How body corporate and strata schemes work in Australia
A body corporate is a legal entity which is created when land is subdivided and registered under the Land Title Act 1994 to establish a Community Titles Scheme (CTS).
The body corporate oversees and supervises the management of the land and associated properties. The members include people who own parts of the land or property individually.
This body looks after administrative tasks of running and taking care of the property with the consent and representation of all the individual owners.
The body corporate’s primary purpose may include taking care of the common areas of the CTS. However, the nature of the body corporate’s roles and responsibilities depends on the members and their requirements.
A community titles scheme is scheme land and the single community management statement registered with Titles Queensland identifying that scheme land.
A community titles scheme comprises:
• at least 2 lots
• common property
• a single body corporate
• a single community management statement
A group of people may individually own different private residences, but they may agree to share ownership of the common driveway and parking lot.
Common examples of CTSs include high-rise accommodation buildings, residential unit blocks, business parks, shopping complexes, or a townhouse complex.
Before registering as a CTS, the property must have two or more separately owned lots.
A body corporate and strata imply the same legal entity in Australia. The name differs depending on the property’s location and state.
Residents of Western Australia may know a body corporate as strata. Meanwhile, people in New South Wales may call the same entity an owners corporation.
The variation in names does not change the nature of the arrangement, which is identical across states.
The way strata schemes work may differ depending on which state the property is located in.
State, local, and council laws determine the way schemes unfold in their respective states. State-wise regulations will depend on the local context and nature of the property.
The overall scheme remains similar in most states, regardless of the legal name. However, you should not assume the same features in every state.
|Australian Capital Territory||Owners Corporate|
|New South Wales||Owners Corporation|
|Northern Territory||Body Corporate|
|Western Australia||Strata Company|
|South Australia||Body Corporate|
• BY-LAWS: All the rules, regulations, and restrictions set by the body corporate for members and residents to follow.
• LOT: The section of the property that belongs to a specific owner. The lot is used as a unit of owned property in areas where a large patch of land belongs to different owners.
• UTILITY LOT: An area in the property meant to host inanimate objects and items other than human residents (Eg. Garbage collection area).
• COMMON PROPERTY: Community title schemes often come with shared areas that all residents and owners benefit from. This shared property is called common property.
• STRATA MANAGER: An individual entrusted with the daily running of the property or help in additional roles that supplement the efforts of the main committee.
• BUILDING MANAGER: An additional manager employed to oversee some of the maintenance and operational work required in the maintenance of a building within a scheme.
• LOT OWNER: any individual who owns a lot, building, or section of strata or CTS. Lot owners band together to form the body corporate and decide the terms of running the scheme.
• CAPITAL WORKS FUND: Funds that are set aside to pay for development works that enhance the property or common areas. Day-to-day repairs are excluded from this category and are paid through administrative fees collected from owner-members.
• LEVY: All members pay corporate fees to fund the running and maintenance of the property. This fee is called a levy. A body corporate may decide what levy members have to pay to ensure that the common areas are maintained well.
• SPECIAL LEVY: Extra fees are collected from owner-members to meet expenses of unexpected emergencies. These fees go towards expenses that come up suddenly and to avoid financial strain on the members.
• STRATA PLAN: A document that indicates the nature and location of individual property or lots.
• STRATA ROLL: A roll/register that contains the name and details of all the debtors, borrowers, residents, and tenants.
A body corporate’s exact tasks and roles may differ depending on the type of property, details of ownership, or state laws. But some of the common roles include:
● Upkeep and maintenance of all the common areas/properties on the owner’s behalf
● Formulating by-laws that will govern and determine the nature of tenancy or ownership and enforcing such laws
● Create a budget that will enable the body to carry out its responsibilities
● Create and maintain records of official documents, meeting minutes, owners’ information, financial dealings, etc.
● Managing all the assets owned or placed under the body corporate’s care
● Acquire and arrange relevant insurance policies to safeguard the property, its tenants, residents, and the body corporate
The body corporate committee consists of property owners or their representatives who handle the day-to-day running of the property and its needs, similar to that of a property manager.
