Michael McGrath, Practice Group Leader discusses what Strata and Community titles are. He also explains some of the rules and regulations that can come along with such titles.
Chris: “Today, we have Michael McGrath, who’s a qualified solicitor with Mullane and Lindsay and also the Practice Group Leader in Property and Leasing. Good morning Michael, thanks for coming to the program.”
Michael: “Thanks for having me, Chris.”
Chris: “Michael, you look at the Strata/Community Title side of things, what is strata and community title?”
Michael: “Freehold of Torrens Title is the most common and traditional form of property ownership under which you are the owner of both the land and the structures on the land. A property such a unit, townhouse, or villa, however, is usually strata title. Under strata title, you own the cubic space, however, the land on which the building is built, which is all the areas that are shared in common by the owners such as driveways, stairwells and lifts are common property and owned by a body corporation. Community Title is a hybrid of Torrens and Strata Title in that you own the land and also the structures constructed on the land, however, but there are also common areas within the subdivision such as parks, cycleways or other community facilities which are again common property to be used by the owners in the subdivision and owners in the community association.”
Chris: “Okay, so what is an Owners Corporation and a Community Association, can you let us know about those?”
Michael: “Yes and Owners Corporation is a governing body which manages a strata scheme and owns the common property. I explain as being like a company, each owner in the strata scheme being like a shareholder in a company. Each owner will have what is known as unit entitlement which is based on the market value of their lot in comparison with other lots in the scheme. The unit entitlement determines your voting right at meetings of the Owners Corporation and also your share of levies raised. A community association is the same as an Owners Corporation in respect of the Community Title.”
Chris: “Okay, so if somebody owns a house worth twice as much as the next person, they would have twice as much voting power?”
Michael: “Yes, that’s right, but they also contribute twice as much to the budget and costs of the Community Association as well so while having a higher unit value entitlement means you have a greater voting right, it also means you contribute a greater share towards the cost of the association.”
Chris: “Are there any additional financial considerations when you get involved in Strata and Community Title?”
Michael: “Yes, there are certain costs associated with owning any property such as council rates and water rates. When owning a Torrens Title, you’re also solely responsible for the repairs on the property you own. When owning a strata title, you’re responsible for maintaining and repairing your own cubic use of space. However, the Owners Corporation is responsible for maintaining and repairing the building and the common property. There are 3 main types of levies involved in a strata or community title. Administrator fund levies are to fund the current day to day expenses in the association such as insurances, management fees and day to day maintenance in the life. The second kind of levy is the Capital works fund levy which is used to fund the capital repairs in the building and other common property. Finally special levies are a one-off levy which need to be raised as unbudgeted expense at the owners corporation or if they have insufficient funds in their accounts to meet the expenses.”
Chris: “It’s going to be interesting this year, with the floods and fires, that there’s going to be insurance costs rising with residential developments.”
Michael: “Yeah, that’s right. So, the admin fund of day-to-day expenses so insurances and so forth, that will be budgeted each 12 months so should usually be expenses and income should cover each other. Probably the biggest concern for me is the capital works fund levy so that’s part of a long term capital repair works so a well-run strata or community scheme will usually have what’s called a capital works forecast report done, which involves a quantity survey, essentially preparing a budget over a 10, 15 or 20 year period which determines what are the likely expenses, what capital works there going to need to do and therefore the association will make sure they put aside enough money so when those repair works arise they have funds sitting in their accounts for those expenses.”
Chris: “And that’s called a sinking fund, isn’t it?”
Michael: “Capital works fund or a sinking fund is the same thing, in the last iteration of the act, the terminology was changed from a sinking fund to a capital works fund but yes they are exactly the same thing.”
Chris: “Are there any additional rules or regulations in Strata or Community Titles?”
Michael: “Yeah, there are rules though that apply known as by-laws for a strata or community scheme which facilitate the administration and harmony of the scheme. By-laws can cover a wide range of matters including permitting improvements to your lot, pets, parking, noise, and smoking. It is important to understand these by-laws before buying into a strata or community scheme to ensure they are compatible with your lifestyle. Generally, by-laws are determined by majority vote meetings of the Owners Corporation or by exclusive use by-laws granting an owner a right in respective property requires a special resolution. Part of living in a strata or community title, for better or for worse, you’re part of a democracy. There is however legislation which does protect owners against matters of unfair or oppressive conduct. An example of a very contentious issue over the last couple of years in respective to by-laws is ownerships of pets in strata schemes. There’s been a number of cases which have started in the tribunal which have gone all the way to the Supreme Court over whether an Owners Corporation can ban having pet ownership in a strata or Community Title. The NSW Government passed legislation last year preventing Owners Corporations having bans on pets which you might’ve thought would bring an end to the matter but now were looking at when can they reasonably hold consent, so it does still continue to be an area of interest in strata and community ownership.”
