The corporation you didn't know you joined

Somewhere in the paperwork, between the pest inspection and the bank's cheque, you became the member of a corporation.

If you own a unit, a townhouse or an apartment anywhere in Australia, you almost certainly did. Buying the lot made you a member of the body that owns and runs everything past your front door. Nobody handed you a membership card. It happened at settlement, automatically, the way the electricity connection did.

Most owners find out what that means at the worst possible moment, when a quote arrives.

What it is called where you live

The thing itself is the same everywhere. The name is not. In New South Wales, Victoria and the Australian Capital Territory it is an owners corporation. In Queensland and the Northern Territory it is a body corporate. In Western Australia it is a strata company. In South Australia it is a strata corporation or a community corporation depending on which Act your scheme sits under. Tasmania uses body corporate.

The regime differs too, and not trivially. Some states run a single strata Act. Others run two or more systems side by side, so that two buildings on the same street can be governed by different statutes with different obligations. South Australia is the clearest example: older unit developments sit under the Strata Titles Act 1988, while most schemes created from 1996 onwards sit under the Community Titles Act 1996, which itself splits into community strata plans, where lots sit above and below one another and the corporation maintains the building, and primary community plans, where the lot is a defined piece of land and the building on it is yours to maintain and insure.

Your certificate of title tells you which. Get it wrong and you can be underinsured without knowing, because a lot owner who assumes the corporation is covering the structure may be covering nothing.

You are a member, not a customer

Whatever it is called in your state, the corporation is not a service provider you engaged. It is a body you belong to, made up of every owner in the scheme, including you. It owns the common property. It sets the levies. It holds the insurance. It can sue and be sued.

There is no landlord upstairs to complain to. When the corporation resolves something at a general meeting, it resolved it on your behalf, whether or not you were there. The owners who turn up decide for the owners who do not.

It also means that a strata manager or body corporate manager, where one is engaged, works for the corporation rather than for whichever owner shouts loudest. The manager holds delegated functions and the corporation remains the principal. It can take back what it delegated.

Mandatory fund, optional money

Two pots pay for everything.

The administrative fund covers recurrent costs: insurance premiums, common area power, gardening, pest control, regular fire servicing, cleaning, management fees. If it finishes the year in deficit, the shortfall comes out of next year's levies, so the pain is deferred rather than avoided.

The second fund covers capital work: repainting, roof replacement, lift refurbishment, common area carpet, pool plant, fencing. New South Wales calls it the capital works fund. Queensland, the Australian Capital Territory and South Australia call it the sinking fund. Western Australia calls it the reserve fund. Victoria calls it the maintenance fund. This is where the trouble lives.

Whether your corporation must hold one at all, and whether it must actually put money into it, depends on where you are and how big the scheme is. The variation is wider than most owners expect, and it does not run the way you would guess.

Queensland is the strictest in the country. Under the Body Corporate and Community Management Act 1997 and its regulation modules, a body corporate must adopt both an administrative fund budget and a sinking fund budget every financial year, and the sinking fund budget must fix the amount to be raised by contribution to cover the capital spending it identifies. The Standard Module works the arithmetic out in an example: if painting is anticipated in three years at a cost of twelve thousand dollars, this year's sinking fund contribution must include four thousand of it. A new scheme must also be given a detailed estimate of sinking fund expenditure for its first ten financial years, repainting included.

The Australian Capital Territory is close behind. Under the Unit Titles (Management) Act 2011, any units plan with four or more units must establish and maintain a sinking fund, must approve a ten-year sinking fund plan stating expected expenditure and the contributions needed to meet it, must review that plan within four years and then every five, and may only spend from the fund consistently with the plan.

Tasmania arrives at the same place by an entirely different route. The Strata Titles Act 1998 requires a single fund rather than two. A body corporate may subdivide it into recurrent and capital parts if it thinks fit, but it is not obliged to. What it is obliged to do is maintain the fund at a level sufficient to meet reasonably foreseeable expenditure. No plan, no schedule, no size threshold, just a standard of adequacy that a corporation running its reserve down to nothing would plainly fail.

New South Wales mandates the structure. Under the Strata Schemes Management Act 2015 an owners corporation must establish both an administrative fund and a capital works fund, and must prepare a ten-year capital works fund plan.

