higher overall costs by the time they eventually pay. If you believe you will have difficulty paying your levies, please contact Management to discuss and arrange a payment plan. SPECIAL / EXTRAORDINARY LEVIES Occasionally the Owners Corporation will encounter a shortfall in funding, or an event will occur that was not foreseen or accounted for in the annual budget. This may be anything from particularly bad storm damage, to excess payments on insurance claims that weren t expected, to building wear & tear or an increase in electricity prices. When these unforeseen costs occur, funds can be drawn upon immediately to pay for the rectification or matter at hand in the short-term. However, those funds were marked for specific use in the annual budget and will need to be recouped in order to maintain the solvency of the Owners Corporation. To accomplish this, a Special Levy (sometimes known as an Extraordinary Levy) will be raised. As with the Annual Levies, it will be raised in accordance with lot liabilities. HOW IS THE OWNERS CORORATION AND COMMON PROPERTY MAINTAINED AND MANAGED? McKenzie Taylor & Bloomfield is a firm that practices in Strata Management, meaning that we manage the needs of Owners Corporations on behalf of the owners. The tasks and services provided by Management will include, but are not limited to; Strata Handbook Page: 5
- Conducting meetings - Set dates for committee meetings, the annual general meeting, extraordinary meetings - Collecting and banking levies - Arranging property maintenance - Advising on asset management - Placing insurance - Keeping financial accounts - Prepare and distribute notices, agendas and minutes - Attend to correspondence - Organise and co-ordinate repairs and maintenance of common property, including a preventative maintenance program - Maintaining the owners corporation register - Arrange payment of all invoices - Prepare and distribute financial statements and budgets - Prepare and distribute contribution notices - Attend to orders, submissions and appeals - Ensure the strata scheme complies with all the Work Health & Safety (WHS) regulations - Provide advice in handling 'difficult' or complex strata issues. Very rarely will the Manager of an Owners Corporation have a financial interest in the property as an owner. Therefore, the role of Management is to facilitate informed decision making and provide advice to this end. The role of Management is also administrative. Whilst the Manager will make decisions relating to obtaining quotes for maintenance and repairs and selecting a contractor from amongst the quotes, the Manager does not have a vote in any of the decisions of the Owners Corporation. Management will offer guidance as to the proposed expenditure of funds and prospective common property upgrades, or Special Rules and the aesthetic that the Owners Corporation chooses to institute for their property, but Management does not have a vote on these matters. The only instance that Management may vote is if/when it is issued a proxy from one of the lot owners, and in those instances Management will vote in accordance with instructions of the owner providing the proxy vote. Whenever any damage occurs to the common property, the first action any owner or tenanted resident should take is to contact Management. Strata Handbook Page: 6
WHAT IS THE COMMITTEE OF MANAGEMENT? In accordance with the Owners Corporation Act (2006), an Owners Corporation may have a Committee of Management. For Owners Corporations consisting of thirteen lots or more, this is a compulsory requirement by law. The role of the Committee is to make decisions on matters on behalf of the Owners Corporation. For smaller properties of (for example) 15-20 lots, the role of the Committee may merely be for those interested owners who wish to have a more intimate involvement in the running of their building. For larger Owners Corporations that may consist of more than one or two hundred owners, the Committee is an essential body that enables pragmatic and efficient decision making. For more information on the role and functions of the Committee, please refer to the Committee handbook attached. INSURANCE In the event that you wish to inquire about the insurance policy of the Owners Corporation, or if you wish to lodge a claim, please contact Management who will assist in this process. For further details and instructions, please refer to the attached INSURANCE FAQ. Strata Handbook Page: 7