You’re looking to purchase a property and someone suggests you get a strata inspection report. You’re already going to outlay a significant sum of money, so it might be tempting to overlook this advice. Our advice to you is that it is worth taking the time to inform yourself or to speak with your Conveyancer as to the risks you are taking by overlooking this advice. Here we explain how a strata inspection report could give you peace of mind for a little cost comparatively.
What is a Strata Property?
A strata scheme allows individuals to share the ownership of a property. When you purchase a property that is part of this scheme, you also become part-owner of the common areas surrounding your property. From the driveways to the gardens, pools, clubhouses, and anything else that is a common area within the overall property, you will be jointly responsible, along with the other owners for dealing with any building issues that may arise.
The Body Corporate is a legal entity that manages these strata obligations (now commonly called an Owners Corporation).
What is a Strata Inspection Report?
This report outlines in full a review of the Owners Corporation records. It gives you inside knowledge as to the kind of people and issues you will be dealing with should you purchase a property within their scheme and it can save you from purchasing a property that can later cause you emotional and financial stress for the years following.
When do I need a strata inspection report?
The only time a strata inspection report is necessary is when you are purchasing a strata property, such as a townhouse within a complex or a residential unit. If you are purchasing a house, you will need a building inspection report instead.
Keep in mind that a strata search can take a few days. If you have entered into a cooling-off period, and don’t want to hold up your offer you may wish to speak with your Conveyancer regarding adding a clause to the Contract that makes your purchase subject to the strata report findings.
What the strata inspection report covers?
A strata inspection report covers all aspects that involve running and maintaining a block of properties, and all the common areas that go with it, including:
- Current property ownership and voting rights
- Planned or previous major works
- Quarterly levies and proposed special levies
- Structural or building defects
- Pet policies
- Disputes or breaches of by-laws
- Minutes from Annual General Meetings and Executive Committee Meetings
- Sinking fund forecast
- Strata scheme insurance
- Compliance documentation
How much does a strata report cost?
The cost of obtaining a strata report varies based on who you instruct to do this for you. As a guide, a strata report usually costs between $250-$350.
Ask your Conveyancer who they would recommend as you want to instruct a qualified strata reporter that knows exactly what they’re looking for to enable them to compile a report that will let you make an informed decision when purchasing a property in a strata scheme.
Important things to look for in your strata inspection report
Unfortunately, not all strata managers will have all the paperwork required. Some may even withhold vital information about building defects etc in an attempt to preserve the property values. Whilst you can’t control their actions, you can control how diligently you review your strata report to see what’s missing. Here are five key areas to pay special attention to:
- Financial Records – Has the Owners Corporation raised enough money to run the building and do they have enough reserve to cover ongoing maintenance and larger costs should they arise? Take a look at all of the special and quarterly levies and how those levies are being spent.You should also check the Capital Works Fund & the Administrative Fund. The Capital Works fund covers projects which are larger in scale and maintenance. This is usually forecasted by a quantity surveyor. This forecast is a good indicator of whether the owners are collecting enough to cover future planned works. The Administrative Fund covers the smaller day to day expenses of the strata property. Whilst there isn’t usually a large sum of money in this fund, there should be enough to cover small outgoings.
- Building defects – Have a look at the building’s history and pay attention to any major building defects such as water penetration or failing facades as these records can provide you with an insight as to the building’s current state. If you are purchasing a property from a new strata scheme, it’s a good idea to do some research on the developers and builders that are part of the scheme. You can do this by visiting their websites, and checking their licence through Fair Trading to make sure they are properly licenced with no disciplinary action against their record. If you have a chat with existing residents at the property, you may also uncover any issues with the building. Studies suggest that a staggering 80% of new buildings have defects, so doing this research is vital.
- Disputes – Whether you’re planning to live in the property or not, you’ll want to make sure there’s a harmonious track record.so you don’t end up with emotional or financial stress from this purchase. Check of any evidence of disputes between building residents or within the Owners Corporation?
- Compliance with legislation – Does the Owners Corporate comply with fire safety & WHS requirements, strata insurance and asbestos management? If they’re not properly meeting their legal obligations this should be a red flag.
- Poor strata management – Make sure you read all available meeting minutes and written correspondence to see how issues have been handled to ensure you can trust the strata manager to keep the necessary paperwork up to date, look after the financials and resolve any issues or concerns building residents may have?
Don’t be afraid to follow up and ask for more information if you find there are gaps in your strata report. It’s your money, and you’re fully entitled to get the full picture before you buy.
If you or someone you know has any questions in regards to a strata inspection report or anything else, do not hesitate to contact our office to speak with one of our friendly team members today on 1300 224 828.