Western Australia sets a threshold. Under the Strata Titles Act 1985 a strata company must establish a reserve fund if it is a designated strata company, meaning a scheme with ten or more lots, and may do so in any other case. Below ten lots it is optional.

Victoria makes the obligation conditional. Under the Owners Corporations Act 2006 an owners corporation that has an approved maintenance plan must establish a maintenance fund. A maintenance plan has no effect unless the corporation approves it. Where no plan is approved, no fund is required.

South Australia runs both answers at once. A community corporation must establish an administrative fund and a sinking fund. A strata corporation need not. The Strata Titles Act 1988 provides that a strata corporation may raise such funds, including reserve funds for future expenditure of a capital nature, as it thinks necessary. A South Australian strata corporation that has never set a dollar aside has broken no law.

The Northern Territory leaves most of it to subordinate rules. The Unit Titles Act 1975 requires a corporation to open and maintain a single account through which all money passes, and says nothing about a reserve. The Unit Title Schemes Act 2009 hands budgets, contributions and levies to management modules made by regulation, so the answer for any particular Territory scheme depends on which module applies to it.

Read across those and the picture is not a national standard with local variations. It is two different philosophies sharing a continent. Queensland, the Australian Capital Territory and Tasmania compel the money, whether by budget, by plan or by a standard of adequacy. South Australia, Western Australia below ten lots, and Victoria without an approved plan leave it to whatever the meeting decides on the night. In that second group a corporation can hold the fund, resolve a token contribution to it every year, and remain entirely within the Act.

So in most larger schemes, somebody has written down what the roof will cost and roughly when. In a good part of the country, nobody is compelled to fund it. That gap is where special levies are born. Levies stay flat for a decade because no owner wants to move the motion that raises them. Every owner banks the saving. Then the roofing quote arrives, the corporation raises a call that lands as a single number in a single letter, and the owner who settled six weeks ago pays the same share as the owner who has been voting the levies down since 2012.

What the bill actually looks like

The best evidence on the size of these calls comes from Victoria, where Cladding Safety Victoria spent several years replacing combustible cladding and, in the process, got to look behind the external walls of hundreds of apartment buildings. Its second research analysis examined three hundred and fifty-nine buildings funded under that state's rectification programme as at May 2023. Around half of them had defects that had nothing to do with cladding: structural problems, failed sealing and fixing, water getting in. Of those, roughly four in five showed water or moisture related structural damage, which is the marker for mould. Seventy-eight per cent of the affected buildings had been built within the previous ten years.

The costs are worth reading carefully, because the figures that circulate in public discussion tend to be the extremes rather than the middle. Cladding Safety Victoria put the average cost of rectification at one hundred and eighty thousand dollars per building, working out to between roughly two and a half thousand and eight thousand dollars for each apartment owner depending on the height of the building. Low-rise blocks of two to four storeys came off worst. Buildings of four to ten storeys carried more defects than towers above ten storeys, which was not what the researchers expected.

Those are numbers a funded reserve absorbs. They are not numbers a single letter with weeks to pay absorbs.

Why the bill lands on owners

The obvious question is why the builder is not paying it. Cladding Safety Victoria is direct about the answer. Domestic building insurance is not required, and is therefore not available, for buildings over three storeys in height. Where it does apply, it responds only if the builder dies, becomes insolvent or disappears, and only for six years after completion. Victorian owners can bring proceedings against building practitioners for up to ten years after the work is finished, extended to fifteen years for cladding defects. The limitation periods differ across the states, but the shape does not. And the regulator notes the common practice of forming a single company for one project and dissolving it afterwards, which leaves owners with an expensive legal path to a defendant who may no longer exist.

So the repair is funded by the corporation, and the corporation is the owners. That much is settled, and no amount of anger at the construction industry changes it. What remains within your control is whether the call arrives as a plan or as a shock.

What to ask before you buy

Every state and territory gives a prospective buyer some statutory right to look before they leap. The name of the document changes, the delivery timeframe changes, and the amount you are entitled to see changes, but the right exists everywhere.

South Australia is a workable illustration of the shape. Section 41 of the Strata Titles Act entitles a prospective buyer or mortgagee to apply to the corporation, which then has five business days to deliver: levies payable on the unit including arrears, the corporation's assets and liabilities, expenditure it has incurred or resolved to incur, and copies of the minutes of general and committee meetings for a period of up to two years, the last statement of accounts, the articles and the current insurance policies. Community corporations have parallel obligations, and where a scheme has more than six lots you should also receive the scheme description and current by-laws.

