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Strata Report
Background
Most buyers of strata units in New South Wales will be aware of the serious issues that caused owners of units in ‘Mascot Towers’ and ‘Opal Towers’ to lose substantial sums of money in recent years.
To do the best you can to avoid this happening to you, it is essential that before signing any binding contract, you arrange for an inspection of the records of the owners corporation in which your unit is located to be undertaken. An owners corporation is the name given to the management body that combines all the owners of all the units in a building complex.
As part of its many functions, it administers the finances of the group of owners, is responsible for maintaining the common property and passes by-laws about all aspects of life in the building complex. It also conducts associated activities like arranging for insurance, resolving disputes between owners, and running meetings to make decisions about its activities.
Its records are generally kept by strata managers who manage the day to day business activities of the owners corporation.
To develop an understanding of the activities of the owners corporation and any problems of which you as a buyer should be aware, inspections of the records of owners corporations are undertaken by strata inspectors. Strata inspectors produce a report for you and your advisers such as your lawyer or conveyancer, to consider when advising you on issues that may affect your decision to buy.
Disclosure of proposed significant expenses
From a buyer’s perspective an inspection of the records will reveal such important issues as building defects, cladding on the façade of a complex which is not fire compliant, problems with fire safety and work health and safety leading to council orders, as well as financial difficulties of the owners corporation. Any of these problems can lead to expense for a new buyer, particularly through special levies imposed on owners.
Those expenses can be very high and sometimes can run into millions of dollars. If you become an owner you will be required to pay a percentage of any such expenses which could run into many thousands of dollars.
It means that if an inspection of the records is not conducted, a buyer may be placed in a position where such expense is unexpected which could have undesirable financial consequences for them.
Disclosure of harmony/livability issues
Buyers also need to inspect the records to find out whether there are issues in a complex relating to harmony/liveability. Often such issues are behind a vendor’s decision to sell. Examples include noise from wooden floorboards in nearby apartments, noisy neighbours, an executive committee that is constantly fighting with each other, and plans to construct a building next door which could block views from the unit for sale.
Another example is where your vendor has made an addition to your unit which has not been approved. The owners corporation once it becomes aware of that addition is likely to require the addition to be removed.
Details of the finances of the owners corporation
Because the owners corporation needs to maintain the complex and keep it properly insured and compliant with all governmental requirements, it imposes levies on owners to pay for that work. You need to know how much those levies are for your unit.
You also need to know if there are sufficient funds in reserve to pay for not only day to day expenses such as cleaning and common area lighting, but also future age-related expenses such as exterior and interior painting and re-carpeting of hallways. If there are not sufficient reserves, special levies/loans may need to be imposed on you and other owners to pay for these important works.
Conclusion
In most instances, none of these issues are required to be disclosed in the contract you have been asked to sign. The only way you can find out this information is through an inspection of the records of the owners corporation.
We can help you identify and understand issues of this kind and others through our strata reporting service.
Types of reports we provide
We offer a standard report and a slightly more expensive risk assessment report.
Pink Inspection Services is a division of The Pink Group (ABN 71 002 697 805). We’re Sydney’s leading provider of pre-purchase property inspection reports.
Our clients include more than 600 conveyancing specialists and law firms, ranging in size from sole practitioners to national firms. And we’ve performed more than 100,000 pest and building inspections over more than 20 years in the business.
Our staff includes 20 technical and inspection professionals assisted by 8 experienced support personnel.
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