Are you planning to buy an apartment, a unit or a townhouse? If so, you might be confused about the difference between a strata title vs body corporate. These are widely used terms in the property industry, and many people often get confused between the two.
There are a number of things you should consider and understand if you want to know the difference between strata title vs body corporate. However, before doing that, let’s look at what these terms are.
Quick Summary
- Strata title means owning a unit/townhouse/apartment as well as part of the whole building and common amenities
- Body corporate (or owners corporation) is responsible for maintenance and management of common areas
- Main difference is ownership (strata title) vs legal responsibility (body corporate)
- Body corporate rules include: getting correct insurance, abiding by by-laws, attending meetings, notifying of ownership changes, paying levies
- Body corporate responsibilities include: maintaining rules, administrative tasks, repairs and maintenance, record keeping, resolving issues
- Strata title owner responsibilities include: paying maintenance fees, contributing to building insurance and rates, paying own bills
- 7 steps before buying: research area, review strata plan/by-laws, check fees and sinking fund, do building/pest inspection, check other unit prices, get body corporate minutes, understand insurance
Table of Contents
What is Strata Title?
When you buy a unit, a townhouse, or an apartment, you also buy a part of the strata title. It means you will also be owning a part of the whole building, along with some common amenities, such as a gym, pool, lifts, garden, lobbies, entrances, car parks, and other facilities. You will also own a part of the land on which your unit is built.
Although you are responsible for your own unit or apartment, under the strata title, the upkeep and maintenance of common areas will be the collective responsibility of all the lot owners, including you. This can be difficult because when many people are involved in a decision, they might have different ideas on the best way to manage things, and this can cause confusion and disagreement. This is where the body corporate comes in.
What is a Body Corporate?
Also known as an owners corporation, a body corporate is a legal entity whose core responsibility is to look after the maintenance and management of common areas in the building.
It’s up to them to decide whether to form a strata management team for the management of the building on the owners’ behalf or select someone from an executive committee who wants to do the work voluntarily.
So, the main difference between a strata title and body corporate is ownership and legal responsibility.
The body corporate is responsible for taking care of a number of issues related to the internal and external structure of the common area. It also tackles and resolves the problems that arise among the lot owners.
For example, if a person has issues with the general behaviour of their neighbour, the complaint goes straight to the owner’s corporation. Similarly, if there are any issues related to car parking or noise experienced by a lot owner, they can take the matter to the body corporate. Any decision regarding these matters is made in a general or committee meeting in the presence of lot owners.
Body Corporate—rules and regulations
To better understand the concept of a strata title vs body corporate, you should understand the rules and regulations from the perspective of both the owners corporation and as a lot owner.
Your responsibilities as a lot owner include:
- Getting the correct insurance for the lot. The lot is insured under the insurance agreement of the building, so you will only need to arrange contents insurance.
- Abiding by all the by-laws laid out by the body corporate.
- Attending general meetings or participating via proxy in case of absence from the meeting. You can nominate a committee member to be your representative or choose a family member as a proxy.
- Letting the body corporate know if or when there is a change in ownership. In the case of a tenanted lot, you should notify them when a tenant changes.
- Making payment of all the levies in accordance with a schedule and without delay. Levies usually include the repair and maintenance cost, and a part of it goes into the sinking fund for coverage of any extraordinary expenditure.
The body corporate is responsible for the following:
- Maintaining the rules and regulations laid out by the state legislation.
- Taking care of the administrative tasks, finances and other funds, and insurance.
- Taking responsibility for the repair and maintenance of common areas without causing any delay or inconvenience to the lot owners.
- Maintaining proper records of all documents, including the register of committee members and lot owners, budget cost, financial records, and minutes of the meeting.
- Making sure all documents are available for lot owners.
- Resolving any issues that arise among lot owners (in the light of by-laws).
In Queensland, body corporate rules and responsibilities are governed by the Body Corporate and Community Management Act 1997. This legislation sets out the key duties and powers of the body corporate in Brisbane apartment complexes, such as:
- Maintaining common property
- Managing body corporate assets and finances
- Enforcing by-laws
- Holding meetings and keeping records
- Raising funds through levies
As a strata title owner in Brisbane, it’s important to understand your rights and obligations under this Act.
