What is a strata search and why should you do one before purchasing a strata property?
Across the Christmas holidays at the end of 2018, the structural defects in Olympic Park’s 36 storey Opal Tower provided somewhat of a horror story as most of Sydney followed the evacuation process and negative publicity that ensued. Just recently residents of an apartment block in Mascot have been asked to leave the premises for saftey reasons. For most real estate agents who were looking on, it reinforced why they advise their buyers to get a strata report carried out before purchasing a strata titled property.
Sometimes buyers shy away from obtaining such reports due to the cost, or because they don’t want to read the details, preferring a ‘fingers crossed’ approach. However, good property conveyancers/lawyers will always recommend a buyer gets a strata report before proceeding.
What is in a strata report, and why get one?
When you obtain a strata report, it should at a minimum contain financial reports for the strata scheme and for the lot you are considering purchasing.
It should also contain information about minutes of strata meetings. Have any building defects been identified? If so, is there sufficient money in the capital works fund of the strata scheme to cover the rectification cost? If there is not, there may need to be a special levy struck in the future to cover the repair. Each unit owner bears a shared cost of any special levy required. If the rectification work is $150,000 but there is only $50,000 in the capital works fund to cover this, the shortfall of $100,000 would be shared between all the unit owners. In a small block of 5 units, this is an expense many owners would struggle with.
A strata search may also uncover large amounts being spent on consultant’s fees, such as structural engineers or builders, which can flag there are major issues with the building. Have professional services, such as lawyers, been engaged and if so, why? Is there any long-standing dispute indicated in the owners corporation records? If so, what is being done to resolve it?
Once you buy into a strata scheme, you become a part of that scheme. Its vital that you go into this type of property purchase with your eyes open, knowing how to educate yourself and potentially save thousands.
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