Why get a strata report? There are two key reasons to check out a body corporate or owners corporation before your commit financially and finalise your purchase: cancellation / renegotiation of the deal or peace of mind the building is sound.
Buying into a body corporate is not the same as buying a house.
A lot of people would consider that sentence and go, duh, one’s a house and ones a unit. Seems pretty clear to me.
But that’s a far too simplistic view of body corporates. Or units for that matter. An apartment building, even a large tower, isn’t necessarily strata titled and therefore doesn’t have a body corporate. It is possible for one entity to own an entire building. A hotel is an example.
And body corporates are used for all sorts of property arrangements from apartment buildings through commercial sheds, rural property subdivisions and even free standing houses. At heart a body corporate is just a joint ownership system.
The joys of joint ownership
Joint ownership is both the driving power and biggest downfall of body corporates.
On the one hand sharing costs allows many people to live a luxurious lifestyle, usually in a pretty fabulous location, all at a manageable price.
But on the other hand every owner is jointly responsible for maintaining and managing a complex, heavily legislated structure.
Along with joint ownership comes the much more difficult prospect of communal living. Some people are well suited to this lifestyle and some just gum up the works for everyone else.
And then of course there’s the financial aspects to consider, the same as with any property. The biggest problem for lot owners in a body corporate is that they may find themselves financially responsible for actions they neither approve not want.
Joint ownership certainly has its benefits, but it also comes with some fairly serious potential downfalls.
Due diligence research
The same is true of any market experience buying from another person not required to give you a guarantee. Sometimes people buy lemons,
whether they’re buying a pair of shoes off eBay, a car or an apartment or house. These purchases are based on the idea Caveat Emptor, let the buyer beware.
It is the responsibility of the buyer to undertake their own due diligence investigations before they commit to buying.
Identify the problems before you buy
Most buildings and body corporates alike have issues of one sort or another, just like most cars do, and, well, most people for that matter.
If we can identify the problems before we buy then we can mitigate the problems or walk away, which saves a lot of time and effort and in some cases a whole heap of money.
Which is why there are so many thriving businesses offering reports.
A building inspection identifies soundness in the structure of a property.
A pre-purchase vehicle inspection can tell us what issues a car has.
On eBay you can’t really check the merchandise so they’ve developed a complex system for checking the Seller’s history.
And a strata report tells you about the Body Corporate or Owners Corporation you’re about to become partially responsible for.
All these reports are aimed at identifying the outliers, the glaringly obvious, and usually huge reasons to walk away from the transaction. For instance, the building has termites, the car has been in a major accident or the seller has a history of non-supply.
For strata schemes it can be any number of things from major building defects, through endless disputes and poor management to the far more common spiralling financial costs.
Knowledge is power
What’s a deal breaker for me isn’t necessarily a deal breaker for you, or vice versa for that matter. Personal circumstances, risk tolerances and finance options are a lens through which each purchaser views a strata report.
Which is why strata reports tend to be fairly comprehensive. As search agents we’re not aware of any of that information so we provide reports that include anything that may have a potential impact.
It’s up to each purchaser then, with the help of his Solicitor or Conveyancer, to look through that lens and decide, from a position of full disclosure, if the deal is worth pursuing.
Or alternatively whether a more favourable position may be negotiated with the Seller.
There aren’t a lot of problems that couldn’t be made much more attractive by shaving an amount off the purchase price.
Peace of mind
The worst case scenario with strata reports is there’s nothing to report.
That could mean there’s something glaringly obvious by its absence, which tells its own story in a way.
For other buildings it’s a sign of a healthy well-maintained building with a strong, co-operative community.
And, since you’re planning on getting involved with these owners, that’s a wonderful thing to know in advance.
Conclusion
Why get a strata report can be summed up in two key reasons. They are:
- To identify issues before you buy so that you may a) walk away from the contract if the issue is too detrimental or b) renegotiate more favourable terms
- To obtain peace of mind the body corporate is financially sound, well managed and well maintained
A lot of people just take the chance it will all be OK, usually to their detriment. Remember, you’re investing and living jointly and there are no guarantees you’ll agree with what’s going on. It’s best to find these things out in advance.
Unless stated otherwise all the information on this website relates to Queensland legislation.
