One of the most common questions asked by people who are new to strata schemes is what exactly a pre purchase strata report is – and how to go about obtaining one. Before you make your property purchase within a strata scheme, be sure to read up on this important documentation.
A pre purchase strata report, or section 108 report, is a document that includes all of the important financial and management information about the strata property you’re planning to buy into. Although obtaining a strata report is optional, it’s an incredibly valuable step in the purchase process because it will give you a good idea of whether that strata scheme’s management and financials will be the right fit for you.
The strata report will include information about the strata scheme’s current and previous finances, insurance cover and a forecast of the sinking fund for major works (or capital works fund, as of 2016). The report should also include a history of the building’s maintenance and repairs as well as expenditure on these activities. This information gives you an indication of the fees you can realistically expect to pay as an owner within the property as well as a general idea of how the property’s matters are handled. A well managed older property, for example, could potentially prove to be more cost-effective than a poorly managed new property.
Before you commit fully to a contract, it’s worth requesting a pre purchase inspection report from a qualified strata searcher. You will require a letter of authority from the property vendor’s solicitor or managing agent in order for the search to go ahead. Your solicitor can also request this document on your behalf.
Section 108 strata reports can take some time to arrange as the searcher needs to work with the manager of the strata records. They can take as little as 24 hours and up to several days if there are delays. Some people plan to obtain the report within the five-day cooling off period after entering into the contract. Other buyers will enter a clause in their contract that makes the purchase subject to the pre purchase inspection report. This can give you more time to receive the report plus the opportunity to negotiate terms once you obtain it.
Section 108 strata reports can be complex to compile and source, so there is generally a cost to obtaining one. While some providers will charge a set rate, others will charge only for the time taken to compile the information. This cost is usually insignificant compared to the value you can gain from it – particularly if it saves you from entering a strata scheme that is poorly managed or maintained!
Strata living can be incredibly rewarding and cost effective if you find the right property for you, so be sure to order a pre purchase report before you make your move.