Strata schemes offer an enticing community-focused lifestyle that's as engaging as it's convenient. But it's not all sunshine and rainbows, as these schemes come with their unique strings attached. To untangle these strings, you should always do due diligence and order a Strata Report before buying a Strata property.
A Strata Report is a professional report prepared based on thorough examination of a strata scheme's records. Think of it as a report from your personal investigator, who has been snooping around the building's finances, physical state, by-laws, management, and squabbles. This report often brings all the skeletons out of the closet, helping you dodge the bullet before it fires.
Start with the Finances
When reading a strata report, you should always start with the finances. A strata scheme's balance sheet should be as robust as an ox. Carefully study the Administrative and Sinking Funds. The Administrative Fund takes care of day-to-day expenses, whereas the Sinking Fund, on the other hand, braces for long-term expenses - like a safety vault.
If there's not much in those funds, you could be staring down the barrel of a hefty special levy. Picture this - a 40-year-old building with a measly $50,000 in the kitty. It won't stretch far if the roof goes or the lift packs up.
Levies
Check the usual strata levies for the lot that's caught your eye. Don't miss out on any special levies due now or soon to kick in. Typically, they cover unexpected or major costs. If a special levy is looming, it could be a smoke signal of big works planned or an undernourished Sinking Fund. If special levies have been imposed repeatedly, it is like a malignant tumour growing within the strata scheme, possibly reaching a stage of no return where intervention is futile.
Check how many owners are dragging their heels on paying their levies, as this may be the reason the Owners Corporation is struggling to pay the bills. If too many lot owners are behind more than a month, that's a red flag waving right in your face.
Insurance
Insurance is the safety net that catches strata schemes when they fall. Check that the scheme's insurance is up-to-date and comprehensive, covering public liability, property, and workers' compensation insurance. An underinsured scheme might turn out to be a pricey mess. You need enough insurance to cover full replacement value. Fall short, and a major incident could leave you picking up the bill. Imagine a building worth $10 million, insured for just half that. It's a disaster waiting to happen.
Major Works
Keep your eyes peeled for any major works - planned or underway. These can be a real drain on the wallet, and if they've been overlooked in the budget, it could put the squeeze on the scheme and lead to special levies. If the sinking fund can't cover it, guess what? That's right, you're copping a special levy.
Legal Disputes
Ongoing disputes or legal battles can be a red flag. They range from squabbles over who does what maintenance to more serious and costly legal fights. Besides potentially draining the scheme's coffers, they can create a high-stress living environment. Picture a never-ending legal fight with a contractor over dodgy work. It'll drain resources and patience faster than a leaky faucet.
By-Laws
By-laws are the code of conduct within the scheme, covering everything from pets and peace and quiet to renovations. Make sure the by-laws aren't at odds with your way of life and plans for the property. Spotting a pattern of illegal parking, noise complaints, or ignoring pet rules might also be a sign of things to come and an indication of the community you are buying into.
Still Confused? Get Professional Help
A Strata Report can shape your property buying decision. So, don't play guessing games if you are not sure. Get it reviewed by a professional. A strata inspection company or an experienced conveyancer can help you cut through the jargon, ensuring you make a choice that you won't regret. Contact Surge Legal on 02 8722 5021 for assistance with your purchase.