Strata title—rules and regulations
Strata title gives certain rights to a lot owner. For instance, it enables you to live peacefully in your lot. This is because all owners are required to honour the by-laws and be respectful of one another.
As a strata title owner, your responsibilities are as follows:
- Pay fees that are used for maintenance of the property.
- Contribute towards insurance of the building and any common property.
- Pay council rates.
- Pay your regular bills like electricity and water.
Bonus: 7 steps to follow before buying a unit
Research the area. Find out the local demographics. An excellent tool for this is microburbs. You can just type in the suburb you’re looking at, even the specific property. It will give you a cafe score and tell you how hip it is and the average age groups of people in that area. All this is important because, if you’re buying a place, you will probably be there for a couple of years, so it should be an area that works for you. Demographics will also give you an idea of your potential tenants if you plan to rent the property out.
Review Strata Plan and By-Laws. It is important to examine the strata plan to understand the boundaries, the elements of the property that you own and the common property. In addition, you also want to familiarize yourself with the by-laws which govern the rules of the strata Community.
The common rule we see is regarding pets. Some buildings might have specific by-laws regarding the size and type of animals. Not long ago, there was a story about a couple that had some iguanas and lizards. The strata property actually said they were fine with cats and dogs but not okay with lizards, so the couple was not allowed to live in that building.
Every building can have its own individual by-law for that specific building, which could impact you depending on your pets, your preferences or even what you want to do on the property. Some will not allow you to enclose your balcony if you’ve got a balcony because it’s got to look all the same.
Some buildings actually forbid Airbnb and short-term rentals. If you buy an apartment in the city, that might be your ultimate plan. You might plan to buy it to live in for the short term and then turn it into an Airbnb. So, take time to really understand those by-laws because this could limit your plans in the future.
Check the quarterly strata fees. This is one thing that you will have to do on each property that you find. You can get this information from the real estate agent. This is usually the first indicator of issues with the building. If you’re comparing buildings and one building has really high strata fees compared to the others, it could mean that there are some problems that you’re unaware of. Also, be mindful that things like pools and lifts can add to maintenance costs.
Check the sinking fund. The sinking fund is a rainy day fund that all the owners in the unit complex contribute to. It looks after any emergencies or maintenance that needs to be done on the building. For example, the sinking fund will cover an air conditioning unit that breaks in the common area. If there is a lot of money in the sinking fund, it may mean that some maintenance is being overlooked. On the other hand, if there is nothing in the sinking fund, then be prepared to contribute thousands of dollars in special levies if there is a maintenance emergency. So it’s important to ensure the sinking fund has a healthy amount of money, but not too much.
You also want to go back to the historic minutes of meetings to see what type of work they’ve done to the property. If they’ve got very little money and you look back on the minutes in the past and you see they’ve done a new roof or the balconies, then that’s not too bad because it looks like most things are up to date. On the other hand, if the money was used to fix major problems like the concrete needing to be redone, you may decide not to buy in that unit. However, if they have heaps of money in the body of corporate levy, you might ask yourself if they are doing enough work to maintain the property. So it’s kind of that Goldilocks zone where you want them to have enough money but not too much money.
Complete a building and pest inspection. These are extremely important. A building and pest inspector can help physically inspect the building and bring up things the Strata hasn’t picked up. For example, when I put an offer on a property before. It was a unit complex. I looked at the property, and it looked like there were no issues with it. Fortunately, the building and pest inspectors discovered the foundations were sinking. I didn’t even think there was any information in the body corporate about this. So, once again, getting the building and pest inspection along with checking the minutes of the meeting will make sure you’ve been really thorough and understand what you’re getting before you commit to anything.
Check what other units have sold for in your building complex. This can also tell you if there are issues in the building. If people are selling for a significant discount in your building compared to the ones next door, it could mean there are probably issues there or something in the body corporate that you’re not aware of. Knowing how much other units have sold can also give you a good idea of what you should pay for your property.
Get a copy of the body corporate minutes. The minutes can let you know what has been going on with the property, especially if there are scheduled levies that are about to come up. The minutes of the meeting are the heart and soul of everything that’s going on with the property, so you want to get a copy of that and understand what’s been going on. The further back you can go, the better the understanding and the better the history you can put together of that particular unit.
