Strata Budgets
If only I had a dollar for every time a home buyer sighed when they discovered the home of their dreams included the dreaded words “Strata Fees”.
You see the blood drain from their face as they pivot on their heels and head for the door, me running after them with the strata budget in hand to show them what is actually included in these fees. Costs that are supposedly only attributable to strata properties and not found in green title properties!
As we discussed last month 40% – 50% of all new land subdivisions in WA are strata and the percentage is only going to increase in Perth as we continue with infill development in existing suburbs. There are many different forms of strata, ranging from 2 lot side-by-side survey-strata subdivisions to mixed use buildings with hundreds of apartments. Typically speaking the bigger the strata the more common property and the more common property the more expenditure allocated to these areas.
So let’s break that down….
In the case of a 2 lot survey-strata subdivision you may have no common property at all. You will still have a driveway, probably a garage with a roller door, a backyard, maybe a swimming pool and most certainly a roof. But given the nature of this development none of these items are considered common and therefore you are responsible for 100% of the cost associated with the running and maintenance costs associated with these items.
In the case of an apartment strata development, typically the lot Owner owns the inside of the walls, the above of the floor slab and the below of the ceiling. They also own a percentage of all the common areas including the land. Therefore the driveway, the gates, the outside walls, gardens, swimming pool and roof are all considered common property and the costs associated with these items are shared amongst all the Owners based on unit entitlement (your valued percentage of ownership).
So what are the actual over extra costs associated with buying a strata titled property? Again this will depend on the type and size of the strata. To help explain this, I have reviewed the budgets of three existing strata complexes that Celsius manage:
Complex 1: 4 lot scheme of townhouses
In this scenario there is minimal common area but the Owners’ preference is to have Celsius manage the scheme and the common property. Celsius arranges the building and common property insurance, the maintenance of the common property – gardens and driveway, the annual pest control and arranges and conducts the Annual General Meeting. The total administrative cost is $1,120 per annum which divided by the 4 Owners equates to $280 per lot per annum. So whilst the strata levies total $2,500 per annum the total over extra cost is only $280 per annum.
Recently I had a prospect enquire on one of these townhouses and they presently live in a house in Canning Vale. When we went through the strata budget line item by line item they concluded that all the other costs within the budget they presently already incur with their home in Canning Vale. On committing to downsizing they now could see that for $280 per annum they could rely upon someone else to co-ordinate the maintenance that they themselves have been doing year in, year out.
Complex 2: 22 lot survey strata houses
Much like the scheme above there is minimal common property however there are security gates, pedestrian access, common lighting and front gardens.
In addition to Complex 1’s range of services, the Strata Manager is responsible for co-ordinating individual building insurance and reading the individual water meters and invoicing each Owner according to their use. The total over extra cost to have a Strata Manager act on behalf of the Owners of this complex equates to $384 per lot per annum.
Complex 3: 37 apartments
When managing apartment complexes there is generally considerably more common property and therefore the budgets are generally higher to cover the associated costs of maintaining this additional common property.
Please don’t mistake this as being extra to what you might have in the case of a house, townhouse or villa. As mentioned above you would still have the driveway; the gates; the entry statement; passageways and roof, only you would be responsible to maintain all these items yourself.
You may also have some additional items such as a lift, gym and pool as well as more sophisticated fire protection systems.
When reviewing this complex the total over extra cost to have the Strata Manager act on behalf of the Owners to look after the complex and all the associated common property equates to $450 per lot per annum.
Of course there are some other things to look out for when buying a strata titled property, you need to check the Budget and the Reserve Fund. In the case of older buildings you need to establish if there are any major works contemplated that may require the raising of a Special Levy. No different to when you buy a house and get a building inspector to confirm whether the roof might need replacing in the near future.
In summary what I’m saying is, don’t be scared off by strata fees alone. Get to understand what makes up the strata fees, get to understand what is common property and what is to be maintained by the individual Owner, work out if the admin costs fit within the range of $280 – $500 per lot per annum and then make an informed decision as to what type of property suits your needs and lifestyle best.
If you are in the market to purchase a property and would like to better understand a strata budget or management statement please do not hesitate to contact me anytime, as I would be only too happy to assist you with your review.
Kind Regards
Richard
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