This is it, you’ve found it! Your new unit. It’s everything you’ve been looking for and you think the price is pretty good.
You’re going to take the plunge and make an offer.
Wait!
Read this first.
When you buy a unit that’s part of a strata scheme you’re taking on a portion of the responsibility for the common property.
That comes with certain risks. I’ve written about that here and here.
Because of the potential risks body corporate legislation confers a “right to view” body corporate records on purchasers, notwithstanding all strata scheme records are private information.
It’s an acknowledgement that there may be things happening in a scheme that will be prejudicial to owners, and as a purchaser you have the right to know about it.
As further acknowledgement of the complexity of body corporate matters purchasers have the right to appoint an agent, usually a strata or legal professional, who may inspect the records on their behalf.
A Pre Purchase Strata Report will be produced by the agent.
Make your offer subject to a Pre Purchase Strata Report
Once a property contract becomes unconditional cancelling it due to prejudicial circumstances is not easy.
Savvy buyers find out what’s happening in the body corporate before they fully commit to purchasing the lot.
Some buyers do that by obtaining the report during the five day cooling off period. It’s better than nothing but you’re hindering yourself in a couple of ways.
Firstly it may not be possible to get the information in time. To get a pre purchase strata report you need to access the records of the scheme and for a variety of reasons it may not be possible to do that within five working days.
And secondly you’ve put yourself in a “buy vs don’t buy” decision matrix and that’s ignoring an opportunity.
It may be far more beneficial as a buyer to renegotiate the purchase price, or some other concession, rather than simply walking away.
A better bargain may be struck.
Making the contract subject to an acceptable pre purchase strata report is a way to extend the time frame to enable completion of the report and open the door to negotiate more favourable terms based on the contents of the report.
In exactly the same as you would make the contract subject to finance or a building and pest inspection you make the contract subject to a pre purchase strata report.
A sample pre purchase strata report contract clause
I like to use the word satisfactory in the clause, because it’s such a broad word which can be extended to the many different buyers and circumstances that may arise.
Acceptable is another good one.
Our laws, including laws around contracts, are all about words, their meanings and how they are to be interpreted.
A clause such as
This contract is subject to and conditional upon the buyer received satisfactory results of a pre purchase strata report following inspection of the strata schemes records
is wonderfully broad and open ended. Who but the buyer can define whether or not the report is “satisfactory”?
Of course the seller, the agent or Solicitor will likely try and close that clause up, particularly through the use of time frames. I suggest a minimum of seven (7) business days as gaining access to records can be challenging.
Other examples of a contract clause for a pre purchase strata report may be found here and here.
What if I haven’t made the contract subject to a pre purchase strata report?
If you haven’t put a clause in your contract regarding a pre purchase strata report. All is not lost.
You will need to be quick however, as the cooling off period, when you may cancel the contract with no question asked, is five days.
When to order a pre purchase strata report
Order your report immediately you’ve entered into the contract.
By placing the clause in the contract you’ve created a condition that must be settled for the contract to go “unconditional”, just as finance or building inspection clauses do.
It’s up to you now to ensure that you do settle the condition within the time frame stated.
If you do not settle the condition within the time frame the seller may cancel the contract.
If you need extra time to settle any condition you must petition the seller for permission and they are under no obligation to grant your request.
Speed is imperative.
To provide the report a search of the strata schemes records must be completed. That will require co-ordination with the manager of the records, and in some instances that is not easy.
The sooner your order is placed the sooner the report will be returned to you.
Can I order before I enter the contract?
Body corporate records are private information. Only “interested parties” or their agents may view them.
A purchaser is an interested party.
Someone thinking of buying a unit is not.
The difference is the contract. Entering into a contract to buy a property, even one with conditional clauses, is a serious commitment. Our legal systems presumes you have entered into the contract with the intention of fulfilling the terms.
From the body corporates perspective the act of entering into the contract triggers your right to view the records of the scheme.
Which doesn’t mean you may not investigate prior to entering into the contract. You simply need to obtain permission from an “interested party” to do so.
The seller is an “interested party” and may grant written permission to a potential buyer and / or their agent to inspect the records of the scheme.
How to order a pre-purchase strata report
All orders for pre-purchase strata reports must be in writing.
Body corporates take their privacy issues very seriously. After all by looking at the records you are going find out how they get on together and what issues they may be struggling with.
Almost all body corporate managers will require written authority before a search of records can be obtained. Only a few actually demand to see the contract although they are well within their rights to do so.
At MyBodyCorpReport.com.au we accept orders in writing as email or through the online ordering system. We do not request a copy of the contract but will ask for a copy should the manager request it.
