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Victoria Body Corporate Services | Myoc

What is a body corporate Victoria?

In Victoria, Australia, a body corporate refers to a legal entity created to manage and administer the common areas and shared facilities of a multi-unit development, such as apartments or townhouses. It is also known as an owners corporation or strata corporation in other jurisdictions.

A body corporate is formed when multiple individuals or entities own separate lots or units within a larger property. The body corporate is responsible for the maintenance, upkeep, and management of common areas, including shared amenities like parking lots, gardens, lobbies, swimming pools, or elevators. Its main purpose is to ensure that the property is well-maintained and that the interests of all owners or unit holders are protected.

The body corporate is governed by a set of rules, known as by-laws, which outline the rights and obligations of the owners or unit holders. These rules cover issues such as property maintenance, noise restrictions, pet policies, and dispute resolution procedures.

Each owner or unit holder within the development is a member of the body corporate and is required to contribute to the costs associated with the management and maintenance of the common areas. These costs are typically shared through regular levies or fees paid by each member.

In Victoria, the rights and responsibilities of body corporate members are governed by the Owners Corporation Act 2006 and the Owners Corporation Regulations 2018. These laws provide a framework for the establishment, operation, and governance of body corporates in the state.

What is the purpose of a body corporate?

The purpose of a body corporate, also known as an owners corporation or strata corporation, is to manage and administer the common areas and shared facilities of a multi-unit development. Here are the key purposes of a body corporate:

Property Maintenance: One of the primary purposes of a body corporate is to ensure that the common areas and shared facilities within a multi-unit development are properly maintained. This includes tasks such as cleaning, landscaping, repairs, and regular maintenance to keep the property in good condition.

Financial Management: The body corporate manages the financial aspects of the development. It collects fees or levies from the owners or unit holders to fund the maintenance, repairs, insurance, and other expenses associated with the common areas. It is responsible for budgeting, accounting, and financial record-keeping to ensure transparency and effective management of funds.

Rule Enforcement: The body corporate establishes and enforces rules and by-laws that govern the conduct and use of the property. These rules may cover issues such as noise restrictions, pet policies, parking regulations, and the use of common facilities. By enforcing these rules, the body corporate helps to maintain a harmonious living environment and protect the rights and interests of all owners or unit holders.

Dispute Resolution: In situations where conflicts or disputes arise between owners or unit holders, the body corporate plays a role in facilitating resolution. It may provide a formal process for addressing disputes and mediating disagreements among residents, helping to maintain a peaceful and cooperative community.

Representation and Advocacy: The body corporate represents the collective interests of the owners or unit holders. It acts as a unified voice in dealing with external parties, such as local authorities, service providers, and contractors. It may negotiate contracts, seek cost-effective services, and advocate for the best interests of the community as a whole.

Overall, the purpose of a body corporate is to ensure the efficient management, maintenance, and preservation of the common areas and shared facilities within a multi-unit development. It promotes a sense of community, protects property values, and provides a framework for effective governance and decision-making.

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Trusted Strata Management Companies

While I don't have access to real-time information or specific recommendations, I can provide you with some general tips on finding trusted strata management companies:

Research and referrals: Start by asking for recommendations from friends, family, or colleagues who have experience with strata management companies. Look for companies that have a good reputation and positive reviews.

Licensing and certification: Ensure that the strata management company you consider is licensed and registered with the appropriate regulatory bodies in your area. This helps ensure they meet specific standards and adhere to professional codes of conduct.

Experience and expertise: Look for companies that have a proven track record and experience in managing strata properties. Check their portfolio to see if they have handled properties similar to yours in terms of size and complexity.

Transparent and responsive communication: Effective communication is crucial in strata management. Choose a company that values clear and prompt communication, both with the owners and within the strata community.

Services and fees: Evaluate the range of services offered by the strata management company and determine if they align with your needs. Understand their fee structure and ensure it is competitive and reasonable compared to other companies in the market.

Professional affiliations: Check if the strata management company is a member of professional associations or industry organizations. Membership in such groups can demonstrate their commitment to professional standards and ongoing education.

