If you own an apartment on the Northern Beaches, whether it’s rented out or owner-occupied, you’re going to have to pay strata fees, usually every quarter. While these fees might seem like an extra expense that you don’t really want to fork out for, they provide plenty of benefits for property owners.
In fact, strata fees basically cover what you, as the property owner or investor, would pay for anyway on a normal house, except that you’re paying a proportionate share for the maintenance of the entire building.
What is meant by a strata scheme?
A strata scheme covers the maintenance of the entire property in which your unit is situated. Essentially, this covers all the common areas of the entire complex.
Common areas include all the external walls, floors and roofing of the complex, the plumbing, the electrical wiring in common areas, the foyer, the elevator, if there is one, car parking areas, your fire protection system, pool or gym, gardens and any other communal areas like laundry or storage areas.
All of these areas are the responsibility of the body corporate and the administrative fund or the sinking fund pays for the maintenance of these areas as well as any essential upgrades. The scheme is managed by a strata manager appointed by the body corporate.
What do your strata fees pay for?
Your strata fees pay for a proportion of the maintenance and upkeep of the building and the common areas. They also help pay for the building insurance, the employment of an on-site manager, if there is one, and the utilities necessary to run the common areas.
These fees are broken down into two separate levies:
1. Administration fund
This includes the day-to-day running expenses of the entire property such as cleaning, gardening, regular maintenance, utility bills for common areas, building insurance and management fees.
2. Sinking fund
This is a reserve fund for more substantial capital expenses such as major property repairs to the roof, exterior walls, replacing carpets or blinds and any other unexpected expenses like upgrading electrical wiring or upgrading fire protection requirements. It’s important that the sinking fund is adequate to ensure that there is enough money to cover unexpected repairs. Otherwise, you might have to pay a special levy that could run into thousands of dollars.
Should your building have an emergency or need to address a costly issue, your body corporate might need to raise a special levy. In most cases, the sinking fund is enough to cover any unexpected larger expenses. In recent times in NSW, many strata schemes raised special levies to install fire protection upgrades that run to hundreds of thousands of dollars. If they’d had robust sinking funds, they could have spread their costs over a longer period and continued to raise monies with general levies.
In most cases, strata fees are paid quarterly and you’ll receive an invoice for these before they are due. If you own your property as an investor, these fees are also tax deductible.
How are strata fees calculated?
How the fees are calculated depends entirely on the individual strata. In some cases, the fees will be divided equally between all the individual property owners but in other cases, the fees are calculated proportionately. Things that are taken into consideration are the floor area of each unit or apartment, whether the unit has additional subsidiaries like a balcony, courtyard or car parking space, and the sale price or value of the apartment.
Why you still need your own property insurance
The building insurance included with your strata fees covers only main building fixtures such as plumbing, intercoms, air conditioners and hot water systems. It also includes coverage for all the common areas and public liability insurance.
Strata building insurance does not cover anything that isn’t common to all units, so it won’t cover, for example, your unit’s light fixtures, carpets, electrical items, window coverings and personal belongings. This means that if you’re an owner-occupier you still need contents insurance and if you’re an investor, it’s important to get landlord insurance. This will cover you against loss, theft and damages.
You should also be aware that strata fees do not cover council rates or water rates so you need to factor these into your budget.
Can we help with your Northern Beaches property?
To find out more about strata fees and how they might affect the sale or rental of your property, please give the JDH team a call.