What Are Strata Fees? A Guide to Shared Property Costs in SA

Buying into a shared property development is exciting, but for anyone looking at apartments or other community titled properties in South Australia, understanding ‘strata fees’ is an important part of making a confident purchase. Here's a guide to what these fees are and what every buyer should know before signing a contract.

If you've been looking at buying an apartment or other property within a shared-title development, chances are you've come across the term "strata fees" more than once - and wondered what you might be signing up for.

You might also be wondering what strata fees actually are: what they cover and whether they’re something you should look at more closely before you commit.

All sensible questions, and worth asking before you sign anything.

However, the first thing to note is that in South Australia, plenty of people still use "strata" interchangeably as shorthand for shared-property living.

In legal terms though, while older strata schemes do still exist, most newer shared-property developments are now created under what’s known as ‘community title’ rather than old-style strata title.

So while buyers might keep saying "strata fees", what they're often referring to in a newer South Australian development is a “community title” contribution or levy.

The basic idea is much the same. The legal structure behind it, however, has changed.

What Is a Community Title Property?

In South Australia, a community title is created when land is divided into at least two lots, along with an area of common property.

Think of common property as the shared part of the development - things like driveways or other shared areas. Each lot has its own separate title, while the common property has a title of its own.

Whenever a community title is created, a 'community corporation' is also formed to manage the common property and handle the shared responsibilities of the scheme.

Despite the formal-sounding name, the community corporation is simply the shared framework that owners use to run the development.

The good news is, as an owner, you don't need to opt in. You automatically become part of that structure the moment you buy into the development.

From there, there are generally two types of community title in South Australia - 'community strata' and 'community scheme' - it pays to know which one you're looking at, because the responsibilities aren't quite the same.

With a community strata scheme, the lot boundaries are defined by the buildings themselves, and the community corporation is generally responsible for maintaining and insuring those buildings.

A community scheme works a little differently.

Here, the lot boundaries are defined by surveyed land measurements, and the owner of each lot is generally responsible for maintaining and insuring the buildings on their own lot.

The community corporation, meanwhile, is responsible for insuring any buildings or structures in common areas.

It might sound like a small distinction, but it's an important one.

Two developments could both be colloquially called "strata", yet the maintenance and insurance responsibilities can differ quite significantly depending on the title structure.

What Are Shared Property Fees Under Community Title?

In newer South Australian developments, "strata fees" are now generally referred to as ‘community title contributions’ - though plenty of buyers and agents still use the old term.

So, what are community title contributions?

Each year, the community corporation works out what the development costs to run, then collects contributions from owners to cover any shared expenses - think insurance, upkeep, admin and so on.

But one thing that catches some buyers off guard is that not every lot owner pays the same amount.

Rather, fees are generally calculated on something called lot entitlement, which, in simple terms, means some lots will carry a larger share of the contributions than others.

The way it's worked out can vary from scheme to scheme, but it often reflects things like the relative value of each lot.

So if the figure quoted on your contract looks a bit arbitrary, it isn't.

There's structure behind it, and your contribution is tied directly to your title.

What Do Community Title Contributions Usually Cover?

While exactly what's covered by your community title contributions will vary from scheme to scheme, the day-to-day basics are fairly consistent.

Generally, these contributions go towards the shared running costs of the development, ensuring things like:

• Common areas are kept clean and maintained
• Gardens are looked after
• Lifts get serviced
• Records are kept
• Accounts are managed
• The admin side is taken care of

None of it is especially glamorous, but it keeps a shared-property complex functioning year after year.

Beyond the everyday running costs, there's also a bigger picture to consider.

A well-run scheme will also put money aside for the major repair, replacement or capital works that come around eventually - think repainting, roof repairs and replacing common infrastructure.

These are the costs that should be planned for in advance so owners aren't caught out down the track.

Insurance is another area worth understanding, because the type of title really starts to matter when it comes to what is covered and what isn’t.

In a community strata scheme, the corporation usually insures the building, so that's one less thing on your plate.

In a community scheme, however, buildings on individual lots are generally the owner's responsibility - meaning the cover for your home sits with you, rather than the corporation.

Of course, like most things in property, there are always exceptions.

Some schemes make different arrangements through their by-laws, so it always pays to check exactly what applies to the development you're looking at.

Administrative Fund vs Sinking Fund: What’s the Difference?

One of the most important (and valuable!) things to get your head around as a potential buyer is how the community corporation manages its money.