Personal meetings and interviews: Arrange meetings or interviews with potential strata management companies to discuss your specific needs and concerns. This will give you an opportunity to assess their communication skills, knowledge, and overall compatibility with your community.

Remember, it's essential to conduct your own due diligence and carefully evaluate different options before selecting a strata management company.

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APRA signals action for Strata Fund Investments

Last month, the Australian Prudential Regulatory Authority (APRA) has signalled what could be the most significant turning point in Australia’s favourite asset class, property, with news this week that it has mandated a higher interest rate to be used by lending institutions (or ‘serviceability buffer’) when considering mortgage applications for residential home buyers and investors.

This has come about after an astounding 20+% rise in national house prices over the last year, flying in the face of the pundits who predicted severe economic concerns during the pandemic. Given the release of Australia’s two biggest economic states from lengthy lockdowns, it is also quite timely, as they run straight into the usually bubbly spring real estate season.

Whilst it is easy to imagine issues with some sectors of the economy, others have had little impact on their incomes. This cohort appears to be leveraging their unspent overseas holiday and pricey dinner surplus into either upgrading their own home or adding to the collection of investment properties. As debt increases, so does its ability to jeopardise the stability of the banking system.

The lifting of the serviceability buffer is material on several fronts. It decreases the borrowing power of the borrower by around 5%, meaning a decrease of $36,000 on the average Australian home loan of $730,000. More importantly, it also means that the Reserve Bank of Australia (RBA) has, for the foreseeable future, stepped down from its secondary role in moderating house prices (its primary role being to influence unemployment and inflation) and handed the reigns to APRA.

Macroprudential masterclass

The setting of the serviceability buffer this week falls under the broad church of what is called ‘macroprudential regulation’, where more targeted policies are put in force to stabilise and protect various areas of a financial system as required. Whilst the idea of such regulation has been around since the 1970s, the post GFC period is a particular instance where such measures grew in relevance.

This is not the first time we have seen macroprudential policies at work in Australia in the last decade, with other forms, such as limits on debt-to-income levels and caps on lending for investment properties being used in 2014 and limits on interest-only loans in 2017. Both arguably worked (in the absence of comparison, of course) in stabilising and slowing high levels of lending to this cohort of borrowers.

The interesting part this time around is the focus on the actual lending rate itself (now fixed at 3%) instead of previous attempts, such as capping investment interest-only lending to 10%, like in 2017. This tells us that APRA’s view is twofold, interest rates are likely to either remain at present record low levels or potentially fall further, and now a synthetic constraint needs to be applied to arrest the ballooning household debt issue. It also reveals that the problem is overarching across the whole property sector, not just those pesky investors pushing up prices.

Central bank limitations

It is safe to say that the RBA has had its hands full over the last couple of years. That might be an understatement. The enormity and severity of the pandemic’s effects on Australian incomes (in aggregate) are challenging to plan for, even with the skills and experience possessed by the entity at the core of the Australian financial system.

On the one hand, it is reasonable to affect the dramatic drop in interest rates to lessen the debt serviceability costs on the economy. This helped by diverting these savings into gaps in revenue and income caused by lockdowns and temporary business closures. It appears to have worked well in conjunction with record fiscal (government) stimulus measures to both households and businesses.

The knock-on effect is, of course, that many Australians, mainly white-collar workers and businesses, have seen little impact to their incomes and revenues as they soldiered on from their kitchens, benches and settees. In fact, for many, the broad and immediate stimulus measures have meant a rise in revenues and wage increases, along with higher profitability from cost savings (think downsizing offices) and increased productivity (longer work hours from home without the drag of commuting).

This surplus, unsurprisingly, has to lead to higher asset prices, both powering the dramatic reversal of the sharemarket falls in March 2020 and the ability to lever up savings when considering a house purchase. As house prices have risen, so has borrowing levels, with 20% of new loans in the June quarter borrowing more than six times their pretax income. Clearly, something needed to be done.

