I’m Buying Off The Plan: Should I Still Get A Strata Search?

off the planI say to everyone I meet who’s considering buying a unit “get a strata search!” There are simply far too many things that could go significantly wrong and end up costing you a fortune and / or make you miserable.

Of course, I have ulterior motives because I am a strata searcher. It’s still good advice.

But what about if you’re buying off the plan? Any strata report on a newly registered building is going to be fairly light on detail because not much has happened yet. Should you still get a strata search?

I’d like to note that this discussion revolves around the idea that you have bought in the initial rounds of release and settlement is occurring before the body corporate really begins comprehensively operating.

If you’re buying and the body corporate is 6 – 12 months old, do get a search. A lot can happen in that first 12 months, particularly with regard to building defects.

The power of a strata search

The whole purpose of a strata search is to give purchasers knowledge and from there the power to act.

That might mean walking away from the deal or it might mean renegotiation. It might simply mean peace of mind knowing all is well, and there is power in that as well.

Much of that though is based on the idea that you’re joining an existing group of residents and investors. You’re jumping into a fast moving river as it were.

Which is not the case when you buy off the plan. You’re getting in at the source and there are different parameters.

For a start there will not be any opportunity to place a motion in the contract making it subject to a successful strata search. The contract has been written, signed and sealed for a while now.

Which means, failing a major error on the part of the developer, there is unlikely to be any opportunity to walk away from the deal.

And the same applies to renegotiation. Negotiation of off the plan contracts has also happened earlier.

The certainty of these contracts is part of what makes off the plan purchasing so risky. The rewards, should things go well, come from having bought when prices were lower.

Which leaves peace of mind as the only outcome of strata search. Which is not to be sneezed at. I have seen new developments registered with strange and unusual setups that later come back and bite the lot owners.

A good example of that is an Adjudicators Order where Body Corporate Gallery Vie sought an order that the electricity infrastructure of the building was common property and not owned by the Building Manger, notwithstanding the developer sold it to them.

It’s a question of what’s available

I don’t want to mislead here; it’s unlikely that information about the electricity infrastructure would have turned up in a strata search at initial settlement. Mostly because it didn’t happen until later, but also because the operation of some clause in one of many contracts entered into cannot be foreseen so early in process.

Developers, or as they become, the Original Owner, do have a huge impact on the operation of the body corporate. You can read more about that here.

A strata search is commissioned between the first EGM and initial settlement, sometimes just after settlement.

Unfortunately what’s likely to be included in the body corporate records at this stage is:

  • Community Management Statement
  • Minutes of First EGM
  • First insurance policy
  • Building documentation including As Built plans
  • Administration Agreement
  • Unsigned Caretaking and Letting Agreements (if applicable)

And that’s pretty much it. It’s possible the agreements won’t even be available.

Body corporate documents are a history, and when there is no history they don’t really have much to say.

So … should I get a search?

I’m sorry to mislead you but I can’t answer that question. I cannot say with any degree of certainty what is right for your personal circumstances. That’s a matter between you and your Solicitor.

I can tell you there will be limited information available and all you’re likely to do is check some boxes.

I can say, were it me, yeah I probably still would. Or at least I’d do it myself. I’d want to know what motions have been passed and contracts entered into.

Of course, if I had to pay $250 to get it done for me, maybe then I’d rethink. What do you think? Let me know in the comments.

photo credit: Will Scullin via photopin cc

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Comments

  1. Hi back again on a query in regard to Administration Agreements. Is there a reasonable time of such a month (30) days to go over an agreement with the committee before expiry date? What can you do it the committee doesn’t agree with certain aspects in the agreement. Also is there any way other than in Part 4 BCCMSSM REg 2008 (you know small schemes thingy) as we wish to terminate our management due to lack of communication and a lot of now expressing the total information requested.

    • Hi Janet

      Administration Agreements can only be entered into by motion at general meeting. The agreement should be circulated to all owners with the Notice of Meeting so they can review all the motions.

      If a committee doesn’t want a particular manager to be renewed they may decline to put forward a motion to reappoint. If you do that it’s a good idea to include a motion to appoint whomever you do want to appoint. Discuss the terms with whichever manager you’re planning to hire then make sure the agreement submitted matches the terms discussed.

      I’m not sure of your other query re Part 4. If you want to terminate your management agreement refer to the contract itself. It will likely set out ways and means of doing so.

  2. Hi tis Janet again. I have another query. Can a Body Corporate Management change they way they do the financials. Ours seems to have charged our audit fee before its been agreed at the forth coming AGM. Also they said it was accrued like a prepayment?? Sounds a little fishy to me.

    • Hi Janet

      You decide at each AGM whether you’re going to audit the next financial years accounts. That’s what the three months between EFY and AGM is for: audit the previous year accounts and prepare a new budget.

      Managers do financial statements in lots of different ways. It doesn’t mean there is anything untoward happening. If you have queries ask them about it. Hopefully they can explain and issues.

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