Chris: “Michael, you mentioned the tribunal. What is the tribunal?”
Michael: “Yes, so the consumer trade or tenancy tribunal is a state government body part of its jurisdiction is over strata and community title and it’s designed to be a low cost jurisdiction without the necessity of having lawyers involved essentially to determine disputes within strata schemes at a low cost and making sure that owners aren’t unfairly treated by an Owners Corporation just because they might be in the minority.”
Chris: “So, if the matter isn’t resolved by the tribunal, then would go to the Courts?”
Michael: “Well, the tribunal will resolve the matter and you can appeal their decisions to the courts, if they aren’t happy with the decisions of the Tribunal.”
Chris: “Michael, say somebody has a pet dog, how do the other owners go on if the dog keeps barking at night and making noise?”
Michael: “That’s generally one of the requirements in the strata scheme, that they can’t unreasonably hold consent to having an animal in the strata scheme, but obviously if there’s an animal that’s causing nuisance to other owners, it might be reasonable to hold or refuse consent for that animal to remain. Ultimately, it would come down to a vote at the owner’s corporation meeting as to whether reasonable to have that pet in the scheme or not and the tribunal sits in the background so that if the owners are unhappy with a decision the corporation makes then they can challenge that decision with the tribunal.”
Chris: “Would there be restrictions on the type of dogs, dangerous dogs?”
Michael: “So, the bylaws would generally have requirements around dogs. I was reading the bylaws last week for a new strata scheme and it said you can have one small dog provided its not over 15kgs in weight. I have two pugs at home, one of them is a bit on the large side of more than 15kgs so I often joke to my wife that we’d need to put him on a diet if we wanted to take him into that scheme. Generally, around dangerous dogs and the like, they might ban specific breeds of dogs, generally the requirement is that the dog is registered with local council and has not been deemed to be a dangerous dog under legislation relating to companion animals.”
Chris: “If people have dogs that’s used to a big backyard, how do they manage having it in a home?”
Michael: “Well, that comes down to having a bit of personal responsibility, if a dog hasn’t been used to living in a unit, it might not go well and you’ve got to take account of your neighbours and living in this part of a community and if you’re the person with a dog that barks till midnight, you’re probably going to get funny looks when you walk out the door in the morning. Part of living in a strata title is you are living in a community, if you’re in an apartment block you’re often living on top of each other and there is just considerations you have to take into account upon deciding if strata title and unit living is right for you and for your pet for that matter.”
Chris: “Michael, you mentioned a point there about people should inform themselves about the rules and regulations. If you don’t inform yourself, you’re still bound by them, aren’t you?”
Michael: “100%, so when you’re looking at buying into a community or strata title, one of the most important things to do is reading what the bylaws are, you have to comply with them just as anyone else does but its also for your protection, but it is important that you comply with those yourself.”
Chris: “Michael, it’s been fascinating looking at strata and community title and I understand that the act has recently changed so if people want to find out before they buy into these places, you’d been the right person to talk to at Mullane and Lindsay?”
Michael: “Oh, definitely. When people buy into strata or community title, you get an inspection with the books and records to see what’s being discussed in the minutes of the Owners Corporations, what the bylaws are, the financial positions of the Owners Corporation, so all really important and useful information to have so you can make an informed decision and we can certainly assist you if you’re looking at moving into that scheme.”
Chris: “You as a solicitor would have that access but would a member of the public have that kind of access?”
Michael: “You have to get permission to review those kinds of records with policy legislation and you have to get the owners consent to do that. The best thing to do is to get a qualified strata inspection to do that as they know what they’re looking for in those records and then we as the solicitors can help interpret and dissect that information to make sure you understand how that information applies to you.”
Chris: “Michael, there’s going to be more and more people living in strata title places and it’s obviously becoming much more complex for people who have been used to a freestanding home.”
Michael: “That’s the consideration that you have to understand, if you’re the type of person that wants to paint your front door pink and its your house, no one’s going to tell you otherwise, well perhaps strata and community title might not be the best decision for you. As I said for better or for worse, you are living in a regulated scheme where there are rules and bylaws which you have to comply with and that’s part of strata and community title living.”
Chris: “How do people contact you when they want to find out more about this?”
Michael: “They can contact our main office in Newcastle on 4928 7300, we of course have our office open in Tea Gardens which we open 2 days every week on a Wednesday and a Friday, and we’d be more then happy to meet with you to discuss any issues you might be having in Community and Strata Title living.”
Chris: “Do you have a website?”
Michael: “Yes, you can find us at www.mullaneandlindsay.com.au which has all our contact details and a number of useful articles on topics like Strata and Community title living as well.”
Chris: “Michael, thank you so much for coming and talking to us today. It’s great to hear that help like you is available to people to help move and relocate to a smaller premises.”
Michael: “Thank you very much for having us, Chris, its been a pleasure coming to speak to you and your audience about Strata and Community Title today.”
