Within the next generation, most property owners in Australia will belong to a Body Corporate. So, it is becoming increasingly important to understand the roles and responsibilities of such an entity. In this article, we will outline the main features of this model of property ownership.
What exactly is a Body Corporate?
A Body Corporate is a legal entity, formed by the owners of a parcel of land, whose purpose is to manage and maintain all common areas used by the residents. The Body Corporate is responsible for both the property structures and any behavioural factors that affect the residents. The regulations governing these bodies vary in each state and territory of Australia. In the case of the owners corporation management of South Yarra for example, regulations are governed by the State of Victoria.
How is the Body Corporate managed?
A Body Corporate must have an elected committee, which handles day-to-day administration and makes decisions relating to its responsibilities. All owners can actively participate in committee meetings, and have the right to submit motions to the committee, for example regarding maintenance issues. Each owner is required to pay a quarterly contribution to the Body Corporate which is allocated to a) administration, and b) maintenance of the property. Recreational facilities are the responsibility of the Body Corporate as they are common areas which require continuing maintenance.
Depreciation, tax benefits and insurance.
As a strata property owner, you can claim depreciation on all common areas, including recreational facilities, which can help to reduce your annual tax bill. Furthermore, you may be able to claim a tax deduction on your body corporate fees. Insurance obligations can be rather more complex.
The Body Corporate must take out public liability and building insurance for all common areas.
As a strata property owner, you are generally responsible for insuring your own property, but certain aspects may also be covered by the Body Corporate’s insurance.
How to decide between strata or stand-alone property ownership.
Buying your own property means you will not have to pay Body Corporate fees and you retain the freedom to make decisions relating to your property. However, you will still incur maintenance expenses which can be unexpected and costly. If a Body Corporate is well managed, its strata-titled properties should have manageable maintenance costs compared to those of an individually owned house. There are of course benefits to both systems of property ownership and you should consider your preferences and financial goals when making purchasing decisions. However, Body Corporate fees should not be seen as a deterrent when choosing a property as there are clearly many benefits to this type of property ownership.
In conclusion, the Body Corporate system of property ownership has a great deal to offer. By contributing to administration and maintenance funds, the Body Corporate system can keep a property looking its absolute best which will naturally make it more appealing to both tenants and purchasers.
Finally, it is important to remember that as a strata-titled owner, you are entitled to a say in all decisions made by the Body Corporate.