What can I do with my strata property?

Unfortunately not all owners within a strata scheme are aware of their rights and obligations regarding strata ownership, which can lead to problems with other lot owners, the strata manager, and the owners corporation.

What does strata ownership involve?

Strata title refers to the type of ownership for individual townhouses, units, villas, and even commercial warehouses, within a complex.

Not only do the individual owners have the right to occupy and enjoy their particular lot, but they also have an interest in the other areas within the complex (such as the driveways, gardens and utilities areas) – referred to as the common property.  Every lot owner shares the ownership of the common property.

UnitsOwning a strata property is not the same as owning a freestanding house – your use and enjoyment of the property is regulated by legislation and also any by-laws that specifically apply to your strata complex.

  • You own your unit or apartment as well as sharing ownership and responsibility for the common property.
  • As an owner, you are automatically a member of the “owners corporation” which has responsibility for the common property.
  • You have to contribute to the cost of running the building by paying levies, usually on a quarterly basis.
  • You also have to pay money into a sinking fund, for future long term expenses such as painting the building or updating the garden areas.

It is important to note that the external walls, windows, doors, the floor (including floor tiles) and the roof do not usually belong to the lot owner, but are considered common property, which means that the repair and maintenance of these areas (and the cost of doing so) usually falls to the owners corporation.

This means that the lot owners own the inside space of the unit, but not the main structure of the building.

So what can I do and not do within the strata complex?  

There will be certain restrictions regarding your use and enjoyment of your strata property, as set out in the by-laws for the strata scheme.  Typical by-laws will specify rules regarding:

  • the keeping of animals – some strata schemes expressly forbid any animals being kept on the property.
  • parking on the common property – there will usually be designated spaces for visitors, however parking will be forbidden on any other part of the common property.
  • keeping noise to a minimum, to maintain peace and enjoyment for your neighbours.
  • drying washing on the balcony.
  • changing the “appearance” of your lot – to ensure that the overall look of the property remains consistent, you may be prevented from installing brightly coloured blinds in your windows.

If I want to do something to my property, do I need to obtain permission?

In addition to the strata scheme’s by-laws, there are a number of other responsibilities set out in the strata legislation (see sections 116 and 117 of the Strata Schemes Management Act 1996):

  • you must not interfere with any support or shelter provided by your lot for another lot or the common property;
  • you must give the owners corporation at least 14 days’ written notice before altering the structure of your lot.  The notice must describe the alterations;
  • The owners corporation can stop alterations to a lot if it interferes with the common property or any support to the rest of the building;
  • you must not interfere with the passage or provision of water, sewerage, drainage, gas or other similar services;
  • you must not use your enjoy your lot in such a way which might cause a nuisance or hazard to another resident;
  • you must not use or enjoy the common property in a way that may interfere unreasonably with another resident’s use and enjoyment of common property or their lot.

What if a lot owner has changed part of the common property without permission?

If a lot owner wishes to make a change or alteration to something in their lot which forms part of the common property (such as windows), then it must obtain permission of the owners corporation.  Usually the owners corporation will review the proposed works, and authorise them with certain conditions being imposed, such as ensuring that the new windows are within the overall look of the entire complex, and that the repair, maintenance and future replacement of the windows are the responsibility of the particular lot owner.

If a lot owner has not obtained prior approval of the owners corporation, perhaps because they were unaware of their obligation to do so, then the owners corporation should take immediate steps to inform the lot owner of their responsibility, and ask that they formally request permission for the works.

If the lot owner refuses to do so, and is unwilling to talk any further about the issue, then there are 2 options available:

  1. the owners corporation can serve a Notice to Comply with a By-Law on the person who is breaching it (section 45).  If that person continues to breach the by-law, then the owners corporation may apply to the New South Wales Civil and Administrative Tribunal (NCAT)Consumer & Commercial Division – for a penalty of up to $550 to be imposed on them (section 203).
  2. The owners corporation, an owner or resident can apply for mediation through Fair Trading.  If no settlement is reached, or if a party does not comply with the settlement agreement, then one side can apply for an order by an Adjudicator or the NCAT (which will be a public hearing, just like a normal court case).  If you are unhappy with the Adjudicator’s decision, then you can appeal to the NCAT.

NCAT has the power to make the following types of orders:

  • an order that a party pay a sum of money to the other party – if this is not complied with, then the order can become a judgment of the Local Court and enforced through the Sheriff’s Office;
  • an order for a lot owner to get consent for repairs to common property;
  • an order appointing a strata managing agent;
  • an order about levy contributions;
  • an order about keeping of animals.

If you require advice or assistance regarding a strata issue, contact our office on 9526 3444 or email Melissa Lammers – mlammers@shirelegal.com.au.