This is where the job of the RBA now bifurcates, as its primary mandate of targeting low unemployment and controlling high inflation conflicts with the runaway asset price bubble it has created. New measures need to be put in place, and so we see APRA having to move in.

What lies ahead for strata fund investments

We are not going back, not to historic mortgage rates, not to ‘reasonable’ rates of return on cash and other instruments like term deposits and not to the way it was.

This week’s return to macroprudential policy marks what could be the next chapter in Australian financial management at the highest level. A new paradigm of record low (or even negative) rates to help ensure stability for Australian financial institutions and their margins has been, at least for now, locked in by enforcing controls at the mortgage shop floor rather than the supply line in preparation for a prolonged period of near-zero rates.

So now the question remains, how much longer can Australian savers accept the near-zero returns on long term capital? New strategies will need to be adopted to ensure that the impacts of the pandemic and its lasting effects on local and global investment returns are mitigated for the foreseeable future.

As a lot owner, financial controller or just strata committee member, there has never been a more appropriate time to reflect upon the investment plans for your long term capital works, maintenance, reserve or sinking funds. With the advent of protracted low returns (or even negative returns once inflation has been taken into account) from cash and term deposit investments, it is high time to consider any alternatives.Strata Guardian is here to help. We have recognised this issue for a long time and prepared a series of portfolios directly targeting the needs of the Australian Strata Community. Get in touch, book a callback or send us an email to start the discussion on how we can help you now.

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Melbourne Strata Management Agencies - Myoc

The Australian Strata landscape is a little odd, filled with names and terms that can change from state to state and can be unwieldy to the uninitiated. Even for those who may have grown up in buildings with a strata plan, outside of perhaps the payment of strata levies, the level of knowledge (and interest!) in what happens inside the 'strata machine' may not always be clear. This article hopes to shine some light on the terms and financial components of strata at a high level.

The state determines the name.

Firstly is the naming conventions. Strata take on several names, which can change depending on the state it is based. Owners Corporation (Vic, ACT and NSW), Body Corporate (Tas, QLD, NT), Strata Corporations (SA), and finally Strata Companies (WA) all essentially mean the same thing.

Each is a collective entity that guides the scheme responsible for the building’s common areas (shared spaces) and can guide the behaviour of residents and use of the building through its own agreed bylaws.

A committee manages each entity, usually consisting of members of the building that can form new bylaws as the need arises and oversee the operation of the building. The day to day management is often outsourced to an external ‘strata manager’ who can monitor and pay bills, organise repairs and issue documentation to residents (and lot owners) in the scheme.

In conjunction with strata specialist lawyers, they can also offer advice on courses of action when disputes arise to ensure adherence to the relevant legislation.

Strata Funds explained

The money collected by the Strata committees is deposited into a fund for the future use and enjoyment of the collective to help maintain the property and, in turn, the value of their investment. Similarly, these pools of funds have different names across the continent.

In most parts, the pool is divided up into two use cases. There is an Administrative fund for shorter-term and recurrent expenditure, such as garden maintenance, annual insurance premiums and replacement of fixings and other small items. Whilst not mandatory in most states, it is usually advised to restrict the shorter-term spending from the longer-term savings. From here on, I will use the term ‘Strata Admin Fund’ to refer to these types of accounts.

For longer-term and typically larger expenditure that needs multiple years to be saved for, there is the Capital Works Fund (NSW & ACT), Sinking Fund (QLD, NT, TAS & SA), Maintenance Fund (VIC) and Reserve Fund (WA). From here on, I will use the term ‘Strata Investment Fund’ to refer to this type of fund.

These funds build up over time and are drawn down to meet the higher costs as they arise and can often be significant (several million dollars) if the building is substantial and well run. The size of these funds is critical, as the balances are available to potential buyers of the lots, can determine how well the strata scheme is run and influence the price willing to be paid for lots in the building.

If a Strata Investment Fund appears to be poorly funded, this can be a red flag to new owners that the management of the building is poor, and there is a high chance that future costs will need to be met by sudden special levies.

