You're planning on buying an apartment or townhouse, for either yourself or to rent out.

Excellent news! 

But you also know that you'll need to pay body corporate fees - or is that strata title?

And, when you get out the calculator and start doing the numbers, wouldn't it be more beneficial financially to buy a house and not pay body corporate fees?

Well, come with us as we explore the ins and outs of body corporates.

What is a body corporate?

A body corporate - technically known as body or owners corporation - is a legal entity wherein a group of apartment or townhouse owners in a strata-titled complex are responsible for maintaining all common areas of the property.

Think lifts, foyers, gardens, pools and gyms.

These same owners need to routinely pay fees and charges for both regular and unexpected maintenance and upkeep, as well as insurance and other details.

The body corporate group of owners also agrees - or at least regularly votes on, via an AGM - the complex's rules and by-laws; keeps budget records and minutes of meetings, and tackles complaints or issues between owners.

What is a strata title?

We wanted to take a quick look at strata titles as they're often mixed up with body corporates.

But here's the 411 on strata titles.

Depending on where you live, a strata scheme is the entire complex site including common areas, which you, as a buyer, will automatically purchase part of when you buy an apartment or townhouse.

This purchase will see you acquire a strata title, which refers to the actual apartment or townhouse that you've bought - as well as part of the building itself and the common areas mentioned above.

What do body corporate fees cover?

Firstly, body corporate fees and what they cover will differ from state to state so watch out for this if you're buying interstate.

As a general rule of thumb, however, here's what body corporate fees cover:

• Administration - day-to-day running of common areas (ie lawn mowing and pool cleaning)
• Maintenance & repairs - similar to administration but for more unexpected details such as fixing a broken gate or light or replacing an air conditioner
• Shared utilities - this applies to strata schemes with just one water meter shared by every dwelling 
• Insurance - is needed for any potential damage to both common areas and the building itself as well as public liability 

NB: body corporate fees don't cover anything to do with your actual apartment or townhouse.

Think council rates, insurance, utilities, and maintenance and repairs.

What is a sinking fund?

Also known as a capital works fund, sinking funds are basically "just in case" body corporate fees to cover either one-off maintenance such as painting or major repair works and unexpected but urgent emergencies.

As such, the body corporate's sinking fund may not be used every year and may therefore grow over the months.

But they're are a legal requirement in the majority of states and if nothing else, they're good financial planning, ensuring body corporates don't have to scramble for cash in an emergency.

How are body corporate fees calculated?

Essentially, the larger and newer the strata scheme is - and the more facilities it has, such as a pool, gym, sauna or outside areas - the higher the body corporate fees will be.

On the other hand, older, smaller schemes with no facilities bar a car park may require high body corporate fees simply to cover the repairs and maintenance needed for the property's age.

But generally, body corporate calculation fees are based on:

• The building's age, size, structure and condition
• The amount and condition of common area and facilities ie pools and gyms will require higher body corporate fees than a basic garden
• The size of your particular property ie a penthouse owner may pay more in body corporate fees than a one-bedroom apartment owner in the same building.
  NB: this isn't always the case as each owner may pay equal fees

How much is the average body corporate fee?

As you can imagine, body corporate fees can vary very widely - and they can increase over time depending on inflation and other details.

But expect to pay anywhere from $1,500 to $30,000 per annum.

Don't forget too that you may need to pay extra if you're late with your fees - although your fees may also be reduced if you're early.

Body corporate fees are also usually paid quarterly.

How can I check body corporate fees before buying?

You should definitely check with your real estate agent on how much the body corporate fees add up to and while you're at it, ask for the last few years' fees along with all AGM minutes.

Also, check with neighbours in the complex as to whether there have been issues with the body corporate overall recently.

PropertyUpdate's Michael Yardney says that body corporates should be both proactive and well-run without spending excessively on pools, gyms or lifts especially if you won't use these facilities. 

Mr Yardney says potential buyers should also look for the following:

• Body corporate expenses and outgoings
• Signs of disputes amongst both body corporate members plus neighbours or contractors 

Are body corporate fees worth it financially?

Aah yes, the big question!

And it's a fair one too, we think.

A basic body corporate fee of $4,000 per annum over a 25-year mortgage amounts to an extra $100,000 weighing down your hip pocket.

Should you just spend an initial extra $100,000 instead to buy a house - and not have to bother about body corporates at all?

Well, here are a few body corporate pros and cons for you.

Pros

• Finances and responsibilities of maintenance and repairs are shared
• Apartments and townhouses are cheaper to buy than freehold houses
• You can enjoy pools, gyms and more without going beyond your home
• Investors may be able to claim some of their body corp fees as a tax deduction

Cons

• You will have to pay extra finances to use pools, gyms and more
• You will likely pay more overall for your home
• AGM body corp meetings may or may not agree to your financial and other suggestions

We're here to help

So, it's down to what's best for you personally, including financially: body corporate apartments or townhouses, or a freehold home where you call the shots - and pay for them.

Whichever way you choose to go, we at Listing Loop can help you buy - and sell - off-market body corporate apartments and townhouses as well as freehold houses.

We can also help you refinance, and first-home buyers and investors, we've got your property back too.

So, if in doubt about any of your home-buying plans, sign up at Listing Loop or download our app.

Our off-market and pre-market marketplace give you VIP access to properties so you can get in first.