Such committees often have three to seven members, but the upper limit may change depending on state laws or the body corporate’s by-laws.
The committee’s roles include:
● Managing daily tasks in operating or running the property
● Making resolutions and selections on the body’s behalf
● Executing the by-laws and other regulations made by the body
The body corporate’s decisions are made in the general consensus of all stakeholders. Individual owners or a single member cannot make resolutions alone.
The body can seek this consensus in two ways:
● Through a general meeting where all members/owners are present
● Through a body corporate committee meeting where all required members are present
Funds for the body corporate come from the financial contributions of the individual members, typically paid in quarterly installments. In some states, these are known as ‘Strata Fees’ and in other states they can be known as “Body Corporate Fees”.
Most CTSs call these contributions ‘levies.’ Timely collection of these levies takes place for two categories of expenses.
Body corporate fees are the payments you and all the other members make towards the care, maintenance, and upkeep of the commonly owned property.
All CTS and Strata Schemes come with common sections that all owners share (Eg. a common swimming pool or garden amidst apartments owned individually). Ongoing costs of maintaining the pool or garden will come from the members sharing ownership of the area.
Body corporate fees can fall under a few categories depending on the purpose or nature of the collection.
Administrative Fees: These fees go towards the daily and ongoing expenses that the property incurs. Maintenance costs of a common lawn area or water supply bills for the property may come under this category of fees. Insurance for the common area (excluding individual properties) may also come under administrative fees.
General Purpose Fund (Sinking Fund): This fund (made up of collected fees) is used to cover required expenses that do not fall under the day-to-day running expenditure. The manager or body corporate may set aside portions of the collected fees as a sinking fund to finance major repairs.
Special Levies: This category of funds remains reserved for exceptional expenses that may occur once or twice. The advantage of special purpose funds is that you don't have to chalk up a huge amount when an unexpected expenditure comes up.
All these are examples of body corporate fees that you must pay to ensure that your individual property and common area both remain functional, usable, and in good condition.
Body corporate fees cover a wide variety of expenses incurred during the running, maintenance, and management of a community title scheme.
Upkeep of common areas costs money that no individual owner will want to pay alone. Body corporate fees cover these costs ensuring that no single owner gets overwhelmed by the expenses and the financial burden gets distributed equally.
Your body corporate may collect periodic fees and retain them as funds to cover these expenses. These areas may include:
• Running and maintenance of common areas shared by all owners and accessed by all residents. For instance, the body corporate may have to pay fees for commercial carpet cleaning, strata cleaning services, or to keep the swimming pool clean
• Costs of repairs incurred in commonly owned sections of the property. For example, broken lamps posted in the garden or fuses blown in the parking area
• Utility bills accumulated from common areas may also require funds from corporate fees. Water or power supply bills for common sections like the elevator or communal toilets outdoors may require payment from the corporate fees collected from all owners
• Shared areas may also need insurance coverage by law or as a means of safety. Structural issues or potential injury to people are common reasons why a property may need insurance by law.
The corporate fees may also go towards emergency (sinking) funds or special purpose funds. These funds are taken from the collected fees and used for unexpected expenses, major repairs, or substantial renovation works. The main purpose here is to prevent excessive financial strain on owners when emergency expenditures crop up.
Administrative Fund: This fund goes towards the general day-to-day upkeep and running of the property. Common expenses in this category include utility bills, cleaning charges, minor repairs, management fees, and insurance premiums.
Sinking Fund: The sinking fund covers capital expenses that you expect or anticipate in the future. Major renovations or remodelling projects are a good example of planned capital expenses that will be drawn from a body corporate sinking fund.
Your body corporate fees will cover the maintenance and management costs described above. However, there are specific areas where the corporate fees will not pay for expenses.
• Any maintenance costs incurred from property owned individually. For example, installing new carpets in your privately-owned building or block will have to be paid from your pocket
• Insurance premiums and payments for items in your individual property
• Personal property taxes which are charged by your suburbs local council
• Utility bills that are not part of the shared areas. For instance, a water meter that only records usage for your private building cannot be paid from the body corporate fees
Owners of property belonging to any Strata Scheme or Community Title Scheme will pay body corporate fees in Australia.
