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Checking beyond the apartment walls - August 2019

By Rich Harvey, CEO & Founder, propertybuyer.com.au

Given the string of stories in the media about problems with new and recently built apartments, those in the market for a unit could be forgiven for wanting to take a closer look before they buy.

A number of developments in Sydney have been plagued by issues, from waterproofing to structural integrity, with owners hit by uncertainty, homelessness and potentially millions in remediation bills.

In Melbourne, the ongoing saga over potentially flammable building cladding continues to raise concerns as well.

But apart from a physical inspection of a building you’re interested in, what else should you check? Some of the most important considerations are beyond the four walls of a unit and can have serious, far-reaching financially consequences if they’re not dealt with properly.


History check

Unit complexes are governed by a committee made up of owners, who take care of the day-to-day requirements and also plan for the future.

Body corporate groups usually enlist the services of a professional management company to ensure compliance on things like fire safety are met, while also balancing the budget that’s made up of strata contributions.

But apart from gleaning a brief statement provided by the agent, detailing the amount of contributions required, many unit buyers don’t take the time to dig deeper.

There’s a wealth of information to be found by pouring over the minutes of the body corporate’s annual general meeting, where any issues that need to be addressed, improvements that can be made and problems that have been identified are covered off.

It’s well worth securing copies of the AGMs going back a few years to see what’s been happening at a committee level as well.

You can see if there are any problems that have cropped up or any looming potential expenses in the near future. You can also get a sense of how proactive the body corporate is when it comes to maintenance and improvements.


Balance the books

A major consideration when it comes to buying a unit is the sinking fund.

For new or recently completed developments, there’s not going to be a huge amount in the sinking fund because it takes time to build up the kitty. Also, most developers promise cheap contributions for the first year or two to entice investors, which can be a bad thing in the long run when the body corporate needs cash.

Check the status of the sinking fund now and also review the budget going back a few years. Where has money been spent? Is enough being put aside?

For older buildings, it’s not unusual for strata levies to be left alone for years on end, meaning they rarely reviewed to check if they’re adequate for the modern era. Suddenly, an ageing building requires a new roof, or a new driveway and the committee finds there’s not enough money.

Special levies are required in these situations and be hefty, especially if the scale of works is significant.

Take that problematic building in Mascot in Sydney. The repair bill is likely to hit $10 million, which owners will likely have to fund themselves. Ouch.

Double check when contributions were last increased and determine if they’re adequate to look after work at today’s dollars.


What’s yours?

Sometimes with unit complexes, particularly those older style ones, it’s not clear who owns what bit of land in the block.

It’s worth asking your conveyancer to do title and plan searches so you can clearly understand what areas you own, which are your ‘exclusive use’ and which are out of bounds.

I remember hearing a story about a poor couple who bought a ground floor unit in Brisbane several years ago that had a lovely fenced courtyard at the front of it. It turns out, it wasn’t theirs – it was common space that a new committee chairman wanted to resume for the benefit of all owners.

Similarly, car parks in some older complexes might’ve been bought and sold between owners over the years without the proper paperwork being exchanged. The last thing you want is to discover that your spot isn’t really yours.

Who’s running the show?

A good body corporate manager is worth their weight in gold.

They make sure the gardener turns up and does a good job. They send out plumbers if the drains in the car park get clogged with leaves. They make sure the fire safety equipment meets standards and doesn’t leave you open to a fine.

And they make appropriate recommendations on your body corporate budget and expenditure to ensure you stay in the black and don’t become at risk of slipping deep into the red.

But sometimes businesses have one over-worked person juggling hundreds of complexes with little time to pay attention to them all.

Do some digging to see how your body corporate manager rates.

Speak to other owners about how responsive the managers are and how attentive they’ve been when issues pop up. Look for reviews and recommendations from their former and existing clients.

Maybe even pop in to say hello to get a sense of their management style.


Who built the place?

And finally, given the recent startling examples of what happens when a dodgy builder constructs a unit block, do some research on who developed your potential apartment.

Conduct some detective work and find out a bit about the builders behind the block you’re interested in. How did the project go? Were there are delays from a certification perspective? Check council minutes for any mention of the project and also review the digital archive of the development planning documents (if they’re still available).

What other projects has the builder done? Where are the builders now? Are they even still around?

Look for complaints registered with authorities over their other projects in the past to get a sense of whether issues have cropped up regarding their work. If you can find the name of the fellow who ran the company and you discover that he’s run several others since that now no longer exist, your ‘bad build’ radar should be pinging.


Sometimes it takes an experienced eye to spot the non-physical influences set to effect long-term value. Make sure you call on experienced experts to help navigate these often-unseen landmines.


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