If you’re planning to buy (or have recently bought) an apartment or unit, you may have come face to face with the term “Body Corporate” or “Owners Corporation”. 

If you’re unfamiliar with the term or don’t quite understand how body corporates work, we’re here to help.

This 101 guide will look into everything you need to know about body corporates, including how they operate, the fees involved and how these costs can impact investors. Let’s uncover all you need to know about buying a property with body corporate attached.

In a nutshell, a body corporate is what’s known as a legal entity and is created when land is subdivided and registered as a community titles scheme (CTS) or strata scheme. This allows individuals to privately own an area of land (like a lot on a housing scheme) or part of a building (like an apartment), but also jointly own common property and facilities with other owners or occupiers.

Anyone owning a property or ‘lot’ within a CTS automatically becomes a member of the body corporate and is responsible for the administration and upkeep of common property and assets.

Since property and asset management requires some specialised knowledge, the body corporate can solicit the services of a body corporate manager to help keep things running smoothly for the collective, within legal and financial guidelines.

While this is no legal requirement to have one, many strata complexes choose to have a Body Corporate Manager (sometimes called a strata manager). That’s because most strata committees are made up of owners who volunteer their time.

Typically, strata managers or Body Corporate Managers (BCMs) are elected by the owners corporate at their annual general meetings. They act as an external professional who managed the day-to-day running of the strata complex, such as record keeping organising meetings and keeps owners and residents informed about what’s happening at the complex. 

One of the big advantages of hiring a strata manager is they will be able to keep the complex compliant with the relevant legislation, laws and regulations. Plus, hiring a Body Corporate Managers can save owners a lot of time and hassle, as the day-to-day running of the complex is handled by a professional. 

The primary purpose of a body corporate is to keep the CTS running smoothly. It is responsible for making decisions on behalf of the best interest of all owners with regard to common areas and all parts of common property.

Typically, these common areas will be shared gardens, pools and gyms as well as hallways, car parks and even lifts. 

Some of the other key functions of a body corporate include:

• Calculating body corporate fees and any special levies for additional repairs or works they need to completed
• Creating and enforcing by-laws that explain what residents are and aren’t allowed to do
• Maintaining proper insurance on the building and all areas of common property
• Ensuring all legal documents remain up-to-date for the complex, running meetings with documented minutes and maintaining records

If you’re thinking about buying into a CTS or strata complex, you might notice body corporate or strata fees are included on the property listing. That’s because each block of townhouses or units will need to charge fees to manage the running of the body corporate. 

As a property investor, this quarterly fee is an extra expense that you need to factor into your budget. Generally speaking, there are two types of funds within a body corporate:

• An administrative fund: this is used to maintain and repair common property and pay for regular, ongoing expenses (such as insurance, paying body corporate managers and paying landscapers and caretakers).
  The sinking fund: this is a pot of money set aside for bigger capital expenses that happen on a one-off basis (for example, replacing a lift or repainting the entire complex).

So, how much can you expect to pay in body corporate fees? This figure is based on a range of factors, including the size of the scheme and whether it has high-cost features that need to be maintained (such as swimming pools, tennis courts and gyms). 

As a general rule, the larger the scheme, the higher the fees. 

Broadly speaking, your strata and body corporate fees will cover:

• Paying management and professional fees to strata management and accountants. Plus, paying wages to caretakers, concierges or building managers.
• Ensuring the safety of the building, such as the infrastructure through inspections, safety reports, fire alarms, lifts, water pumps, balconies, steps, car park maintenance and flooring.
• Look after the common areas, gardens and lobbies, whether with cleaners, gardeners, security staff or window cleaners.
• Compulsory residential strata insurance covers damage and repair buildings and common areas, including personal injury, liability and sometimes volunteer cover in some states.
• Power and water supply to common areas, managers’ offices and shared facilities.
• Some states make this mandatory for future capital expenditure, and it is kept from the administrative fund.
• Maintaining and repairing everything inside and outside the building that are not within the individual unit (which comes down to the owner’s responsibility).

Every state within Australia has its own specific body corporate fees. And without these fees, there would be no way for the body corporate to cover the costs of the building from a legal and maintenance standpoint. 

Body corporate fees vary wildly based on the complex or scheme you’re in; these fees can range anywhere from $1500 to upwards of $25000 per annum is common. Annual levies for an apartment in a large-scale development have higher costs.

(Graph from Strata Consultants)

It’s worth noting that strata fees for townhouses are often lower than those for apartments. 

The total amount required to maintain and manage the building each year is calculated by the managing body and then divided up between the owners.

The older the building may mean higher fees, and the number of common areas within the specific property area (such as car parks, gardens, and lobbies) could also contribute to higher costs. 

This is important to keep in mind when deciding which investment property to purchase (as high strata fees can eat into your rental profits). 

No, body corporate fees don’t include council rates. As an apartment or townhouse owner, you’ll need to pay the council rate directly. 

Some of the other costs that aren’t covered by strata or body corporate fees include landlord insurance, home and contents insurance, as well as the budget you set aside for ongoing repairs and maintenance for your rental property.

Yes, home insurance will be your own responsibility and will protect your rental property from theft, damages or other losses. 

Home insurance ranges in price, but research conducted by Finder found that landlord home insurance for a $1 million dollar property is roughly $208 a month. 

Understanding how a body corporate works can help you make an informed decision about what investment property is right for you. Investors and homeowners should be mindful that no matter if it’s a townhouse, apartment or unit, you’re also buying into an owner’s corporation. 

The body corporate will run the annual general meeting, where they will set the budget, collect levies, maintain the common property, renew the building insurance and any other facet related to the property outside the owned units. 

So, make sure to run the numbers and factor these fees into your budget before making a purchase. 

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