Buy a flat, townhouse or unit in Australia and you will almost certainly become part of a strata scheme. For British buyers, the nearest comparison is leasehold with a management company, but the legal structure is different in ways that matter, starting with the fact that you own your unit outright. This article explains how strata works, what the terminology means in each state, and what to check before you sign.
Ownership: freehold, not leasehold
In England and Wales, most flats are sold leasehold. You own a lease for a fixed number of years, a freeholder owns the building, and you pay ground rent and service charges. Lease length, ground rent terms and the behaviour of the freeholder can all affect value.
Australian strata title works differently. Each owner holds a title to their own lot, which is usually the inside of their unit and sometimes a car space or storage cage. The common property, such as the roof, external walls, lifts, gardens, driveways and pool, is owned by all the owners together through a legal entity. There is no separate freeholder, no lease clock running down and no ground rent.
The entity’s name depends on the state. In New South Wales it is the owners corporation, and the system is called strata. In Queensland it is a body corporate, under community titles legislation. Victoria uses owners corporation, and other states have their own variations. People across the country use “strata” and “body corp” loosely to mean the same thing.
| Feature | UK leasehold | Australian strata |
|---|---|---|
| What you own | A lease for a set term | Title to your lot, plus a share in common property |
| Who owns the building | A freeholder | All owners collectively |
| Running costs | Service charge, often ground rent | Levies, usually quarterly |
| Rules | Lease covenants | By-laws |
| Who decides | Freeholder or managing agent | Owners at general meetings and an elected committee |
Levies, funds and the managing agent
Owners pay levies, usually quarterly, based on their unit’s share of the scheme. That share is set by unit entitlement or lot entitlement, recorded on the strata plan. A larger unit or one with a better view may carry more entitlement and pay more.
Levies are normally split into two pots. An administrative fund covers running costs: insurance for the building, cleaning, gardening, common electricity, management fees and minor repairs. A capital works fund, called a sinking fund in some states, saves for big-ticket items such as a new roof, lift replacement or repainting. Most states require larger schemes to plan these costs over a period of years.
Many schemes employ a strata managing agent to handle the paperwork, collect levies and organise meetings. The agent works for the owners, not the other way round, and can be replaced by a vote. Small schemes, such as a block of three or four units, sometimes self-manage.
When the funds fall short, for example because a building has defects, owners can be asked to pay a special levy. These can be substantial, so understanding the scheme’s finances before buying is essential.
By-laws and day-to-day life
By-laws are the scheme’s house rules. They cover matters such as noise, parking, rubbish, renovations, short-term letting, smoking on balconies, flooring and pets. Some states have limited how far a scheme can go in banning pets outright, but by-laws still vary widely, so read them rather than assuming.
Renovating inside a unit often requires approval from the owners corporation or body corporate, especially for work that touches common property, waterproofing, structure or plumbing. Swapping carpet for hard flooring is a common source of disputes because of noise to the unit below. The NSW Government’s guidance on building or renovating a home is a useful starting point for understanding approvals in that state.
What to check before you buy
Before exchanging contracts, buyers usually order a strata report, also called a strata search or body corporate search. It summarises the scheme’s records and should tell you:
- The current levies and whether any are overdue.
- The balance and forecast of the capital works or sinking fund.
- Recent meeting minutes, including disputes or planned special levies.
- Known building defects, legal action or insurance claims.
- The by-laws in force.
Read the minutes in particular. Discussions about cracking, water ingress, cladding or a failing lift often appear there long before they reach the sales brochure. Pair the strata report with an independent inspection, and our guide to reading a building and pest report explains what to look for in that document.
Disclosure rules and the process for obtaining body corporate records differ by state. In Queensland, sellers must provide specific information to buyers, and the Queensland Government’s guidance on buying and owning a home covers what to expect. Your conveyancer or solicitor should also review the documents for you.
Questions readers ask
Is strata the same as a management company in a UK flat?
Not quite. In the UK a management company may act for a freeholder, whereas an Australian owners corporation or body corporate is made up of the owners themselves, who appoint any agent.
Do houses ever come under strata?
Yes. Townhouses, villa developments and some subdivided blocks of two or more houses are often strata or community titled, so check the title even if the property looks like a standalone house.
Who insures the building?
The owners corporation or body corporate generally insures the building and common property, funded by levies. Owners usually still need their own contents cover, and landlords should consider landlord insurance.