10-year maintenance plans explained

The idea of the 10-year maintenance plan is a simple one. Plan and prepare for the costs. Whilst anyone can produce such a plan, it is highly recommended that a professional (usually a quantity surveyor skilled at pricing repairs and replacements) is engaged to assess the areas in the common property. This work is done to ascertain if and how various components may fail or need to be replaced.

These estimates are then categorised and put in a timeline to help the owner’s committee determine how much needs to be saved in the Strata Investment Fund to allow for the work to be done. Examples of this work can be replacing carpet and tiles, repainting and refreshing surfaces, and replacing major plant and equipment like fire equipment, pool equipment, and air conditioning.

Below is an example of a very simple 10-year plan to help illustrate:

As you can see from the above, the cash requirements are low in some years, with the occasional significant expenditure. This, of course, is just an estimate, and like most things, may be subject to change as equipment fails earlier than expected and needs to be replaced.

In this event, several options are usually available. If there are ample reserves in the Strata Investment Fund, then fantastic. If there is not, the decision will need to be made to authorise a ‘Special Levy’ on the lot owners or finance the works using a loan. It can also result in a mixture of Special Levy and finance depending on the situation and money available from the lot owners. The ability for the Strata Investment Fund to be exhausted and debt then being required would be a big concern for future buyers of lots in the building.

Excepting the above, the process of planning for the expenditure was reasonably straightforward. Total amounts were calculated and then divided by the number of years and levy-paying lots to determine their quarterly or annual contribution amount. The plan can also incorporate figures for inflation and returns on aggregated savings to provide more realistic results.

Regrettably, this method, whilst still somewhat helpful, needs work in ensuring that the current cash return rate (which is less than inflation) is accounted for. With the widespread assumption that this situation will not change anytime soon, now is the time to do something about it.

You can check out our maintenance fund / sinking fund forecast tool to get an estimate of your scheme/plan's needs and how better investment can help lower

annual levies by clicking below:

Searching for a solution for Strata Funds

So, by now, you have familiarised yourself with the naming quirks of the strata schemes and their respective types of funds, along with where the 10-year plan interfaces with the savings of the building. The big question now remains, how can this process be optimised to ensure that the buildings cost needs can be met, whilst trying to minimise the amount required from each lot owner through rising strata levies?

Much like your own personal superannuation, the Strata Investment Fund can be thought of as the superannuation of a building. Upon retirement, you draw down on your savings in sporadic amounts (think holidays, caravans and increasingly, helping the family financially) with the knowledge that the residual amount is invested appropriately, building upon itself and giving you confidence that it will hopefully not run out.

Unfortunately, this is where the similarities end for Strata Investment Funds, which are typically ‘invested’ in either cash or term deposits. Both are currently earning a below-inflation return, meaning the account’s value is falling against the costs ahead saved for.

It is this unfortunate situation that Strata Guardian aims to fix using proven and robust investment strategies that can assist in achieving better real returns over the long term for the Australian Strata Community.

We can do this in a number of ways, including getting a better rate for your term deposits, using our Strata Term service, or looking for better returns using our market-linked portfolios, Strata Guardian and Grow.

We welcome you to get in touch and see how we can incorporate your building’s 10-year plan into competent and transparent investment strategies that help fight rising strata levies, avoid ‘special levies’ and support the value of the lots within your building.

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Building Strata Manager Melbourne

Investing your strata funds is not a new proposition. Most Owners Corporations have been using primary forms of investment, usually, term deposits, for their long term Maintenance Funds for decades. https://myoc.co/

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Compounding Matters

For most, superannuation really only gathers relevance in the later stages of life. This makes sense, as the goal is now in view and preparations to build the funds become the primary focus as the picture of what retirement might actually look like becomes clearer.

For those fortunate enough to have built a substantial amount during their lives, this is a happy period and brings with it the comfort that their lifestyle will be preserved (or increased) once they finish work and move into the next phase of life. For many, this is also a time of regret that they didn’t start earlier or make more effort to contribute more to their retirement savings or focus on how it was invested.

