Increase in Strata by 110%

Hello Experts,

I am very new user in this forum and my friend suggested that I may get some good advises by posting the problem in which I got stuck. I am a first home buyer and after searching various properties in Sydney, I finally opted for a Unit in Parramatta which costed me about 6,30,000. Its a new building (constructed in 2017) with modular kitchen and centralized air con. Though little far from station (20 mins walk), the only reason I still opted for this Unit was because of its strata. When I booked the property (2 months ago), the strata was $575 per quarter. And, thats what made me decide to opt for this unit instead to opting for other better options which were nearer to the station and next to westfield mall in the same budget. The only reason why I didnt opted for those units near to station was because of its strata, ranging from 1200-1800 every quarter. Things were going fine uptil now when I today received a letter from our strata saying that the strata of our building is getting increased from $575 to $1200 every quarter. This letter came to me as a shock as its been just 2 months that we moved into this property and no one could ever thought that these guys will increase the strata in one shot and that too forever high. Its not a one off where they increase it sometime and later after recovery, will revert back. The email that i received from our strata (Westside management) says that we are ought to pay the new strata with immediate effect. We were not called in any prior meetings, we dint do any voting but we are now being asked to pay such a high strata for a building that has no swimming pool, no banquet halls, no gym, nothing. They just have lifts and garbage shoot. I am very hard pressed that we sacrificed electing for such a unit which is not just far away from the station but shortlisting the unit which has no gym, sport, recreational, swimming pool, etc in it. Before moving into the property, i even paid $300 for getting the strata report as suggested by our conveyancer. Now at this point neither our solicitor is helping us nor do strarta and left alone in the dark having no clue which way to go. If I could get some expert advise or some guidance to overcome this unfortunate then I will be highly obliged.

 

One of the issues with new buildings (especially units / apartments) is there is no history of anything - not the building, not the strata etc. Doing a strata search as your conveyancer suggested at the time is pretty much a waste of time and money - it won't tell you much of anything.

Strata levies in new buildings tend to be cheaper to start with (especially those without pools, gyms and spas) BUT those like yours with lifts can become very expensive as lifts come out of their warranty period and the OC has to pay for lift maintenance itself.

All the same, it is a big increase you are faced with. Perhaps @Scott No Mates has some advice on what you might do going forward?

 

The most important thing to know is that you are part of the strata - you should join the executive committee who instruct the strata manager.

The strata fees don't change without notice and are voted upon at a general meeting. So either you missed the correspondence (common in the first few months of ownership) or the previous owner didn't disclose - maybe there is a claim here but it should have turned up in your strata search.

That being said, $575 is probably inadequate. $1200 for a building with a lift and no sinking fund seems reasonable but not generous.

 

A new building will often not have any sinking fund as the developer doesnt want to be paying to "save" a future fund. Typically newer buildings have no fund or a very small one and then once a majority of owners are occupying the developer hands control to owners and then the fund needs to be enhanced to reflect actual expected maintenance and potentially defects.

 

A bit of common sense here. When you bought, why did you think the body corp was so much cheaper than similar buildings?

 

It's not unusual for people selling apartments in new buildings to understate the strata levies to make the purchase stack up.

 

Not surprised, new build developer keeping costs down. Now body corp managers ensuring enough funds...
As per above did you question why a brand new dwelling had significantly lower costs then other properties?
Just comes down the lesson learned, dont think you have much recourse.

 

Strata levies in new buildings are usually lower than the rest of the established by properties as noted by others above.

This is caused by warranties on major items expiring (these warranties are covered/included in the purchase price - so you're still paying for them but the costs are not transparent).

1-2 years post completion, these warranties expire and the BC starts to pay for maintenance. Don't be surprised if they continue to escalate.

Review the budget put forward by the strata manager, seek advice on what you don't fully understand eg why is there a provision of $##### for fire safety?

What is the 10 year budget for the property?

 

Did you get the last AGM Agenda, and subsequent minutes, and did you attend the meeting?

 

Assuming this is a new building.
Section 89 of the Strata Schemes Management Act allows you to seek an Order from the Tribunal (NCAT) requiring the original owner (usually the developer) of the strata scheme to pay compensation to the owners corporation if estimates and levies determined during the initial period for the purpose of meeting expenditures relating to the Scheme were inadequate to meet the actual or expected expenditures of the owners corporation.

In other words the developer cant understate costs to make the property seemingly more desirable. However you wont have a case if it can be proven that they took due care and diligence in determining the estimates and something else was the cause (e.g. insurance increased by 500%, then that was not within their control)

This is something you need to bring up at a General Meeting ASAP as an application under this section must be made no later than 3 years after the end of the initial period.

@StrataClub facebook page

 

High levies usually means the building will be looked after. If you want to live in quality the extra $50 a week is well spent on maintaining the building.
Remember the agent doesn’t earn more money because of higher levies. The money gets spent on your property.
Low levies are the VERY WORST reason to buy a property, as it usually means the building is badly managed. And levies are not determined by the agent but by all owners who attend the meeting. Those that don’t attend have no say.
In return you probably still have the developers strata manager and some agents charge far more than others

 

Assuming you obtained the last strata AGM Agenda and minutes you might have found out why this is the case, otherwise contact your OC Secretary.

@ankitjhingan can you give us an update?