Strata - what are the long term issues

hi Folks

sorry if this is newbie question but Im shortly hoping to buy in SA for the first time. I currently own a unit in the UK which Im about to sell and its leasehold not freehold and its turning into a comlicated and expensive situation which is in turn making me wary about doing the same over here (tho we may only be able to afford an appartment due to the huge increases in prices.

Anyway, my question which Ive been fruitlessly googling for 30 mins is what are the long term issues with buying strata ie:

Is your claim to the unit indefinite? (in the UK you have to renew the lease)

What happens when the building reaches the end of its life?

Any other issues I havent thought of?

many thanks

Rich

 

try this link. I suppose you could of googled it however it explains it well.

lawsociety.

the downside of Strata Title are the strata fees.
and dealing with Karens on the committee.

consider the impact of strata complex's with gyms, pools, lifts etc. as there is a lot more costs associated with maintenance.

 

thanks for replying, I read the article you linked to. Just to be clear, I did google it and read a few articles about ongoing issues such as bodies corporate and strata fees, but Im still unclear about the questions I mentioned relating to the long term ..

 

no worries,

I'm a NSW Surveyor so it might be slightly different in SA, but, basically in NSW you own a share in the property.
there is no renewing of any lease. Strata title means that there are multiple owners on one piece of land.
that being a "Lot", which can be made up of several Lots on one piece of land.
carports, garages, storerooms etc may be shown as a part lot and make up the total area you own.
the distribution of rights within the scheme are given a value in the unit entitlement table.

all the owners in the strata scheme are responsible for the areas that are shared known as 'common property"
typically you don't own the building as the structure forms part of the common property to which you are all responsible for its maintenance. (managed by the body corporate) and other rights are created in the Strata act.

basically you own the airspace created by the confines of the structure shown as a thick un-dimensioned line on the strata plan - outside lots are shown by a thin dimensioned line.
there are other options, like schemes with minimal or no common property. where you do own the structure but share services and/or maybe common areas.
it will be noted on the strata plan (well should be) what you own. ie: Pt Lot 6, and possibly a comment indicating a specific ownership like a timber pergola forms part of your lot.

if the building falls down you all own a share of the rubble and the land.

 

In WA. Strata covers various property types. It might be 3 villas on a block (you own the villa outright) with a common drive way. Strata fees cover building insurance, sometimes water, maintenance to driveway and common area gardening (many don't do that). It can also cover a large apartment block with a pool, gym etc etc and a much more expensive strata fees.

So "issues" with "strata" depends what you buy

 

We don't have the UK type leasehold system apart from primarily the ACT where all land is leasehold owned by the Commonwealth Government. There is some private leasehold elsewhere, usually for commercial premises, and rural leaseholds in areas like the Western Division of NSW (NSW Government). When land is originally leased in the ACT it is for 99 years and there is no ongoing lease cost. Renewal of the lease back to 99 years is a minimal cost administrative exercise and change of leaseholder is automatic. The only issue that is starting to arise as the ACT is nearing 100 years in existence is that mortgage providers check that the remaining lease duration is sufficient to cover the mortgage timeframe. Extending the lease can done at any time.

 

@Rich B - it's pretty much as @bmc said.

As for end of life of the building, the OC has an obligation to maintain the building and to achieve this they establish a sinking fund to cover planned & reactive maintenance and an administration fund for running costs (insurance, water, rates, power, strata manager etc).

If a building is well maintained, it'll last for a very long time though much of it may have been repaired or replaced over the years eg concrete cancer, hand rails, exterior lights, mailboxes, paths, rollershutters etc.

Leasehold is pretty rare (usually govt or statutory bodies).

Just avoid large buildings which may have controlling blocs of proxies which can be a cause of dysfunctional OCs.

 

thanks for all this folks, good to hear that theres no time limit on ownership and that it includes a percentage of the land (neither being the case on my uk property).

following the comments about lifespan of appartment blocks, I googled that question and it brought up this useful reddit thread about all this.

One poster cites the case of Mary Erling v The Owners Strata Plan No. 8891 [2010] NSWSC 824 where the Court ordered the termination of a strata scheme on the basis that the cost to repair and make the building habitable was greater than the value of all the lots.

I guess it depends on where the land is and what percentage of it you own ..

 

It's not an actual % but a unit entitlement as described on the schedule for the strata subdivision.

As for dissolution of a Strata Scheme, when a building becomes that old, it's likely that the land would be worth more as a development site (this can now be done with 75% resolution at a special or annual meeting & a lot of process).

 

ok thanks, so you would likely get something back from the land share, tho presumably unlikely to be as much as if you had owned a house which would have a larger land parcel ..

 

If 4 people on strata then your interest in the land is 1/4 of block value
If 40 in apartment block then 1/40 of block value. However the land is often worth more due to development potential .

A beach front (no road between) block of flats in Perth (very rare) had to be demolished. The owners actually did ok out of it because the entire block was worth more to a developer than the sum of the parts (all flat prices added together).

Me. I would avoid large strata groups and factor block value into purchase price