Bexley/Beverly Hills Blog

When you’re a property investor, strata fees may be just another expense that you’re not too impressed about having to pay. However, strata fees are actually very important and will save you money and headaches if something goes wrong with the property.

What do strata fees cover in NSW?

Strata fees are charged on buildings that house a number of units or apartments and that have common areas. In general, the strata fees are designed to cover a portion of the upkeep and maintenance of the entire building and also the common areas.

Other things that strata fees cover are the employment of an on-site manager, if your building has one, the building insurance and the utilities that are used in all the common areas such as electricity, water and gas.

Commonly, you’ll find that these fees incorporate two different levies. These are:

1. An administration fund. This fund includes the cost of the day-to-day running of the property. These costs might include maintaining the gardens, cleaning of the common areas, regular building maintenance, building insurance, common area utility bills and management fees for the entire property.
2. A sinking fund. A sinking fund is a reserve of monies to be used for substantial capital expenses such as major repairs to the building itself or the common areas. This fund could also cover essential maintenance such as replacing blinds or carpets or upgrading electrical wiring or fire protection equipment.

It’s vitally important that the sinking fund is adequate enough to cover any of these major or unforeseen repairs. Otherwise, the body corporate may need to raise a special levy to cover any additional costs for major repairs and maintenance. A special levy can be thousands of dollars and you would have to pay it upfront.

Although you might consider that your strata fees are quite high, they offer a good level of protection so that you don’t suddenly find yourself out-of-pocket for major repairs or upgrades as building laws change. Essentially, strata fees offer you peace of mind when it comes to large expenses that may crop up in regards to property maintenance costs.

In most cases, you’ll find that strata fees are tax-deductible because they are a necessary expense of owning your investment property just like property management fees and insurances.

Do strata fees include council rates?

Your strata fees do not cover council or water rates. You’ll still have to pay these separately. However, you can factor the cost of your rates into the rent that you charge your tenants.

Essentially, you need to work with your property manager to ensure that the rent that you receive will cover all major expenses in relation to your particular property but is comparable to market rates.

Do you still need to have your own property insurance?

You absolutely still need to have your own property contents insurance as the strata fees only cover the insurance for the main building and its fixtures. This includes items such as the plumbing, the hot water systems, the air conditioners and the intercoms. In addition, the insurance paid for out of the strata fees also covers all the common areas and pays for public liability insurance.

However, if something happens to just your unit or apartment, you’ll need to pay for any repairs yourself. This could include things like replacement of carpets, light fixtures, window coverings or electrical items.

As a property investor, it’s highly recommended that you take out landlord insurance. This will not only cover you for essential repairs but it will also cover you against theft, loss of rental income and damages to your property from careless tenants.

Need help with your St George home?

If you’d like no-obligation expert advice about your St George investment property, please get in touch with our team. We’re here to help.