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Hey guys, love your show, just have a burning question about strata fees as I’m looking to buy an apartment in Sydney. More specifically how exactly they are calculated and why there can be big discrepancies between seemingly similar blocks.
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Strata levies are based on the Unit Entitlements set by the developer and are based, loosely, on the relative value of the apartments. Thus a large apartment on a lower floor with no views can have lower unit entitlements than a smaller unit on a higher floor with views.
However, in the past some developers have artificially lowered the levies on premium apartments to make them more attractive to big-spending purchasers.
The problem for the other owners is that it can be horrendously expensive to get the levies adjusted to a reasonable level because you need surveyors and lawyers and the people who are going to have to pay a lot more will fight any changes. Often owners will decide that the benefit of having their levies lowered was outwieghed by the cost of getting it done.
One of the few cases that I have heard of where it was worth the apartment owners having the UEs recalculated was a development in Sydney where a supermarket on the ground floor and basement had lower levies than one-bedroom flats in the building above.
That said, it has become easier in recent years to do this as the courts will accept sample surveys of apartments rather that wanting every unit in the block to be surveyed so that comparisons can be made.
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There can be many reasons why similar apartments in different blocks have wildly different levies. On top of the unit entitlement items mentioned by Jimmy, there can be other reasons for differences between blocks.
Between blocks it will also be affected by the level of facilities and amenities in the block. For example does one have luxury foyers with plush carpets , with artworks, cleaned daily, and a 24×7 onsite concierge and manager, plus well kept gardens maintained regularly. Another block can have tiled , simple utilitarian foyers only cleaned weekly (or monthly). Also look at then number and age of lifts, pools, gyms and their equipment and other amentities such as common BBQ or cinema rooms.
Similarly on age and past financial performance- is one block adding to a low sinking fund, as there are large expenses coming – eg new lifts, or major works such as painting that were not correctly budgeted for in the past.
Perhaps one block has a poor insurance claim record, so much larger premium to be paid. Different strata managers can also charge different fees.
There is also the differences in how buildings run – some like to run on bare bones finances with just enough to cover expenses, others run with large buffers for “just in case” scenarios.
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I misread the original post and assumed it was about the difference in apartment levies. The post above is a pretty good summary of the difference between apartment blocks. One thing I would say, watch out for hotel conversions. They can have more lifts than purpose-built apartment blocks and that adds considerably to costs.
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Every lift will add approx $5000+ per year in maintenance fees. More for a taller building. But of course, taller buildings share the cost amongst more owners.
In my building, our levies have been high for a while because we are saving for a project. I was concerned that this had been agreed informally between owners and only the approved levies appeared in AGM minutes. Nothing else was documented. So last year I wrote a project status report and attached to the AGM papers so that the nature of the project and the funding approach would be “discoverable” by any potential buyers. As a strata Chair, I would also be happy to talk to potential buyers about how our OC operates. If you’re thinking about buying into a block, you could ask to be put in touch with the Secretary or Chair, but not if one of them is the vendor.
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That’s a really good idea Uberowner. A quick chat with a committee chair or secretary will give you a read on the way the building runs, the diligence of the committee, the quality of and strata and building managers and any upcoming big projects.