Do I need a strata inspection report?
You’re about to make an offer on a property and someone suggests you get a strata inspection report. Given how much money you’re already spending, you might be tempted to skip it. But it’s worth taking the time to find out more. We explain how a strata inspection report could be a little investment for a lot of peace of mind.
What is strata?
Strata schemes allow individuals to become the shared owners of a property. When you buy a strata-titled unit or townhouse, you also become part-owner of the common areas surrounding your property. From the gardens to the driveway, hallway, pool, lifts and laundry, you’ll be jointly responsible for dealing with any building problems that come up.
These strata obligations are managed through a legal entity called The Body Corporate (now commonly called Owners Corporation).
What is a strata inspection report?
A strata inspection report is a full review of the Owners Corporation records. Before you spend a small fortune on a strata-titled unit or townhouse, it’s good to know the kind of people and issues you’ll be dealing with. And, it could save you from buying a property that’s going to cause you financial and emotional stress in years to come.
When do I need a strata inspection report?
A strata inspection report only applies if you’re buying a strata-titled property, such as a residential unit or a townhouse within a complex. If you’re buying a house, then you need a building inspection report instead.
Bear in mind that a strata search can take a few days. If you don’t want to hold up your offer, you might use the 5-day cooling-off period or include a clause in your contract that makes your purchase subject to the strata report findings.
What the strata inspection report covers.
A strata inspection report covers all the aspects involved in running and maintaining a block of properties, and all the common areas that go with it, including:
- Current property ownership and voting rights
- Structural or building defects
- Planned or previous major works
- Quarterly levies and proposed special levies
- Sinking fund forecast
- Strata scheme insurance
- Pet policies
- Compliance documentation
- Disputes or breaches of by-laws
- Minutes from Annual General Meetings and Executive Committee Meetings.
How much does a strata report cost?
Strata searcher fees can vary. As a guide, a strata report usually costs between $250-$350.
Make sure you shop around and find a qualified strata searcher. Don’t be tempted to take on the strata search yourself, because you need to know what you’re looking for.
Important things to look for in your strata inspection report.
Not all strata managers will be organised enough to have all the paperwork. Some may even withhold vital information about building defects in an attempt to preserve property values. Whilst you can’t control everything, 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 – Is the Owners Corporation raising enough money to run the building? Is there a big enough reserve to cover ongoing maintenance and larger one-off costs should they come up? Take a look at all special and quarterly levies and how those levies are being spent. It’s also worth checking the Administrative Fund and Capital Works Fund. The Administration Fund covers the smaller day-to-day expenses of the strata scheme. Whilst you wouldn’t expect to find a large balance in this fund, there should be enough to cover small outgoings. The Capital Works Fund covers larger scale projects and maintenance and the forecast for this is usually done by a professional such as a quantity surveyor. The forecast is a good indicator of whether the owners are collecting enough to cover future planned works.
- Disputes – Is there any evidence of disputes between building residents or within the Owners Corporation? Whether you’re planning to live in the property or not, you’ll want to make sure there’s a harmonious track record.
- Building defects – Keep a very close eye out for major building defects such as falling facades or water penetration in the building’s history. You won’t get a crystal ball view of the future, but past records can provide some indication of the building’s current state. If you’re buying into a new building, it’s also a good idea to research the builder and developers. Visit their websites and your state’s Fair Trading website to check they are properly licensed with no disciplinary action against their record. Talking to existing owners in the building may also uncover any issues with the building. Studies show that a staggering 80% of new buildings have defects, so doing your research is vital.
- 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 – Can you 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? Make sure you read all available meeting minutes and written correspondence to see how issues have been handled.
If you find there are gaps in your strata report, don’t be afraid to follow up and ask for more information. It’s your money, and you’re fully entitled to get the full picture before you buy.
Essential resources for first home buyers.
Buying a property is a complex process, so it’s good to have some helpful resources to hand. Our first home buyer essentials include useful calculators, a free property report, plus home buying tips from our very own community.
And, if you’d like to take your home-buying skills to the next level, sign up for our Home Knowns email series.
Eligibility criteria, terms, conditions, fees, charges and normal lending criteria apply. This information has been prepared without considering your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness, having regard to your objectives, financial situation and needs. All loans are provided by Beyond Bank Australia, 100 Waymouth Street, Adelaide, SA 5000 ABN 15 087 651 143 AFSL/ Australian Credit Licence 237856. © 2019.