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I am buying a unit. What does the term “strata” mean?

QuestionStrata title is a form of ownership used for multi-housing developments, such as:

  • units
  • townhouses
  • villas
  • detached dwellings within a defined area.

The strata plan divides the building(s) and the associated land into:

  • individual lots (owned by the various lot owners); and
  • common property.

Lots typically consist of the airspace within the walls, floor and ceiling of the particular unit or townhouse – that is, the lot owner really only owns the right to occupy that space, and doesn’t necessarily own the actual walls, floor and ceiling of the building.

Common property is the part of the land and building in the strata plan which does not form part of any unit, and which is shared between the lot owners (e.g. stairways, passages, driveways and visitors’ carparking).  It also includes the actual structure of the building, which is not owned by any particular lot owner.

Other terms you need to know:

Owners Corporation

The Owners Corporation (previously referred to as the body corporate) comprises the registered owners of all of the units in the strata plan. An owners corporation and its committee has powers and responsibilities to administer the building and care for such things as the land around the building, entrance, stairways and paths.  The Owners Corporation also makes decisions regarding repair and renovation of the building as required, the cost of which is covered by the strata levies that have been paid by the lot owners (see next point).

Strata levies

Strata levies are the fees paid by each lot owner to the Owners Corporation (usually quarterly) to contribute to the general upkeep and maintenance of the building and the common property. There are 3 types of strata levies:

  • administrative fund (for day-to-day running expenses such as gardening and cleaning)
  • sinking fund (for long term repairs and maintenance such as carpet replacement)
  • special levies (if there aren’t enough funds in the admin or sinking funds for essential expenses)

The levies are determined each year by the Owners Corporation, with reference to the strata scheme’s budget. The amount of levies payable by each lot owner is determined by the “unit entitlements”. Basically, the larger the lot, the greater the portion of levies that it needs to contribute to.

Unit entitlements

Unit entitlements specify the proportion of strata costs that a particular lot needs to contribute towards the strata scheme.  For example, a top floor penthouse would have a larger unit entitlement (and therefore strata levies) than a ground floor bedsit.  The unit entitlements are determined when the strata scheme is first registered, and are generally based on the understood value of the individual lots.  If this is not the case, then the NSW Civil and Administrative Tribunal has the power to amend the unit entitlements (see case note below).

Why would I need a lawyer after I have bought a strata property?

Change of By-Law – If you wish to undertake any improvements to your property (such as upgrading the kitchen or bathroom, installing a skylight, replacing the screen door with a security door and so on), then you would need to approach the Owners Corporation at first instance to seek permission to do so.  You will then be asked to submit a proposed “Change of By-Law”, setting out the details of the proposed work and also setting out your rights and obligations regarding the proposed work.  Shire Legal can assist you with this.

Strata dispute – You may be involved in a dispute with the Owners Corporation if you have sought approval for proposed works, but for whatever reason, it has not been granted.

Below are some examples of recent cases heard before the NSW Civil & Administrative Tribunal (Strata Division):

More case studies are available on the Fair Trading website.

For more information …

Strata laws are administered and regulated by Fair Trading NSW.  There is a wealth of information available on the Fair Trading website, such as:

Now that contracts are exchanged, can I start renovating?

Gaining access to your recently purchased property to commence renovations can provide you with an opportunity to save time before moving into your new home or alternatively, reduce any time your new investment property remains vacant. However, there are inherent risks involved and the potential benefit can be outweighed in the event that there are complications with the settlement.

Renovations

The ownership of the property does not actually change hands until settlement (also referred to as completion).  But if you want to gain access beforehand to paint, lay new carpet, or even upgrade the toilet, you must first negotiate with the vendor or their representative.

The vendor is under no obligation to provide access to the purchaser prior to settlement. The vendor’s only obligation under the Contract for the Sale and Purchase of Land (clause 12.3 of the 2014 edition) is to do everything reasonable to enable you to make one (1) inspection of the property in the three (3) days before a time appointed for completion (subject of course to the rights of any tenant who may be living in the property).

Whilst a vendor may allow access to take measurements, it is unlikely that the vendor will consent to allow the purchaser access between exchange and completion to undertake significant renovations as the vendor remains responsible for the property and its insurance during this period.  There are also other considerations which will have an effect on the vendor’s decision such as:

  • whether there is a tenant in the property,
  • whether the vendor is currently occupying the property and
  • whether the vendor is unwilling to take on the risk that the purchaser may not be able to complete the transaction after undertaking the renovations.

In the event that a vendor does allow access, the terms of such access should be determined prior to undertaking any work. The purchaser must ensure any appropriate building or planning permits are in place before commencing any work. This is especially relevant where substantial work is being undertaken.  Also the purchaser should ensure that adequate insurance is in place before commencing any works.

