14 More Red Flags in a Strata Search

I did a search recently where a special levy was issued. A special levy is one of many red flags in a strata search, an indication there may be bigger problems so, hey, you best investigate.

On that occasion the small special levy turned out to be the tip of a complex situation that’s going to end up requiring a significant, permanent increase in levies payable.

There are lots of these red flags, things that might indicate something more peculiar and wide ranging going on. I’ve previously written about 15 of them here.

This article is 14 more red flags to watch out for in a strata search.

1. Levies are the same year in year out

Levies should increase each year, by just a small amount, in order to keep up with CPI. If the levies remain the same it can be an indicator that there is no leadership in the body corporate and the body corporate manager, if there is one, is on autopilot.

2. Missed levy issues

Body corporate levies are best when they’re issued like clockwork. It keeps the flow of cash smooth and, hopefully, allows lot owners to form a paying habit. Missed levy issues are unusual and missing more than one is very rare indicating a problem in management with likely implications for cash flow.

3. Levy arrears are not being chased 

The first rule of debt collection is “ask for the debt to be repaid”. If a body corporate is not chasing their overdue levies it severely reduces the likelihood that said levies will be paid and indicates poor management.

4. Missed AGM’s

Body corporates have late AGM’s all the time however it’s rare to miss an AGM altogether. When AGM’s are missed it’s a clear indication of problems with the body corporate management, be it contractor or Committee, probably both.

5. The body corporate manager has abruptly resigned

If a body corporate manager resigns it generally indicates that the Committee is doing something the body corporate manager is uncomfortable with, usually in contravention of legislation. Alternatively it may indicate the behaviour experienced by the manager is unacceptable.

6. Many Committee resignations

Being on the Committee is a demanding and sometimes thankless job. Still, most elected members do tend to renominate every year for a few years at least. Consequently if owners join and then resign from the Committee quickly it’s an indication of problems. Some examples are: someone on the Committee / management who’s hard to get along with or an inability to get anything done.

7. There are no complaints in the body corporate records

Lot owners pay levies and as a result they tend to take a great interest in what those levies are being used for. The key vehicle for that is written complaints along the line of “hey, such and such is leaking”. If there are no complaints in the body corporate records it may indicate the residents are all tenants who have no interest in reporting issues. Alternatively it may mean that complaints are being ignored.

8. Constant complaints about the same thing(s)

Complaints are good. It means the owners are taking an interest. However, if the same complaint comes up again and again it’s an indication that the issue is not being addressed. If not, why not? Is it that nobody is taking action or is it that the action taken is not working?

9. Lots of Adjudicators Orders over a long period of time

Complaints may be good but there is such a thing as vexatious complaints. That’s a situation where a lot owner(s) and body corporate are engaged in a battle with one party or the other, possibly both, refusing to compromise. Adjudication happens when agreements can’t be reached. A lot of Adjudicators Orders over a long period of time can indicate a vexatious owner / Committee. NOTE: That doesn’t apply to very large buildings (300+ lots) where many Orders are expected due to many owners.

10. Few body corporate records

Even a small building will generate a fairly hefty amount of paperwork over the years. If there are few records that either means they’ve been destroyed or lost or the details were never recorded in the first place. Neither inspires confidence.

11. No Community Management Statement or by laws

The Community Management Statement is a foundation document. It’s surprising then how many body corporates don’t have a copy, or for older buildings, a copy of the registered by laws. It’s an indication that things might not be managed according to legislative requirements, and indeed the registered requirements of the scheme.

12. No Insurance Valuation

An Insurance Valuation is required under legislation and its also a tool for ensuring the scheme is adequately insured. If there is no valuation it’s possible that the building is under / over insured. Over-insuring is a waste of money whilst under-insuring puts everybody at risk.

13. No Fire Safety Records

Fire safety regulations for buildings are fairly onerous, and with good reason. Fires are dangerous. It’s comforting then to see in body corporate records that body corporates are giving thought to minimising fire risk and promoting safety. Correspondingly it’s worrying if you don’t see any mention.

14. The builder / developer / building manager are the same entity

Selling the Caretaking and Letting Agreements for a body corporate is “icing on the cake” for developers. Consequently when they don’t sell the Management Rights it can indicate that they choose to be involved with the body corporate process for other reasons, possibly because there is more development in the works and they wish to retain control where they can.

The above are all indications only, reasons to dig a little deeper to understand what’s really happening and from there assess whether or not it’s likely to impact on you.

As with all problems within a strata scheme the existence of said problems is not automatic reason to cancel a contract or put your unit on the market.

Everyone has their own circumstances and resources and each person must make their own decision, preferably with full disclosure and understanding of the situation.