Strata Reports: Why You Should Request It When Buying Your Next Property
If you’re thinking of purchasing a strata property, doing your research beforehand is always highly recommended. If the property is above board, thorough inspections will give you peace of mind that you’re buying into a good strata. If it’s not, however, performing your due diligence will save you hundreds of thousands of dollars and potential heartache. In particular, strata reports can go a long way towards revealing the inner workings of your strata property.
What is a strata report?
Also known as a strata search, Section 108 report or Owners Corporation Records Inspection, a strata report is a document that covers the important management and financial information about the property you are planning to buy. Whether you are buying an apartment, townhouse or villa, these reports will give you a good idea if the strata scheme is right for you as they will give you an indication of the fees you can expect to pay as an owner of the strata property, as well as how disputes are handled. The inspection that informs the report will be carried out according to Section 108 of the Strata Management Act, which covers changes to common property including the procedure for authorising changes to common property as well as ongoing maintenance.
What does a strata report include?
Your strata report will consist of important information such as:
- The history of the building
- Pending building works (maintenance and repairs)
- Past building works (maintenance and repairs)
- Special levies
- Financial status of the plan
- Proposed major expenditures
- Expenses for the past two years
- Ten-year budget analysis
- Insurance cover
- Forecast of Capital Works Fund (also known as the sinking fund)
- Strata Scheme Management Act compliance issues
What to look out for in a strata report
Your strata report will contain a lot of information, but we recommend paying attention to these key areas:
- Financial Position:
Check out the financial history of the strata. What are the quarterly levies for the property and when are they paid? Are there (or have there been) any proposed Special Levies which will require additional contributions outside of your quarterly levies? How much money is currently in the Capital Works Fund? Are any of the funds in a deficit? Is the Capital Works Forecast current? Was it performed by a reputable survey and does it contain a recommended fund balance for each year?
- Building Defects:
See if the building has any history of major defects and if these have been addressed. Also consider the condition of the common property – is this something that will need major repairs after you purchase the property? Are there any proposed major expenditures?
- Management and Disputes:
One of the most common complaints in strata is poor leadership and management. Are there any known disputes in the strata scheme? What process does management have for dealing with issues? Do they welcome input from all owners and respond in a timely manner? What are your voting rates and entitlements? How are breaches of by-laws managed?
- Legislative Compliance:
Body Corporate must comply with a number of Acts in order to avoid claims of negligence. Check that the strata scheme complies with all fire requirements, WHS obligations and asbestos management rulings. Is the building adequately insured? Have there been any legal issues with the building or are there any outstanding?
Purchasing a strata property is a huge investment, so make sure you do your due diligence and commission a strata report. The team at Jamesons are experienced in all strata matters. Get in touch with our team today for more information on our range of strata services or explore our document bank for more information.