Owners Corp, Sinking or Strata funds can be looked at similarly, but thankfully with a much higher level of clarity over what is required at the other end. The increasing requirement for buildings to have a 10-year plan (now mandatory in many states for specific sized buildings) has meant that much of the ambiguity found in personal retirement plans can be removed, and more defined costings and timelines can be established.

So with the periodical and significant costs of replacing substantial components of a building now clearly defined, the ‘financial plan’ of a building is thankfully a lot easier to compose. There is an existing amount and a reasonably good idea of the end amount required, so all that is left is the pathway there.

Essentially this all now boils down to two major components, contributions to the strata (strata levies) and the rate of return available to compound the accumulating funds.

Compounding Matters for Australian Strata and Sinking Fund Investment

Albert Einstein reportedly said it. “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”

In the frame of long term investment, there is no more crucial aspect to understand.

For most Australian buildings’ strata funds, the rose-tinted glasses of previous years can be worn with honesty. Term deposits, the default and most secure investment vehicle for these funds over the last few decades, have proven useful with interest rates providing a reasonable return, and little thought has been required in managing these holdings. As the adage goes, ‘if it ain’t broke, don’t fix it.’ For many financial controllers, the task at hand was simply rolling over the term deposits and perhaps a precursory check of better rates at another institution.

The ways of before, unfortunately, are proving now to be inappropriate going forward. As global central banks (including Australia) are consigned to relaxed monetary policy, leading to sub 1% rates of return on traditional options like the term deposit, more effort is now going to be required to ensure that the financial goals of the savings can still be met.

The difference between a prior and current term deposit and cash rates is significant on long term savings. As illustrated in the table below, a mere 2.5% drop in average returns has an alarming impact on the final result, meaning that the only lever left to pull is increasing the strata levies on each lot holder to cover the shortfall.

As a basic example, consider a 5 lot apartment building with $100,000 in their strata / capital works fund and current annual strata levies of $2,500 each year, rising 4% per year. There is an estimated expenditure of $300,000 at year 10 ($365,698 including 2% inflation).

Using historical term deposit returns (4.5% pa.), this would be fine. The savings plan would roughly meet the expenditure requirements, but what if that return fell to 2%?

Starting Balance – $100,000

Required Expenditure – $300,000 at year 10

Adjusted for inflation (2%) – $365,698 required at year 10

Current annual strata levy – $2,500 per lot

Number of lots – 5

Scenario: Strata Fund balance at year 10:

Levy growth at 4%, Investment growth at 4.5% (reaches goal) $363,794.42

Levy growth at 4%, Investment growth at 2% $306,949.28

Difference (56,845.13)

Levy growth at 9.3%, Investment growth at 2% $364,409.56

Final annual levy amount at 9.3% compounding, per lot $6,083.33

The result is that the annual levy will need to be increased at a rate of 9.3% per annum (rising 243%, nearly two and half times, over the 10 years) to make up for the missing investment return shortfall, or the deficit (nearly $59,000) will need to be borrowed and repaid once the work is done.

Seeking a higher return rate on the invested capital is much more preferable to annual levy rises of nearly 10% being borne by lot holders.

But where to find a reasonable return rate that still offers sufficient protection from the perils of modern markets and can provide confidence to all lot owners that their hard-earned contributions can be reliably invested and accessed when they need it?

A new solution to a new problem

This is the reason we started Strata Guardian. We understand the importance of seeking higher returns to minimize the need for tough decisions like raising (and re-raising) annual strata levies to keep a building’s strata fund on track to help meet its goals.

We do this by managing a portfolio of high-quality, reputable exchange-traded funds that are always on market and accessible by our investors with the express purpose of achieving higher than term deposit returns without taking on too much risk.

We welcome you to check out what a portfolio could look like for your building today through our no-obligation onboarding portal which will provide a full breakdown of the portfolio and annual fee estimates before you make a decision.