As a purchaser it is crucial that an agreement is in place as you are taking on risk that the time and money spent on improving this property prior to settlement will be wasted in the event that the sale does not proceed.

Whilst getting a head start on your renovations upon purchasing your new home seems like a great idea, the potential downside of investing time and money and energy into improving what is essentially someone else’s property (up until settlement) is significant.

There are alternatives which we can explore including:

  1. Negotiating with the vendor for a shorter settlement period to get you into your new property sooner; or
  2. Negotiating for you to take possession prior to completion (which usually involves paying a token rent or licence fee to the vendor) – although if you want to renovate during this time, you will still need to negotiate this with the vendor.

Contact Andrew Morris, Solicitor, on 9524 3444 if you have any questions about buying or selling property.

The importance of requisitions on title when purchasing a property

As part of the normal conveyancing process, the purchaser will make enquiries with the vendor about the Title of the property.  These are referred to as “requisitions on title”.

The purpose of requisitions is to ask the vendor information which may not have been disclosed in the contract or discovered during an inspection of the property.  The information can range from whether there is a dispute with the neighbour regarding fences, to whether there is any matter that could justify the making of a demolition order.

Requisitions

There are four categories of requisitions:

  • Requisitions as to title – these are matters relating to the title of the property for sale, such as whether there is an easement affecting the property.
  • Requisitions as to conveyance – these are matters relating to how the property will pass to the purchaser, such as the documents to be handed over at settlement. For example, the proper execution of documents to be handed over at settlement and the time and place for settlement.
  • Requisitions in the nature of general enquiries – these are best described as things that are routinely asked and may include information on how matters are to be dealt with on completion. For example, adjustments to be made, documents to be handed over, or the existence of any statutory notices.
  • Requisitions in the nature of reminders – these are as they sound, simply reminders to comply with the Contract.  For example, any caveat on title must be removed before settlement, vacant possession must be provided on settlement, and so on.

Whilst a great deal of the information sought in Requisitions on Title are now covered in a vendor’s duty to disclose matters affecting the property, there are some areas that are not covered by this duty of disclosure.  Given that purchasing property is probably one of the biggest decisions and investments a person will make in their lifetime it goes without saying that it is vitally important that as much information as possible is obtained about the property before settlement takes place.

The vendor is required to answer Requisitions on Title honestly and to the best of their knowledge.  There are a range of remedies if this is not done, some of which can be quite severe.

Incorrect  Answers

A vendor who deliberately answers a requisition falsely is liable for damages for deceit if the false answer was intended to, and does, induce a purchaser to complete the purchase.  This not only applies to the answers originally given but also to situations where the vendor unintentionally provides an incorrect answer, becomes aware that the answer is incorrect and does nothing to disclose the truth to the purchaser.

If a vendor or their practitioner intentionally conceals a matter that is material to the title of the property in order to induce the purchaser to settle, then they may both face criminal and civil charges (s183 Conveyancing Act 1919).

If the reply is honest but incorrect the vendor and possibly their practitioner may be liable for negligent misstatement.

Incorrect replies may also be found to be a breach of consumer protection legislation such as the Australian Consumer Law.

If a vendor is unable or unwilling to reply to a requisition the contract provides that the vendor may rescind the Contract but only if:

  • the purchaser has made a proper requisition;
  • the vendor is acting on reasonable grounds, not for ulterior purposes or out of recklessness.

Any notice of intention to rescind under this clause must give the purchaser a reasonable time to waive the requisition (s56 Conveyancing Act 1919).

When is stamp duty payable? How much do I need to pay?

OSRTransfer of land

Stamp duty is generally payable on transfers of ownership of land or business within New South Wales (unless you are entitled to a stamp duty exemption or concession).  Stamp duty is paid to the New South Wales Office of State Revenue.

A stamp duty calculator is available on the Office of State Revenue’s website.

First Home Owners

First Home Owners who purchase or build a new home (with a total value less than $650,000) may be eligible for a $15,000 grant (aka “FHOG”) (the grant will reduce to $10,000 in January 2016).

There are also exemptions/concessions on stamp duty for first home owners under the First Home New Home Scheme:

  • for new homes valued up to $550,000 – exemption
  • for new homes valued between $550,000 and $650,000 – concession
  • for blocks of land valued up to $350,000 – exemption
  • for blocks of land valued between $350,000 and $450,000 – concession

Transfer to your Self-Managed Superannuation Fund (SMSF)

There is a reduced duty of $50 payable on transfers of title from your name to your SMSF (section 62A Duties Act 1997 (NSW)) (subject to certain rules set out in the section).

