It is advisable to obtain a Strata Report before purchasing a Home Unit. The report can reveal a number of matters which may influence the price you’re prepared to pay for the unit or even whether you purchase the unit.
Some of the matters revealed by a Strata Report are the following:
Financial State of the Owners Corporation
In addition to establishing what exactly are the Strata Levies, both the Administrative Fund Levy used to cover reoccurring administrative expenses and the Capital Works Levy (previously known as a Sinking Fund Levy) which is used to create a pool of savings to cover major expenditure in the future such as painting, the Strata Report can indicate whether there is major works to be done which will not be covered by existing resources and therefore a Special Levy will be created. A Special Levy is a one off requirement for each owner to pay an amount of money which will fund the intended expense.
The Strata Levy will also indicate the present financial position of the Owners Corporation. It will reveal the amount of savings in the Capital Works and hopefully confirm that the Administrative Fund is not in deficit. If there is a considerable balance in the Capital Works e.g. $60,000.00 and the overall condition of the building in which the Strata Unit is located is very good, then there is little cause for concern. If however the balance is extremely low and the condition of the building is poor, there may be insufficient funds to cover repairs, maintenance and upgrades in the future and this will result in either substantially increased levies or a Special Levy to fund those works.
Condition of the Building
The Strata Report will indicate either in the commentary or by reviewing minutes of the Annual General Meeting of the Owners Corporation which are usually provided with the Strata Report, whether the Owners Corporation is aware of any major building defects or substantial remedial work to be done to the building in the near future. The report will also detail what repairs have been done in recent times.
Insurance
The Strata Report will confirm that all the necessary insurances are in place and most importantly the amount of insurance cover that has been taken out in respect of the building. The report will also indicate when the last valuation of the building was done to establish what amount of insurance cover was needed to adequately insure the building on a replacement basis.
Other Matters
The Strata Report will usually indicate how many of the Strata Units in the building are owner occupied. It is usually regarded that if there are more owner occupiers in the building, it will generally be a quieter more peaceful building than a building which has a majority of tenants.
The Strata Report will also confirm whether a Strata Manager has been appointed to operate the Owners Corporation and most importantly by viewing the various issues raised in the Strata Report, a buyer can be advised as to whether it appears that the Owners Corporation is well run. In the long run a well run Owners Corporation will result in a better building in which to live or invest and it will also usually mean the Strata Levies will be lower than in a mismanaged Strata where errors have occurred.
The Strata Report will also indicate the degree of harmony in the building. Specifically it will detail the number of disputes in the building, which have been referred to the Strata authorities.
In conclusion, then purchasing a Strata Unit the expenditure of $300-$450.00 on a Strata Report is well justified and strongly recommended.