Nine myths about strata living busted

Over the years as our cities have grown and our housing needs have changed, it's become more common for Australians to call apartments and units home. Many of these are strata communities.

A report published last year by UNSW found that there are more than 350,000 strata schemes across this country that are home to about four million Australians, or roughly 16% of the population.

That number is a conservative estimate and one that is likely to shoot up in the years ahead as more medium- and high-density homes are built to meet the nation's goal of 1.2 million new homes in five years.

People buying into a strata community - either as owner-occupiers or investors - will need to get to grips with a confusing world. In fact, it's one that can confound even old hands.

"I have often experienced investors come to me and say, 'I just bought into strata and I have no idea what this crazy, complex landscape is all about'," says Amanda Farmer, a strata lawyer at Your Strata Property.

"And I have seen investors who have lost hundreds of thousands of dollars on these investments, usually [due] to legal things, because they have misconceptions about strata as a form of property."

So what are some of the major misconceptions and myths related to strata living that current and future owners need to know about? We asked Farmer and two other experts to help set the record straight.

Myth 1: Strata and owners corporations are one and the same

One of the basic points of confusion that Farmer comes across is the use of the word strata as a catch-all term.

"Most people refer to 'the strata', but that is not a legal concept. So when someone talks about strata, it's not clear if they're talking about the strata manager or the owners corporation.

"The term 'owners corporation', or 'body corporate', is used to describe the legal entity that essentially is the building. Every owner is a member of the owners corporation - it's the legal entity they buy into."

"When we're talking about professional strata management, that's a professional strata manager or a strata management company who assists with the day-to-day management of the building."

Bridging the two is the strata committee, which is typically a small group of elected owners that represents the interests of all the other owners and keeps the building running, often with the assistance of a strata manager.

Myth 2: Strata schemes are only for units and apartments 

"Strata can be anything from a high-rise apartment building to a block with townhouses, villas or a duplex on it," explains Farmer.

"It can even be a block of land with two buildings that has a shared facility like a driveway. Because of local planning laws, these are sometimes developed as strata title, not as two separate blocks."

This is why Farmer says that it's never safe to assume whether a strata title is in place or not. That's especially important for those buying into smaller-scale schemes where decision-making may have to be made with a small group or even a single other owner.

"In my experience as a lawyer, it's the smallest communities that have the biggest problems, because it's much harder to get that majority consensus when you've got fewer people."

Myth 3: Renovating in a strata scheme is like renovating a house

Reena Van Aalst, the managing director of Sydney-based strata management firm Strata Central, says that one of the fundamental misunderstandings she comes across is owners who don't understand the process involved with renovating in a strata community.

"When people want to make changes to their apartment like renovating their bathroom or kitchen where they're relocating things on the boundary, they have to get permission.

"So for waterproofing or anything that changes the external appearance of your apartment and affects the whole look of the block, such as adding an awning to your balcony, you've got to get what we call a common property rights by-law that needs to be passed by owners at a general meeting."

Van Aalst also says it's common for new owners to expect to be able to undertake renovations on their own schedule, but this isn't the case.

"If someone wants to renovate an apartment that they're about to move in to and they want to be in there in four weeks, that deadline may not be achievable. Steps need to be taken to call a general meeting and there are meeting notice periods, which are statutory, that we have no control over."

Myth 4: By-laws are set in stone

By-laws are the rules set by a particular strata scheme that can regulate everything from noise levels and short-term rentals to pet ownership and how garbage needs to be disposed of.

These rules can be amended, though. People can seek to change the by-laws in their strata scheme with the support of a majority of fellow owners, though the exact majority differs from two-thirds of owners in some States and Territories to three-quarters in others.

"By-laws are usually set by the developer and the strata manager who sets up the scheme initially, but they can be changed by owners at a general meeting with a majority of the vote," says Karen Stiles, the executive director of the Owners Corporation Network of Australia.

"So, they certainly can be changed, and often they should be, in order to keep them contemporary and to ensure good governance for the scheme."

Myth 5: Owners can only vote at a meeting in person

If by-laws are being voted on, it's safe to say that most owners will want the option of having their say.

But do they have to attend a general meeting in person to vote? Stiles says this is a myth, and given that some investors might not even live close by, it wouldn't be practical.

"Owners have always been able to vote by sending in a proxy form if they can't attend a meeting. But during the pandemic, governments were also swift to introduce electronic voting for schemes so that owners could meet online and make decisions when they weren't able to do so safely in person."

In terms of the process for people who can't attend, Stiles says it should be fairly simple.

"In good time before a meeting, the strata manager or secretary of the scheme will send out meeting papers. Included in that is a form where 
a person, if they can't get to the meeting, can make their choice known. Alternatively, they can appoint somebody to vote at that meeting as their proxy."

Myth 6: There are 'standard' strata levies

"There is no yardstick or benchmark for quarterly strata levies. It is a myth, because every building is different," says Farmer.

"Think about the incredibly luxurious buildings on offer with concierges and wine storage cages, or even those with pools, gyms and lifts. Then you have your 'red brick, six-pack' buildings - the kind from the '60s or '70s that have none of these amenities, so their levies are naturally going to be much lower."

Farmer also says it's crucial that buyers are aware there can be costs beyond regular levies that may need to be budgeted for.

"This myth that everything is taken care of in your quarterly levy is just wrong, because there will be unexpected expenses in the life of a building that may require a special levy to be raised, which is an added expense that every owner must contribute to.

"Let's say a big storm caused damage to a roof. The building's insurance premiums could go up as a result of that. Or there could be an upset owner on the top floor whose roof is leaking because the repairs weren't done properly and they end up suing the owners corporation," she says.

Myth 7: Cheap levies are always a positive 

Another misconception that Farmer comes across is the idea that lower levies are always a good thing. While nobody will want to pay more than they need to, she says that cheap levies can be a red flag.

"If I was looking to purchase into a building where the levies are low, I would be concerned about whether that building is properly maintaining its common property and whether it has a rainy day fund built up to meet unexpected expenses.

"If they're pretty low relative to the amenities available, I'm going to dig further. But if it's a reasonably healthy levy relative to the building's needs, I'll feel confident that this building knows what it's doing and understands its obligations to plan for the future," says Farmer.

Myth 8: Tenants can't attend meetings

While it might come as a surprise to many, Stiles says that there's some scope for tenants living in a strata scheme to get involved if  they're interested.

For example, she says that in NSW, if tenants occupy more than half of the properties in a strata scheme, a tenant representative can be appointed to attend strata committee meetings and advocate on behalf of other tenants.

"Tenants can attend meetings and they can be involved in committees if they're appointed by an owner. I think they are often forgotten about, but tenants are often quite keen to be involved in the gardening committee or something else, so they shouldn't just be dismissed."

Myth 9: Strata communities are always fighting  

Given that so many Australians will buy into strata schemes in the future, Farmer says she's particularly keen to dispel the idea that strata communities are often at loggerheads and that buildings are hotbeds of litigation.

"In my experience, probably less than 10% of buildings have real problems, and most of our strata communities are operating well. So I am always keen to say living or investing in strata is a great option - and it's one of the only options for a lot of people, especially if you want to live in a city," she says.

"The best thing you can do is to get educated and understand what you're buying into, both from the perspective of how strata works as well as a specific investigation into the building you're looking to buy in. It's on you to go in with your eyes open."

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