Transfer pursuant to a family law property settlement

If the ownership of a property is transferred as a result of a family law property settlement (e.g. from both spouse names to just one name), then the transfer is exempt from stamp duty.

Transfer of a deceased estate property

A transfer of a deceased’s property to the legal representative (executor) or a beneficiary, pursuant to the Will, is exempt from stamp duty.

Establishment of a trust

The establishment of a trust, such as a family discretionary trust, is subject to $500 stamp duty.

When is stamp duty payable?

Stamp duty is payable within 3 months after the duty to pay liability arises, otherwise interest will be charged.

However, if the property is being purchased “off the plan”, then stamp duty is payable:

(a) at settlement/completion; or

(b) after 12 months from the date of exchange,

whichever occurs first.

Can I be gazumped?

It is a common misconception amongst buyers of real estate in New South Wales that once a vendor has agreed on a price with you, then the vendor is obliged to sell the property to you.  Unfortunately, that is not the case.

A vendor is only legally bound to sell the property to you once contracts have been exchanged – that is, both you and the vendor have signed a copy of the contract, the identical copies are physically exchanged, and you have paid a deposit. Until then, a vendor is entitled to enter into negotiations with any number of purchasers.

Therefore, even if you have negotiated to purchase a property and even agreed on a price with the vendor, the vendor can still decide to sell the property to another purchaser (usually for a higher price, or on more favourable terms) – typically referred to as “gazumping“.

A vendor can gazump you even if you have paid a “holding deposit” to the real estate agent – this payment has no legal basis and is usually only considered to be a sign of goodwill by the purchaser.

Of course, if you are gazumped, you are entitled to a refund of your “holding deposit”. However you are usually not entitled to be reimbursed by the vendor for any expenses you may have incurred in anticipation of purchasing the property, such as pre-purchase inspection reports and valuations.

It is because of this that buyers often will exchange contracts in a hurry so that the property is secured and not sold to anyone else, even though the buyer has not yet undertaken the recommended pre-purchase inspections and contract negotiations.

Many buyers prefer to exchange with a cooling-off period and then obtain their inspections and negotiate the contract during the cooling-off period.  Although it must be noted that once contracts are exchanged, the vendor is under no obligation to agree to negotiate anything regarding the contract.  Your only option if you do find something untoward with the property, as disclosed in an inspection report, is to rescind (that is, pull out of) the contract and pay a penalty of 0.25% of the total purchase price.

Be careful when buying off-the-plan

Whilst buying an off-the-plan unit or apartment is an exciting prospect for any wanna-be property owner or investor, there are inherent risks with doing so, particularly because the property is not yet built so you do not really know exactly what you are purchasing until just before settlement – typically a year or so down the track after you first entered into the contract.  You are instead relying on the developer’s plans and any specifications set out in the Contract.

OTP

Be mindful of the following:

1. Off-the-plan contracts are drafted by the developer’s solicitor, therefore they tend to have the developer’s best interests in mind.  In particular, they will typically contain a clause allowing the developer to make changes to the property if required, such as the floor plan, the location of the garage and/or storage space, the colour of the finishes etc – if such changes will not significantly affect the property being purchased.  Sometimes, the developer can even amend the square meterage of the property by a stated percentage.  Be sure you read through and understand each of the special conditions in the contract, and understand what modifications the builder can make to your property.

2. Sometimes developers will only be able to secure finance to commence building the project once they have sold a certain number or percentage of the units by a particular date.  In these cases, the developer will ensure there is a special condition in the contract allowing them to pull out of the contract if they do not reach their target by a particular date.

3. Almost all off-the-plan contracts will contain a “sunset clause” which means that if the development is significantly delayed for whatever reason (such as problems with the actual build, or delays in registering the title document) then the purchaser has the right to pull out of the contract and receive their deposit back.

4. Depending on its location, the newly built unit may be able to offer water views, and often the agent marketing the property will make promises of water views.  But what if those water views don’t eventuate, either because of a change to the floor plan of the unit (in line with point 1 above) or the view being built out by a neighbouring property?  The recent NSW Court of Appeal case of Higgins v Statewide Developments dealt with such an issue.  Whilst the yet-to-be-built property was marketed as having 180 degree views, a newly constructed wall obstructed those promised views.  The purchaser argued that there was a difference between the property as per the contract and the property that was built, which substantially detrimentally affected the property.  Whilst the Court noted that the contract did not refer to the marketing model or the promise of water views, and that there was nothing wrong with the unit per se (apart from the absent water views), it nevertheless used its discretion and found that the developer dishonoured representations made by it that the property had water views, and this was an important consideration for the purchaser when deciding to purchase the property.  It therefore ordered the developer to return the purchaser’s deposit.