Help me to understand Strata Fees

[Craig-G]

Hi guys,

I have never purchased a unit previously however am currently exploring the market as I feel it may best suit our current needs. I am however struggling to understand the rationale behind strata fee price variances.

I fully appreciate that the greater the services typically the greater the fees - pools spas gyms etc all cost money and have to be paid for some how. That said one property I recently had an interest in was a 1 bedroom old warehouse conversion in a block of 14. No onsite manager, no joint services, nothing and the strata fees are quoted at $930 PER QUARTER. Looking at other properties in the area they are charging as low as $500 per quarter.

Does anyone know how these prices are fixed and what they contribute to - if the money was going towards a major refurb and then reverting to a more reasonable rate it may be financially worth my while but if not then how is this number arrived at.

All thoughts appreciated.

Craig

 

[Rob Williams]

One potential variable might be that one body corp you are looking at might have a "sinking fund" to which unit holders contribute each quarter. These funds get parked in a fund as a contingency against future upgrading or repairs eg. replacement of external blinds, replacement or overhaul of plant and equipment etc.
Another body corp may not have a sinking fund, but when they do need to do some upgrading, they will be asking for contributions from unit owners.
I prefer the sinking fund option as it spreads my cashflow.
The last thing I want is to be asked to cough up a couple of grand by the end of the month to replace a bunch of dodgy sewage pipes.

 

[George]

Strata Fees in my opinion are a little bit on a highway robbery side.

Administrative cost is anything from $100 to $400 per quarter, this is just Body Corporate personnel and for that you get them to organise annual meeting, where cost of room for meeting is included, plus they pay building insurance and public liability insurance usually $20 million now, which is also included in the BC fee.

BC also has some sinking fund component, which usually is laughable, like $10 per unit per quarter, unless there is big item coming up, which is divided by units and by time that it will be required.

Lift is a big item, as it has to be inspected and approved for operation on annual bases.
You mentioned spa, pool, there is also common property maintenance including cost of electricity and service, where single globe replacement can be up to $100 if there is nobody in the units who can do it.
(In some states common property globe has to be replaced by qualified electrician, if nobody is prepared to turn blind eye)

Any matter arising in between meetings is something like $10 to $20 per letter to every owner.

If any property can be converted to Torrens titles should be looked at it, but it is not always possible also is expensive and you need all owners consensus and that's different story.

 

[marg4000]

We have owned units.

Strata fees vary wildly, but you can always ask for the annual accounts for any unit you seriously inspect.

We found that it is best to go for either:
a small block, the old 6 or 8 pack brick block, garages underneath, no lift, manager, pool etc.
or
a large block (or several blocks in the one development) with 40+ units. This block will have a manager and probably a pool.

Avoid lifts, gyms, expensive foyers.

The worst ones financially are blocks of about 20 units with a manager. There are too few units to absorb the costs of the manager which means body corp fees will be high.

There are two components - body corporate fees AND sinking fund fees, usually billed together but listed separately.

Some things included are items you would have to pay anyway - building insurance, public liability, maintenance of gardens and grounds, lighting in common areas, removal of rubbish, pool maintenance (if there is one) etc.

One point to remember is that a body corporate is simply a committee of unit owners. If you want a well run building, become involved.
Marg

 

[Craig-G]

Cheers for the responses guys,

Just a quick follow up question. Given that the body corporate is a committee of unit owners, would I be correct in saying that it is this committee that sets the level of the Strata fee. That is, it is at this groups descretion how much they choose to pay at any one time and can change this amount at any one time?

Craig

 

[The Y-man]

Cheers for the responses guys,

Just a quick follow up question. Given that the body corporate is a committee of unit owners, would I be correct in saying that it is this committee that sets the level of the Strata fee. That is, it is at this groups descretion how much they choose to pay at any one time and can change this amount at any one time?

Craig

Yes - but you need to get a majority to agree (or at least not to oppose)

Cheers,

The Y-man

 

[peastman]

Yes - but you need to get a majority to agree (or at least not to oppose)

The easiest way to do that is to go to the meetings and get yourself elected into the commitee. From my experiance, very few investor owners ever bother, so if you make the effort you can usually set it up to suit yourself. I learnt this lesson when the body corp decided to spend $26000 on video surveillance last year. Since I did not go to the meeting I decided it was my own fault. This year I went and was elected as chairman and since the cameras had not yet been installed, renegotiated the price down to $14000. This represented a saving of $266 per unit.
The fees are set by the body corp so if you are concerned about them, get involved.