What Is Strata Housing & How to Calculate Strata Fees?

 

 

The word “strata” is commonly used in Australia, New Zealand, and parts of Canada to refer to divided property ownership, such as condos and townhouses. Individual ownership requires a strata title, which comes with fees similar to condo and HOA fees.

But how do you calculate strata fees? In this guide, we detail what strata fees and housing are. In addition, we teach you what strata fees cover, how to calculate them, and tips for paying them on time.

This post covers:

• What is strata housing?
• What are strata fees?
• What do strata fees cover?
• How to calculate strata fees?
• Tips for paying strata fees

 

 

What is strata housing?

Strata housing, or strata corporations, involves individual ownership of units or plots within a larger property and shared ownership of common areas and facilities.

For those in the United States, strata corporations seem like another name for condos or HOAs, but the term refers to other properties.

So strata corporations may include:

• Duplexes
• Townhouses
• Single-family homes (“strata subdivisions”)
• Restaurants
• Parking lots
• Office buildings
• Marinas
• Stables

Like HOAs and condos, strata housing will encompass their councils, budgets, meetings, and bylaws. However, strata corporations can be divided into sections with their own rules and regulations.

For instance, one section may be comprised entirely of single-family homes while another has apartment-style condos and commercial property, such as a restaurant or office building.

 

What are strata fees?

Strata fees, or levies, are expenses owners pay to contribute financially to the strata corporation’s management, maintenance, and ongoing operation costs. Depending on where you’re located, strata fees may be paid monthly or quarterly.

The three major types of strata levies include:

1. Administration. These cover daily operating tasks like insurance, utilities, maintenance, and landscaping.
2. Reserve. The strata collects reserve levies to cover the costs of major projects that improve the property, such as replacing the roof or painting common areas.
3. Special. Similar to HOA special assessments, special strata levies are collected when unexpected expenses occur and the reserve fund is insufficient.

 

What do strata fees cover?

As we discussed above, strata fees cover a wide range of expenses related to the corporation’s operating costs. In other words, they cover the costs of managing, operating, and maintaining the property.

More specifically, strata fees help cover the following expenses:

• Utilities. Any utilities shared amongst the community, such as water, electricity, natural gas, etc., are included in strata fees.
• Insurance. The building and common areas must be insured, so residents must cover the costs. Liability insurance is also a must to protect against unexpected damage or repairs.
• Amenities. Maintaining existing amenities and adding new ones are included in strata fees because they’re shared among all residents. The same goes for common areas, such as elevators, lobbies, and garages.
• Groundskeeping. Your strata fees will help keep the entire building’s gardens, lawns, and other outdoor amenities. For strata subdivisions, the work is usually limited to common spaces, while homeowners are responsible for landscaping their own plots.
• Management fees. These include administrative costs—bookkeeping, legal fees, accounting—and fees paid to professional management companies that oversee the strata corporation’s day-to-day operations.
• Reserve fund contributions: Finally, a portion of your strata fees will go into a reserve fund, which helps cover repairs and replacements for major maintenance projects.

 

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How to calculate strata fees?

The method by which your strata fees are calculated will depend on your property’s bylaws.

Strate fees may be calculated in two ways:

• Based on unit entitlement
• Equally divided

 

Based on unit entitlement

Typically, strata fees are calculated by determining the corporation’s total budget and dividing it by the unit entitlement.

A unit entitlement is a number assigned to an owner based on the size of their unit and the percentage of common property they own. For example, in an apartment-style condo, an owner of a three-bedroom unit will pay more in strata fees than the owner of a one-bedroom unit.

The strata fee formula you’d use for this method is as follows:

Your strata fee = Budget expenses x (Your unit entitlement ÷ Total unit entitlements)

Let’s say you have a strata corporation with a budget of $100,000. The total sum of unit entitlements is 1,000. If your unit has an entitlement of 60, the formula would look like the following.

Your strata fee = 100,000 x (60 ÷ 1000)

That means your total strata fees for the year are $6,000.

 

Equally divided

The other method of calculating strata fees is dividing them equally among owners. This method is usually only used with bare land strata corporations. In this situation, the council determines the yearly budget, which decides the strata fees for owners.

 

Tips for paying strata fees

If you’re a strata title owner, you’ll want to stay on top of paying your strata fees to prevent any legal action or lofty fees. So, we’ve outlined some tips for paying your strata fees on time.

Pay your strata fees on time with these tips:

• Budget accordingly. Incorporate strata fees into your monthly or quarterly budgeting. This way, you’ll be better prepared to pay them when the due date arrives.
• Automate payments. Set up automatic payments to ensure your payments go through on time and you can avoid late fees. Your strata corporation should use an online portal to collect payments for the best experience.
• Stay updated. Attend and participate in your strata council meetings. These meetings will bring up important information regarding fees, budgeting, and bylaws. You can give input to improve the use of strata fees by being there.
• Communicate. Inform the council of potential financial problems you may be experiencing. Many councils are open to working with you when you’re unable to make payments on time. Consider asking them for a payment plan or mediation for your situation.
• Dispute and appeal (if necessary). Familiarize yourself with your rights under that relevant strata legislation. Then, if you feel strata fees have wronged you or they were increased unreasonably, take legal action. You should also discuss these concerns with the council and other residents to guide your actions.