Do you want to allow your tenant to have a pet? Or maybe you are thinking of knocking out the wall between the kitchen and dining room. If you live or invest in a strata-titled property, there may be more involved in making these decisions.
When you buy into a body corporate property, you’re buying into a complex with other owners. This means that you own your individual property lot, but you share ownership of the common areas, such as pools and gardens, with the rest of the owners, collectively known as the body corporate or owners corporation.
For many buyers of strata-titled apartments, it is a must to not just look at an investment property at face value. Beyond the location, amenities, and general state of the apartment you wish to invest in, you will need to fully understand what the body corporate is all about.
These are six of the most common traps that you need to be aware of when investing in a strata-titled property:
Trap 1: Not reviewing the financials
Prospective buyers should engage a professional to search the books and records of the owner's corporation and view the finances and see any issues the owner's corporation is facing.
You do not want to enter into something that you would eventually regret so it is best to do your due diligence and dig through to uncover any potential issues and analyse whether it is still worth investing in.
Trap 2: Failing to read between the lines
Get your hands on as many committee meetings and annual general meeting minutes as possible.
Read through the documents carefully to see whether repairs are actioned quickly, how the body corporate committee members work with each other and whether there are any disputes between owners.
This is still part of the background check you must do to ensure that you are actually in the company of like-minded homeowners or investors who want the best in their homes.
Trap 3: Forgetting to check the details
You will need to have an eye for detail when investing in strata-titled property to guarantee that you get what you are entitled to.
For instance, if you’re buying an apartment that has a car space allocated to it, check that the car space or garage you were shown is correctly allocated to the apartment. The strata plan will usually detail this and your lawyer should also take you through the contract to ensure you understand each step of the purchase process.
Trap 4: Getting stuck in the present
While it’s important to ensure the property is in good condition today, it’s also just as important to ensure that the body corporate has adequately planned for future maintenance expenses, such as repainting, maintenance of plumbing and electric system, and others.
Have a good look at the condition of the building and make sure that the funds in the sinking fund match the long-term maintenance that is planned for the next few years.
Trap 5: Taking the agent’s word for it
There might be certain things that your agent might not be able to answer accurately.
One common issue is with pets — before you buy, check whether the owner's corporation will welcome both you and your pet into the building. Do not necessarily take the word of the selling agent when he tells you the block is pet friendly.
Trap 6: Being a passive owner
Once you buy the property, find out who you need to contact on your executive committee if something goes wrong in the building. Remember, while you own your own space, you are still living in a complex and you will always end up having to use the common areas which everyone collectively owns.
With this, you must take an active interest in what goes on in your building. Attend the annual general meeting so that your voice is heard, and consider becoming a member of your building’s executive committee, if you must.
This article was originally written by Nila Sweeney on 07 Sep 2011. Last updated by Gerv Tacadena on 8 June 2022.
