Be prepared when buying into a strata scheme
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People buying strata-titled apartments or townhouses have been warned to do their homework before purchase to ensure they fully understand the financial position and personalities within the property.
“You’re not just buying the residence, you’re also buying into a body corporate with shared common property and other owners,” Archers the Strata Professionals partner Grant Mifsud said.
“People are buying strata-titled properties every day in Australia but often they don’t fully understand what a body corporate is all about and whether the scheme has any problems that may be of concern.”
Mr Mifsud said while most strata schemes were well managed and maintained communities, there could also be financial, legal, administrative and emotional challenges for buyers whether they be owner-occupiers or investors.
Buyers should investigate the Body Corporate records to determine whether they are financially and emotionally stable and well managed, he said, while buyers may engage a professional body corporate record search agent trained to prepare a report on any potential problems.
Mr Mifsud said the five key areas where bodies corporate experience problems include their finances, common property defects, legislative compliance, body corporate management and disputes.
“A problem in one of these areas can easily lead to problems in other areas,” he said.
Mr Mifsud said “the budget” is the lifeblood for bodies corporate and under-budgeting the administrative or sinking fund levies for the strata scheme can have repercussions for several years, particularly if there are issues for the building such as water ingress or structural damage.
“A solid program of maintenance, good recordkeeping, reporting and a healthy sinking fund are all important tools for maintaining common property,” he said.
“A body corporate also needs good leadership to avoid stagnation and disputes. It is possible for a building to become derelict or invaded by toxic personalities and shockingly quickly. Since apathy usually goes hand in hand with stagnation of action, the longer it continues the larger the cost both financially and emotionally to eventually get the building back on track.”
Mr Mifsud said external and internal disputes affecting bodies corporate cause major problems all too often usually due to the lack of knowledge or personal agendas making life particularly stressful for the committees charged with decision making responsibilities.
“But knowledge is power. Knowing what issue might arise and how to spot them, can help committees, owners and buyers alike navigate the often complex world of shared investing and community living.”
This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.