The advice in this article is general only, for specific advice please contact us.
What are Unit Titles?
Unit Titles (sometimes referred to as ‘stratum estate’ or ‘strata title’) are governed by the Unit Titles Act 2010, and essentially give title to part or parts of a building together with access to common property.
Unit titles can be purchased, mortgaged or sold like any other title. You can rent out or lease your unit title.
- A typical unit title is part of an apartment block and usually consists of:
- A principal unit (often an apartment or retail space);
- Accessory unit(s) attached to the principal unit (often a carpark or storage locker);
Access rights to common property (such as lifts, stairwells, entrance foyers, laundries, gardens or even gyms and swimming pools).
You also own a share of the underlying land in accordance with your unit entitlement (see below). If the unit title was cancelled (for example if the building is destroyed or demolished) the unit entitlement corresponds to the proportion of the underlying land that you would own.
The accessory unit is attached to the principal unit and cannot be sold separately.
What is a Body Corporate?
All the owners of the units in the particular building or development your titles is situated in have an organisation representing them known as the ‘body corporate.’ The job of the body corporate is to organise insurance for the building and to maintain the common property. The body corporate has a secretary and committee responsible for carrying out its duties and is required to hold an annual general meeting at which unit tile owners can attend.
Body corporates have rules that apply to unit tiles in the development. The rules are either stated that can be searched along with the tile, or alternatively there are default rules under the Act. Body corporate rules address issues including compliance with bylaws, who must pay for damage to common property, and not causing a nuisance to other owners.
Body corporates levy a fee to recover the costs of carrying out their duties. This is done using the ‘unit entitlement’ a figure that gives the relative value of the unit compared to others in the building. Typically a penthouse apartment has a much higher unit entitlement (and hence higher body corporate fees) than a modest ground floor apartment.
What Information should I Receive When Purchasing?
When you enter into an agreement to buy a unit title you should be provided with a document called a pre-contract disclosure form. Prior to settling you should be provided with a further, more detailed document that tells you about the body corporate called a pre-settlement disclosure statement.
What Should I Consider when Buying a Unit Title?
If you are looking at buying an Apartment or Unit by way of a Unit Title then you are also signing up to be part of the Body Corporate. Your pre purchase investigation (due diligence) needs to be more extensive than buying a standalone house. You are automatically a member of the Body Corporate and that organisation can have a large effect on your Unit and the development as a whole:
- You pay annual levies to the Body Corporate so you need to protect your money. You do not want to be subsidising other owners and you want your dollars to be managed well.
- The Body Corporate is in charge of common property. You need the standard of the complex to be kept high and managed well to in turn maintain the value of your asset.
- The Body Corporate sets rules for the use of the Unit, such as commonality of appearance, and the use of common area. It arranges insurance for the development and makes sure everyone pays their share. It is helpful if your Body Corporate is managed professionally and you are happy with that management.
This article focuses on the Body Corporate elements of buying an Apartment or Unit. You also need to carry out normal investigation for a purchase as to the structural integrity of the building, council information in the LIM report and your finance. Should you have any further queries then please do not hesitate to contact us.
1. Body Corporate Rules
The Body Corporate not only repairs and maintains all common property but they also set rules that are registered on your title for the use of your Unit. The law states that the Body Corporate rules cannot limit an owner’s independence in relation to a Unit however, Body Corporate rules do try to create common colour themes, repair and maintenance obligations and tidiness for example. They also will address the use of common property.
You should see the Body Corporate rules as a way of maintaining your investment in the Unit and in that development. However, you should also review those rules to consider whether your use of the Unit will fit within the Body Corporate rules. Each development has its own set of rules so you should provide these to your lawyer for review but also read them yourself.
2. Body Corporate Levies, Finances, Budgets and Bank Accounts
You pay a levy to the Body Corporate either quarterly or annually. You need to budget to pay the levy. That levy is used to maintain common property, often to pay a Body Corporate Manager and effect repairs in the common property also.
To ensure that the Body Corporate you are buying into is adequately managed and does not have any financial issues you should review their finances, their budgets going forward, proposed spending and their bank accounts. If there is major expenditure coming up in the next few years then you will be levied to pay the contribution towards that. Therefore, as a purchaser you would like to see healthy bank balances and repair and maintenance funds established for that ongoing maintenance. However, vendors have the opposite approach, they do not want to be leaving behind money in the Body Corporate.
On the sale of the Unit you cannot get your money out of the Body Corporate funds.
3. Body Corporate Maintenance Plan
All Body Corporates must have a maintenance plan. This is crucial for you to review, especially given our advice above. The maintenance plan should set out what annual repair and maintenance is carried out and any large expenditure for the future or any five yearly maintenance expected. As you would when you buy a standalone house you get a building review of that house for its ongoing maintenance requirements and immediate work needed.
With a Unit Title you need to ensure that the Body Corporate considers these matters but also take into account what you consider should be done on the property by looking at the development as a whole (including the common property) and what additional costs you can see may come up.
4. Is there any litigation?
The Body Corporate is required to disclose to you in a Pre-Contract Disclosure Statement if there is any litigation against that Body Corporate. If it is noted on that that there is then you should discuss direct with the Body Corporate Secretary.
5. Get to know your Body Corporate
It is our recommendation that you obtain the minutes to the Body Corporate meetings and discuss the Body Corporate management and the development as a whole with the Body Corporate Manager. Discussions and reviewing of minutes can unearth issues as to how the Body Corporate work together or if you have any problematic owners, owners that are not paying their levies and other issues such as that.
6. Management and Service Contracts
You need to review the management and service contracts that your Body Corporate has entered into. The Body Corporate budget will show you where their funds go each year and therefore you should be able to tell from that what service contracts and management contracts are being paid for on a regular basis. You need to ensure that the terms of those contracts are not unduly harsh and that the cost to the Body Corporate is at a market rate.
7. Insurance
The Body Corporate must insure the complex including common areas. You should check that this insurance is adequate to replace the complex.
Last updated: March 2021