Ask your conveyancer which instrument applies in your state and what it entitles you to, because the answer determines how much of the picture you are buying blind.

Then get the search and read it rather than filing it. What is in the capital works or sinking fund. What the forward plan says is coming. Whether a special levy has been raised, discussed or foreshadowed. Whether the minutes record a defect, a leak or a quote that has been sitting unresolved for three years. Use your own conveyancer, not the vendor's.

Insurance, and the gap nobody notices until there is a fire

Where the corporation insures the building, it must insure it for full replacement cost. That is not market value. Western Australia's Act spells out what the phrase means, and the definition is a fair guide to the concept generally: the amount required to rebuild, replace, repair or restore the asset so that it is no less extensive and in no worse condition than when new, plus the costs of demolition, site clearance and the professional fees of the architects, surveyors and engineers whose services the rebuilding requires. Land value is excluded.

The common property boundary is not where most people assume, and it is drawn differently between jurisdictions and between title types. Broadly, for walls and fences it runs at the inner surface, for floors the upper surface, and for ceilings and roofs the under surface. Kitchen cabinetry, tapware, benches and fixed air conditioning inside a lot are often treated as part of the insured building rather than as contents, but check your own scheme rather than assuming. Improvements need to be declared: a pergola, a new barbecue area on common property, a kitchen renovation. An undeclared improvement is an uninsured one.

Most jurisdictions also set minimum public liability cover, and several require fidelity guarantee cover against theft from the corporation's own accounts, usually with exemptions for the smallest schemes. The figures differ by state and are set by regulation rather than by the Act, so check the current number rather than the one someone quoted at a meeting three years ago.

The quiet failure is the annual bump. The insurer proposes a percentage increase at renewal, the committee accepts it, and the sum insured drifts away from reality. That is an adjustment, not a valuation. Australian building costs have moved sharply since 2020, and a scheme still riding a 2019 figure carries a shortfall that sits with the owners, divided by lot entitlement, payable in cash, at the moment they are least able to pay it.

Every owner and tenant still needs their own contents policy. The corporation's cover does not touch your belongings.

Who the umpire is, and how hard they are to reach

This is the part that surprises people who have owned strata in another state, because the answer changes at the border.

Most of Australia gives strata owners a specialist forum. New South Wales has NCAT, sitting behind compulsory mediation through Fair Trading. Victoria has VCAT, generally after conciliation through Consumer Affairs Victoria. Queensland has a dedicated Commissioner for Body Corporate and Community Management whose adjudicators decide most disputes, with appeals to QCAT. Western Australia uses the State Administrative Tribunal, the ACT uses ACAT and the Northern Territory NTCAT. Tasmania routes disputes through the Recorder of Titles.

South Australia has none of that. No strata commissioner, no ombudsman, no tribunal, and no government agency overseeing how schemes are managed. If a South Australian corporation makes a decision an owner considers unreasonable, oppressive or unjust, or if the Act or the by-laws have been breached, the remedy is an application to the Magistrates Court.

A court can do a great deal. It can review decisions, resolve disputes between owners, order a general meeting to be convened, appoint an administrator, and in some circumstances set aside a contract between a corporation and its manager or the developer. Those are real protections.

They are also slow and formal, and no forum anywhere, tribunal or court, is a sensible mechanism for deciding whether to reseal a driveway.

Which is why the annual general meeting is the cheapest dispute resolution available to you, and more so in South Australia than anywhere else in the country. An hour a year, in a room where the decisions are still reversible.

What to ask at the next meeting

What is actually in the capital works or sinking fund, and what does the forward plan say is coming. When was the building last properly valued for insurance, as distinct from indexed. What is the manager paid, and separately, what else does the manager receive: commission on insurance, contractor referral fees, charges for certificates and after-hours attendances. Are those payments disclosed in writing. What notice does the corporation have to give if it wants a different manager, and does leaving cost anything.

None of those are hostile questions. They are the questions a director of any other corporation would be expected to ask, and you are, in every sense that matters, one of the people running this one.

The meeting takes an hour. The special levy lasts longer.