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Online Property Strata Management | Myoc

Myoc is an Australia's leading online strata management software, designed to help owners self-manage their strata corporations online. https://myoc.co/

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Tips For Hiring a Perfect Strata Management Agent - Myoc

In the past the system of dividing and obtaining the ownership of any apartment was completely related to the company owners. On the same side this aspect was full of faults as well as questions that are why the strata title was introduced to facilitate the strata schemes in the New South Wales province of Australia for the smooth running of strata management. This title allowed people to own their own units and flats in multi leveled or storied apartments. The strata schemes are not only limited to the ownership of residential units this is also applicable in case of commercial, industrial, committees as well as in community titles on the same side.

In the process of strata management, you own to complete various tasks related to strata schemes. It is considered as a very ordinary exercise for any company to hire a service provider for managing different task related to the strata title and proceedings. It includes various tasks to be carried out by the professionals. Communicating with intricate and arduous real estate agents supposed to be quite a common task for this fast-growing industry. This means that for managing your strata issues you must require to hire people having special abilities and expertise that can be capable of carrying out all the works efficiently. That is the only reason behind the hip in the popularity and demand for the individuals in strata management.

The most desired question is that what to seek in an individual for the strata management task. The only thing is the skill and specialization. As the matter of fact, the strata management task involves the stake as well as the reputation of the company that is why a person should have all the expertise and ability to perform this task effectively. Hiring an individual for the discussed task is considered as a crucial as well as a critical decision as a person has to bid upon the reputation of the company. You must hire a company offering expert assistance in this field. It will help you in finding out the perfect person for performing this crucial task without bothering about the reputation and stakes of the company.

For this task you have to invest a quite time in researching about the companies as well as agencies which are providing you all the desired aspects. It is a well-known fact that this decision is very crucial and requires a quality time to calculate or going through all the facts and figures before hiring any company or agency for strata management works. You can ask help from your friends and family or you can ask them if they have any information about any trusted company which can provide you the desired assistance. On the other hand, you can adopt various external sources for finding out the good professional help in this task. Finding good strata managing agent is not an easy task as it involves a very crucial decision of your life so be very careful as well as attentive while going through the proposals of various companies.

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Introducing Strata Guardian

It’s no secret that we are now faced with a world of low-interest rates, propelled by the coronavirus pandemic and its associated poor economic conditions. Even before the pandemic, cash and term deposit interest rates have been gradually declining, decreasing the long-term viability of term deposits as a useful investment option for those seeking a reasonable return without taking on too much risk.

The more significant issue at hand now is not the risk of losing capital but the genuine risk of not having enough when the time comes to employ the funds for their intended purpose. This dilemma is the same for people saving for a home, retirement, or indeed for a group of lot holders looking to replace a significant building component.

As central banks the world over have slashed interest rates to stimulate the economy, it also has the intended effect of making term deposits and cash at call interest rates now, not a viable investment. This has meant the conventional mainstays of the low-risk investment world are increasingly unattractive for long term capital. By creating a situation where the return is mediocre, to the point where it is in danger of being eroded by simple inflation, financial controllers are compelled to seek alternatives or face the prospect of higher contributions to ensure that the purpose of the saved capital is met.

An innovative and secure solution to a new problem for Australian Strata and Sinking Funds.

Strata Guardian seeks to help with this problem. It is the reason we have decided to build an investment product that is specifically designed to help the thousands of Australian lot owners, Owners Corporation / Body Corporate and strata managers out there facing the prospect of inadequate returns on their building capital. By using quality, diversified portfolios that target more meaningful returns while still carrying significant downside protection, we aim to help with the difficult task of fixing inflation erosion with what is essentially the superannuation of your building’s financial future.

Using the latest technology in data security, both for the onboarding and ongoing, personal information protection is a core focus of our offering. All client capital is secure on a trusted third-party financial platform that is backed by local and global fiduciaries and allows both transparency and access to your funds at any time.

We are here to help you.

We welcome you to present Strata Guardian at your next Owners Corporation / Body Corporate or strata committee meeting, buildings accountant, or owners corporation strata management. We are always available to make introductions by phone, email, or virtual meeting as required.

For more information, or to check out what a portfolio can look like for your building, head to the get started links or contact us on 1300 482736 or contact@strataguardian.com.