Lean on your solicitor to review the contracts and the minutes. If you need help with that, a solicitor will be more familiar with the intricacies of the contract. In New South Wales, they’ll generally help you review the strata reports and the minutes of meetings to help you make the right decision on this particular building.
Check out the balance between occupants and investors. Ideally, you want to go for a building with a higher owner-occupier rate than investors. Owner occupiers tend to maintain properties better. An investor is probably going to be less concerned about the general upkeep – how the apartment looks. They’re just thinking about their return. Owner occupiers are going to have a different perspective. They will care if the garden looks scrappy or if the paint’s flaking off. Having more owner-occupiers will change how those body corporate and strata meetings are run.
The best way to check this out is on realestate.com.au. You can look at the current units that are rented in that building and try to work out the proportion of ownership compared to investor.
Understand the Insurance Cover. Knowing what the strata’s insurance covers can protect you from additional risk. We see this a lot here in Brisbane, where floods are pretty frequent in some inner-city areas like West End. Some banks will actually request to see the strata Insurance to make sure the building is protected in the case of a flood. Take time to understand not just your apartment’s insurance cover but the whole Strata—the whole complex’s insurance cover.
This is where you really need to put a due diligence clause or a subject to satisfactory body corporate or strata checks in your Finance offer. It’s going to give you time to investigate all these different matters to make sure you’re going to be protected because, at the end of the day, once you’re the owner, you’re the one who’s going to be on the hook.
Consider a pre-approval. Unfortunately, not all banks like to lend for units. Some banks have specific units that they will not lend on, and other banks have specific postcodes they won’t lend on. Other banks want the units to be of a certain size. It can get complicated, so when you get your pre-approval, ensure the bank is okay with the type of place you want to buy before you get too far along.
Put protective clauses in your contract. Putting a due diligence clause subject to satisfactory body corporate or Strata will protect you and give you time to investigate the minutes, the financial records, the insurance and everything we’ve covered in this section. This is where you want to talk with your solicitor to ensure you’re getting the right terms in the contract. Also, check with your mortgage broker for any other conditions you need to put in the contract, such as a subject-to-finance clause or even a building a-pest clause, because you want to make sure you have all the right clauses. Do keep in mind in a more competitive environment, you might find that other people aren’t putting these clauses in, and that’s why you want to talk with your broker to make sure that you’re making the right clauses that meet the market expectations. Your mortgage broker may suggest you don’t include these Clauses but add other clauses like finance that can protect you.
Frequently Asked Questions
What is the average body corporate fee for apartments in Brisbane?
According to the 2020 PICA Queensland Strata Insights Report, the median annual body corporate fee for Brisbane apartments is $4,472 ($86 per week). However, fees can vary widely depending on the building’s age, size, location, and amenities. Newer, luxury apartment towers with facilities like pools, gyms and lifts tend to have much higher fees than older, simpler ‘walk-up’ unit blocks.
Can body corporate fees increase and by how much?
Yes, body corporate fees in Brisbane can and do increase over time. Each year, the body corporate committee must set a budget to cover the building’s insurance, maintenance, management and utility costs. As these expenses rise, owners can expect their levies to go up too. In Brisbane, body corporate fees rose by an average of 8.5% in 2020 according to the PICA report. However, individual levy increases may be higher or lower than this.
Are body corporate sinking funds mandatory in Queensland?
Yes, all strata titled properties in Queensland must establish and maintain a sinking fund to pay for future capital expenses like painting, roof replacement, and lift overhauls. The body corporate must keep a 10-year sinking fund forecast and ensure the fund has adequate income to cover anticipated costs over this period. The body corporate can raise sinking fund levies from owners if required.
Can I inspect body corporate records before buying an apartment in Brisbane?
Yes, by law the seller of a strata titled property in Queensland must provide the following body corporate records to prospective buyers:
- Minutes of committee and general meetings for the past 2 years
- Current by-laws and any amendments
- Copy of the community management statement (CMS)
- Schedule of levies and fees payable (for administration fund and sinking fund)
- Most recent financial statements and budgets
- Current insurance certificates and policies
- 10-year sinking fund forecast
- Any current contracts or agreements entered into by the body corporate
- Details of any legal proceedings involving the body corporate
Make sure to obtain and carefully review these documents before signing a contract or paying a deposit on a Brisbane apartment. If you have any concerns about the records, raise them with your solicitor or conveyancer.
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