Under South Australian community title law, a community corporation will generally have two separate funds - an administrative fund and a sinking fund - and they each have quite different jobs.

The administrative fund is basically the everyday account, covering the regular running costs of the scheme.

The sinking fund, on the other hand, is the long-term savings account, set aside for the bigger, less frequent expenses like significant repairs, replacement works and other non-routine costs.

There is an exception for some very small schemes, but for most buyers looking at newer property developments, both funds will usually form part of the picture.

Why does any of this matter to you?

Because the state of those funds can tell you a great deal about how a development is being run.

If a scheme has little in reserve and major works are looming, owners can end up wearing that cost later.

A scheme that's funding future works in advance, however, is generally a much healthier sign and tends to mean fewer financial surprises for owners down the track.

Why Buyers Should Pay Attention to Shared Property Fees

When weighing up a property, most buyers, understandably, look at the contribution figure on a sales listing and judge the development value on that alone.

But a lower fee doesn't automatically mean better value, in the same way a higher fee isn't always necessarily a red flag.

What really counts is the story behind the dollar amount.

A development charging less might sometimes reflect a scheme that's cutting corners on maintenance or deferring major works.

While a development charging more might be doing so because everything is running smoothly, the building is well insured and there's a healthy reserve in the sinking fund for when the roof eventually needs replacing.

So before signing anything, take the time to look closely at the records and disclosure material available for the scheme.

And remember, practical questions are still the right ones to ask, like:

• What are the current contributions, and when were they last reviewed?
• Are there any arrears attached to the lot you're buying?
• Is major expenditure already planned or likely?
• What do the minutes and accounts say about the corporation’s financial position?
• What insurance is in place - and, importantly, what isn't?
• What do the by-laws allow and what do they restrict?

Together, the answers to these will give you far more insight than the levy figure will on its own.

What About the Rules That Come with Community Title Living?

One of the biggest concerns for buyers looking at a community titled property is often the rules - because shared-property living inherently needs them, to make sure things are fair and equitable for everyone involved.

Under community title, these rules are what's known as 'by-laws'.

Broadly speaking, by-laws govern how the common property is managed, how shared areas can be used, and what owners and occupiers can and can't do within the development.

However, this is another area where community title differs noticeably from old-style strata.

Older strata schemes usually came with a reasonably standard set of rules.

These days, each community title scheme has its own by-laws, drafted specifically for that development - and they can vary considerably from one scheme to the next.

In practice, that might mean rules around parking, pets, landscaping, external appearance, renovations and building works, maintenance obligations and other day-to-day matters that affect how people live alongside one another.

Whether that feels like a positive or a negative will depend on the buyer.

For some, by-laws can feel a bit limiting. For others, it's reassuring to know shared standards are in place, so there's no ambiguity around expectations.

Either way, the by-laws for any property you're considering are something you'll want to understand carefully before buying.

When it comes to newer shared-title developments in South Australia, the question to be ask is no longer just "what are strata fees?", but "what type of title am I buying into, and what do these shared property costs actually cover?"

The "strata fees" terminology will likely stick around for a good while yet, and there’s no harm in that.

In legal terms, however, many newer South Australian developments fall under community title, and buyers are far better served when that distinction is made clear from the very beginning.

The good news?

Once you understand how community title works - the role of the corporation, the way contributions are calculated, what the funds are doing behind the scenes, and the by-laws that shape day-to-day life - those shared property costs start to make a lot more sense.

And from there, you’ll be in a much stronger position to weigh up any development on its merits and decide if it’s right for you.

Cedar Woods Properties is a leading, national developer of residential communities and commercial developments.

We strive to create quality homes, workplaces and communities that people are proud of.

With award-winning projects in Western Australian, Victoria, Queensland and South Australia, we continue to place great importance on understanding our customers and their lifestyle, producing design solutions to enrich their lives.

For more than 30 years we have worked hard to think ahead, evolving our designs to always respond to the changing world in which we live and creating meaningful places that inspire connection and help us grow.

We work with our customers every step of the way to create a solid foundation for their future.

Because at Cedar Woods we know we are developing tomorrow, today.

DISCLAIMER:  The information provided in this article is general in nature and does not constitute financial, legal or tax advice. Property laws are complex and subject to change. Individual circumstances vary. You should always seek independent advice from a licensed financial adviser or qualified accountant before making any decisions regarding your property investments.