Whether it's a residential unit, townhouse complex, or apartment block, owners must pay corporate fees to meet the expenses of running and maintaining the shared sections of the property.
Residents who are not owners of the property in the complex are exempt from paying corporate fees.
Body corporate fees are calculated based on the lot entitlement (also known as unit entitlements) of each lot or unit. These entitlements are established on creation of the strata and are based on the approximate value of each unit.
For instance, larger properties will require higher corporate fees because the upkeep also demands more work and expenses. Strata Schemes with shared areas that require frequent maintenance may also incur higher body corporate fees (Eg. A garden that needs regular care).
There are a number of factors that can influence body corporate fees including:
• The size of the building
• The age of the building
• The number of occupants
• The general condition of the building
• The efficacy of ongoing maintenance
So, a smaller property’s corporate fees may run around $100 per week, while a larger and more substantial property may hundreds per week in body corporate fees from its owners.
If you’re the new owner of an existing property, consult with your agent on the property’s value and potential fees. Getting information on the property’s corporate fees for the preceding years may also give you an idea of the expected fees. Large complexes with sophisticated common areas will require higher fees.
Imagine your new property comes with common areas that include gyms with high-end equipment and heavy traction elevators.
Cleaning the gym and lubricating the equipment will involve recurring fees for all the owners. Traction elevators need timely oiling and higher utility bills because they run on an electric motor.
These high-maintenance common areas are all good examples of how much your corporate fees cost. However, even smaller properties may not offer much reprieve from high fees sometimes.
Fewer owners in small properties mean that the financial burden is also shared by fewer people. Here the collection-per-head increases, unfortunately, and the long-term costs may become similar to owning a larger property.
Your body corporate will decide how often owners must pay the required fees. The schedule may depend on the type of property and the expected costs of maintenance.
It’s common to collect body corporate fees quarterly in most CTS arrangements. However, weekly collection or annual fees are also options available to any body corporate.
The body corporate estimates the required expenses for the year and calculates the fees that owners should pay.
CTS properties and Strata Schemes with identical individual properties will impose the same fees on all owners. That's because all owners and their residents get an equal advantage from the common area (Eg. Parking lot), and no individual property receives undue advantage (Eg. Every individual building gets the same number of parking spots).
However, there are cases where individual owners may end up paying different body corporate fees.
The owner of two apartment blocks may pay more corporate fees than another owner who owns one block. Some sections of a township may have better access to a common area than other sections.
The body corporate considers these differences and calculates individual fees for all owners. Agreement for the final fees may be confirmed during the general meetings where all owners are present.
No. The amount you pay for body corporate fees does not cover council rates. You’ll have to make a separate payment as council fees as an owner in a Community Titles Scheme or a Strata Scheme.
Council rates are a category of tax paid by property owners to the local government. The amount you must pay depends on the type and size of property you own. Councils use your property's value to determine the tax and rates you pay.
Your council uses these fees as collected funds to finance local projects, developmental work, or other local services. Timely payment of these funds allows your council to continue projects that benefit the community.
There are two steps that the body corporate takes if owners fail to pay the corporate fees.
The first move for the body corporate is imposing late fees for missing out on timely payments. You'll have to pay the penalty decided by the body corporate in addition to the regular fees expected from all owners.
In most instances, the penalty is an interest surcharge that’s less than 2.5% of the total for every month you delay.
In cases where owners fail to pay the fees, the body corporate has the power to take action toward recovering the overdue fees.
The body corporate can begin legal proceedings like lodging a complaint at the local council against the owner for failing to clear corporate dues. Some states have tribunals where cases of corporate over dues are decided, and others have dedicated commissions that handle such matters.
In either case, the authority in question will direct the owner to clear such dues before more severe action is taken towards them.
The type of fees your body corporate charges will determine whether they count as tax deductible or not. Fees spent on capital expenses are not tax deductible. However, there may be other costs that come under the deductible category.
You may be able to claim a deduction for body corporate fees and charges incurred for your rental property, however not all body corporate fees are deductible in full in the financial year you incur them. If the funds are used for a capital expense the expense can be claimed over several years.
