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Strata Essentials for Property Owners - Responsibility


If you talk to people who own apartments/units in NSW 99% of them will say something like "our strata is totally dysfunctional" and some of them might say "our strata management is quite good". Below I will explain what they mean by saying that, because what they are referring to may be quite different from what they say.

Term "strata" is used by majority as something that relevant to ownership, management and ongoing maintenance of a block of units. The concept of strata title was introduced in 1961 in Australia to deal with property rights of apartment blocks. Strata title allows individual ownership of "a lot" which is part of the building (apartment, unit, townhouse) together with shared ownership in the "Common Property" which is the remainder of the building that is not included in the individual lots (i.e. walls, roofs, foyers, planters, pathways, parking etc.).

This is a type of communal ownership and living. The keyword here is "communal". This usually causes various problems.

All owners of a strata title are responsible to:

1. Maintain all common property including the structure of any buildings on the land
2. Insure the whole of the property for the full replacement value
3. Administer the finances and common funds of the group of owners
4. Administer the secretarial functions including the conduct of meetings of members, documentation of minutes, and dealing with all correspondence
5. Resolve disputes involving unit owners and enforce the strata rules.

The keywords here are "all owners". For every strata there is established an "owners corporation" (some people call it "body corporate", "strata company" or "community association"). Owners corporation includes all owners.
For details see: Strata Schemes Management Act 1996 (NSW) s 8 and Strata Schemes Management Act 1996 (NSW) s 11

When somebody is buying into strata title it is also meaning buying into the responsibility of being an owner and part of owners corporation. In order to simplify the decision making process and to try to reduce involvement in building management for majority of strata lots (units) owners there is an "executive committee" – a group of owners who should make decisions in regards to the above-mentioned responsibilities on behalf of owners corporation. This, however, does not repeal the responsibilities of all owners (every owner).

Consider the following scenario. A property manager (a person who manages property of someone else, in this case real property) is writing an email to the strata manager (I will talk about those characters later) with the following contents:
"Upon going to the building to do my condition report, I was appalled at the condition of the maintenance on the outside of the property. Including the entrance, foyer, carpet and lifts. Could you please bring it to the attention of the company that cleans the building? I will also make a note to go and inspect the building within 1-2months."

In this case I think it may be a good idea to remind property manager that it's all owners responsibility to keep the building clean, including the owner of the lot in that particular case. Therefore the property manager or owner should be
a) involved in organising of cleaning process;
b) instructing the manager to do so.

It is problematic to run the strata title properly, because of various reasons among other things:
1. Different interests of strata lots owners
2. Overall reluctance to deal with strata matters
3. Absence of knowledge about strata title essence and how it works and should work
4. Incomprehension of the fact that strata is communal living and effort of everybody in the strata block is essential in order to achieve better results for all owners
5. In a situation of serious disputes or dealing with illegal activity people just don’t do anything and try to delay important decisions.

In order to try and improve the situation, owners get help from other people – property managers and strata managers. There is a perception that "strata managers" will do the job owners corporation should be doing. It is only partially true. I will explain why in the future posts.

Happy property ownership and investing!

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