Inspection of strata books and records - important precaution
In the course of negotiating an offer for the purchase of a strata title property or before attending an auction, it is very important for the purchaser to inspect the Owners Corporation’s books and records.
The inspection will disclose the extent to which the Owners Corporation have complied with the requirements of the Strata Titles Management Act in relation to, for example, records of notices and orders, books of accounts, Minutes of meetings, fire safety compliance, balances in the administration and sinking funds and other matters.
An examination of the Minutes may disclose building defects, repairs and maintenance commissioned and carried out and whether for example there is a building claim pending against the original builder. The records may include independent building reports commissioned by the Owners Corporation to ascertain the extent of remedial work required to rectify defects which have emerged in the property.
These Minutes may also disclose whether special levies have been struck or are proposed for repair or rectification work. These special levies and their impact upon the potential purchaser may be significant.
An inspection should indicate the extent of the building insurance and whether the insurances are backed by a building insurance valuation. A well run Owners Corporation will have commissioned a sinking fund forecast to implement a program to accumulate sufficient funds to meet future maintenance and repairs of the property.
Additional matters covered may include for example whether there is a history of disputes between strata owners or with the Owners Corporation, whether new or amended by-laws have been passed but not registered as at the time of proposed exchange of Contracts (for example by-laws relating to the use of the common property, by-laws creating exclusive use of parts of the common property, etc), and whether the Owners Corporation is involved or may be involved in pending litigation.
Due to the complexities of strata title legislation and the statutory obligations placed on Owners Corporations, it is advisable to engage a specialist strata search company for the preparation of a pre-purchase report. The prospective purchaser should carefully examine all aspects of the detailed information such reports provide and satisfy himself or herself what is revealed as to the overall standard of management of the strata complex by the Owners Corporation.
Lee Jackson
Consultant
T: +61 2 9390 8312
E: lee.jackson@holmanwebb.com.au