Beware the Strata Fee Trap!There is no free lunch in strata fees for apartment living in Australia. Before purchasing an existing or off-the-plan apartment your buyers agent should investigate what strata fees are levied and if possible the forecast for future strata fees. Strata levies are determined by the cost of running building facilities, divided by the number of apartments and then multiplied by the size of your apartment.
As a general rule, strata levies should be around 1% of the cost of your apartment. So for an apartment costing $600,000 you would expect the annual strata levy to be around $6,000. However this is rarely the case.
In recent times many new apartment buildings have enticed buyers by keeping strata levies artificially low for a year or two. Owners have then been shocked to see their levies jump 40% in a year. Remember that the better the facilities, like pools, gyms and lifts the higher the levies!
There are three types of strata levies: The Administrative Fund to cover day to day running expenses, The Sinking Fund to cover long term repairs and maintenance and Special Levies for unexpected expenses where no funds were available. It’s the final of these, Special Levies, that can trap potential apartment buyers, so we make sure we closely review the minutes of Body Corporate Meetings.
“By Shane Clinton”