Who orders the search?
A pre purchase strata report may be ordered directly by the buyer or by their Solicitor.
It’s important to co-ordinate with your Solicitor to ensure that only one document is obtained.
Details needed to enable the search
Luckily we live in the age of email so written requests are very simple. An email or letter addressed to the agent appointed is sufficient.
The minimum details will need to be included to be able to undertake a search:
- Scheme name
- Lot number
- Lot owners name (for verification purposes)
- Contact name and number of whomever manages the records
So an email along the lines of
Please provide me with a pre-purchase strata report for Lot 57 Villa Corfu owned by John Doe. The records are managed by Body Corporate Services
is adequate to enable the search be done.
At MyBodyCorpReport.com.au we have an online order form that takes you through the same process. Figure 1 below shows what the order screen looks like requesting all the details as set out above.
Figure 1: Order a MyBodyCorpReport.com.au pre purchase strata report
Additional Useful Information
It’s enormously helpful for search agents to have as much information as they can before going into the search.
Things like the CTS number of the scheme and the plan number of the lot are very useful and help in identifying the correct body corporate and lot.
Most helpful however is an indication of what in particular you would like to check.
For instance, we recently did a search where the buyer was a fireman and consequently particularly interested in the schemes fire safety. It’s something that’s checked automatically as part of the search however as more a YES / NO criteria. Knowing the client is interested in, and will understand, the specific steps that have or have not been taken triggered the searcher to notice and record the information for the client.
We know what we’re looking for in the records of a scheme, and will certainly report on whether or not the information we expect to see is there or not.
We will also follow any threads that seem to us unusual or unexplained.
Any tips or keywords you can give going into that process is extremely helpful and allows us to provide a thorough report tailored to your specific needs.
These questions may be recorded in the email or in Details: on figure 1.
Granting permission and paying for the search
Figure 2: Page 2 of MyBodyCorpReport.com.au pre purchase strata report
Figure 2 shows the second screen of MyBodyCorpReport.com.au online order form.
You are asked to grant permission for us to view the records of the body corporate, and to indicate how the right to give permission is granted (ie are you a Lot Owner?).
The remaining details are for billing and payment.
If you elect to send an email rather than use the online order form please include your contact details and how you would like to arrange payment.
What happens next?
Once we receive an order for a search we immediately make contact with whomever holds the records (next business day if the order is submitted over the weekend).
An appointment will be made to view the records of the scheme. You will be notified by email of the booking time and when you may expect to receive the report.
Orders submitted via the online order form will automatically email a copy of the order to you. If you do not receive a copy please contact us immediately as the email address entered is incorrect.
Once completed the pre purchase strata report will come directly to your inbox within the time frame specified in the booking confirmation.
Your tax invoice will be included with the report.
Conclusion
A pre purchase strata report is an enormously useful tool when you’re buying a unit. Getting the most out of the report means creating the circumstances that allow you to either walk away or renegotiate the contract.
That’s achieved by making the contract subject to and conditional upon a satisfactory pre purchase strata report.
Order your report as soon as you’ve entered into the contract either online or via email. The search will be undertaken and returned to your nominated email address.
Act quickly; the sooner you have the information the sooner you can decide if this deal is right for you.
Unless stated otherwise all the information on this website relates to Queensland legislation.
Such a well written post. Very clear, very useful.
Only question would be, isn’t it too late when you sign a contract to do it upon the strata report? I mean, at what extend at that moment the content of the report can help you in renegotiating the price? If you’re within the cooling period you don’t need any clause to walk away (and loose your 0.25%). If you don’t like the content of the report and you want to offer less, then they can say that the price was already agreed, and reject your request. You walk away and they get next buyer in the list.
So besides avoiding you from purchasing a can of warms, (which it’s a big benefit itself!), how to make effective these conditional clause to reduce the price?
Thanks!
Hi Marta
Any contract is renegotiable until its unconditional. Hence the clauses you put into the contract as so important. Making the clause conditional on a pre purchase strata inspection indicates you’re going to carry out due diligence investigations and may cancel the contract if something prejudicial comes up. In that circumstance renegotiation of the purchase price is a way for both parties to keep the contract alive if something makes the buyer uncomfortable.
Trying to get the report done within the 5 day cooling off period is problematic. Legislation allows bodies corporate up to seven (7) days to allow access to records so there is no guarantee that you’ll get the results within that timeframe.
Also, its the entering of the contract that makes you an “interested party” and able to view the records of the scheme. Prior to that you’re reliant on permission being granted by the seller which is not always given.