I am frequently asked whether owning a property that falls under a strata is worthwhile, bearing in mind the monthly outlay. Or often I will hear a customer say that they prefer to own a house so that they do not have to pay strata fees or deal with a strata.
So what is a strata? Strata title is a form of ownership devised for multilevel apartment blocks and horizontal subdivisions with shared areas. The “strata” part of the term refers to apartments being on different levels, or strata. Governed by strict laws and regulations, a strata is an effective way to ensure that common ground and services in a condominium block are properly maintained and paid for.
The strata usually covers services such as pest control, gardening and general maintenance of the exterior of the building, common grounds and amenities, such as swimming pools and play areas. It also covers the insurance of the properties, which can be a hefty sum. To cover these costs, owners pay a regular (usually quarterly in advance) sum to the strata.
When prospective homeowners seek my advice whether or not to invest in a property, they frequently show preference for a house rather than a strata property, fearing that the monthly outlay will be too high. Then, if they do decide to purchase a strata property, they spend a great deal of effort comparing the strata costs of comparable properties.
It is worth noting that many “stand-alone” homes within a development or subdivision often belong to a similar type of common governance (homeowners association) where regular fees are paid to manage common areas. Some types of common expenses for these neighborhoods include for cutting the grass of undeveloped lots, gates, street lights, possibly security, common garden areas, private roads and development signs, as are common today for many of our neighborhoods.
The difference between a homeowners association and a strata often is that the regulating rules or covenants are enforced in a different way and do not cover insurance.
My advice is that you should carefully consider the costs involved when owning a house, because you still have to bear these costs in order to keep up your property. Periodic infrequent outlays for big-ticket items, such as painting the outside walls, having the roof fixed, replacing a swimming pool pump and payment for annual insurance, make up part of a homeowner’s capital outlay, as do more regular payments for gardening, pest control, regular maintenance services for the A/C, pool and also often homeowners association fees.
Add up all these costs and divide over the period of time the property is owned and you end up with your monthly liability, usually more than a regular monthly strata payment because strata properties share the burden of such costs.
A strata is rigorously controlled by a body, regimented and consistent in how it is run, with managers who control the finances. Homeowners, on the other hand, are generally left to their own devices, requiring careful budgeting to ensure the finances are there to keep their home in good condition during the time of ownership.
In addition, if you deduct the property insurance cost from the monthly strata payment, you immediately eliminate 30 percent to 40 percent of your costs, as you would have this cost with a house. This will give a better picture when comparing a stratified property to a house.
Strata fees per property come down to the age and managed style of the property. Strata costs for properties along the prized Seven Mile Beach segment work out at around 82 cents per square foot per month, all the way to $1.32 per square foot per month, depending on the service.
Some luxury properties charge a higher strata fee because they offer amenities that you won’t find anywhere else, such as a hotel-based condo like the Ritz-Carlton.
From my personal perspective, I chose to purchase a strata property rather than own a house as a lifestyle choice. When I bought my first property at the age of 27, having a property maintained and cared for by the strata suited my lifestyle. As I work on Saturdays, I just don’t have the time to spend mowing the lawn and tinkering with maintenance issues. And even if, as a house owner, you hire someone to look after your garden and so on, you still need someone to manage and pay for the extra help required. In my opinion, strata properties are a highly viable option when purchasing a home in the Cayman Islands and should be given careful consideration.