Source: Australian Tax Office
As a property owner, you must remain a member of the body corporate. Being a part of the body is also advisable because you get to vote on critical matters concerning your property's well-being and future.
Body corporate services can be offered by specialist companies or individuals to cover the responsibilities entrusted to the body corporate in managing and supervising the administration of the CTS or strata’s common areas.
They can be known as ‘Body Corporate Managers’ or Body Corporate Management Companies’ and they must execute these services to benefit all the owners collectively.
For instance, a CTS or strata may be a residential block where apartments remain owned individually, but the car park and garden areas are shared. The body corporate’s services will include the care, maintenance, and management of the parking area and the garden.
Owner-members of the body can decide what responsibilities should come under these services. Some strata schemes hand over all these services to the body corporate committee and its active members. Others may hire additional body corporate managers to carry out parts of these services.
You may enlist the expertise of a professional body corporate service that handles all these responsibilities on your behalf. These services will incur professional fees, which means more collection and payment for the members. But it relieves the members from the responsibility of carrying out all the common areas' maintenance, care, and development.
However, body corporate services go beyond maintenance work to include fees, by-laws, and official documentation.
● Body Corporate Fees: As part of its services, the body corporate will determine the levies to be collected from the members. It will also decide if additional levies must be collected for renovation works or to complete remodelling projects for the common areas.
● By-laws: These are the regulations and rules that residents must follow. The body corporate services include formulating these rules and putting them in place. The body will also enforce and check whether residents are observing these regulations.
● Insurance: Correct insurance provisions must be in place to ensure the residents’ well-being and the property’s safety. The body corporate makes necessary arrangements for securing insurance and payment of premiums.
● Other Legal Documents: Your local and state governments may require other affiliation documents that a CTS and strata must possess. Part of the body corporate’s services will include securing and maintaining these documents. The body will also conduct meetings and keep records of all resolutions and decisions taken in these discussions.
A body corporate may need the services of a manager when the body or committee is not always available for administrative tasks or lacks the expertise for specific roles.
A body corporate manager may step in to offer advice on legal matters of the property or in the administration of financial and logistical issues. The body may appoint a manager regardless of whether an active body corporate committee exists or not.
The body corporate manager may assume the roles that the committee cannot handle immediately or additional duties that supplement the committee's actions. The manager's role may also differ drastically depending on whether a committee exists.
In Body Corporate with a Committee
If the body corporate has a committee executing the core functions, the manager may serve in roles that support and add to the committee’s efforts.
The committee will prescribe the powers or responsibilities of the manager depending on the property's requirements. An official agreement between the committee and the manager will determine the details of these responsibilities.
Maintenance of Common Property
Property maintenance is not part of the manager’s responsibilities under normal circumstances. However, the manager may arrange for maintenance work if entrusted by the committee.
Your body corporate’s building insurance may differ depending on your location, local laws, and the type of insurance you possess.
So, there’s no fixed coverage that applies to all body corporate entities. In many cases, your body corporate insurance may cover only the designated areas owned commonly by all members. In this case, you may have to arrange building insurance for the block or building you own individually.
However, there may be instances where your body corporate’s insurance covers the individual building in addition to the common area. This insurance may cover damages incurred to your building through natural calamities, accidents, etc.
Keep aside a portion of your finances to meet unexpected corporate fees and expenses.
Check the corporate fee history of the property to understand what recurring repairs take place and if any major renovation is expected in the future.
Keep in mind that you must pay a fair amount of fees for the common area that benefits you too.
Potential owners who enjoy making their own decisions and running a solo ship may prefer sticking to individual ownership instead of strata schemes.
Consult with the real estate agent in regards to the fees applicable to the property or contact the buildings committee.
It's common for some properties or townships to have their body corporate lapse. In most instances, the owners decide that they can handle maintenance responsibilities by assigning work among themselves.
This arrangement may work for some smaller properties but may cause confusion in others.
If the body corporate lapses during your purchase, you can dig past records and documents about how the property was managed and where the responsibilities lie.
However, you’re less likely to get favourable terms if the body corporate had lapsed long before you became an owner.