Finding a good strata property in Sydney is always challenging and sometimes it is easy to understand why some Sydney property buyers try and avoid strata altogether. But given the cost of Sydney real estate, Sydney property buyers may not always find this possible so it is essential to carry out satisfactory research to ensure that you do not end up buying into a Sydney strata scheme saddled with problems. If you are unfamiliar with strata reports, it can be difficult to interpret the information and know what follow up questions or enquiries to make. Given the prevalence of poor-quality apartments and badly managed strata schemes across Sydney, it is important for the buyer to accept responsibility for conducting thorough due diligence.
As Sydney’s leading buyers’ agents for busy professionals, here are our top 5 things to check when searching for strata titled properties in Sydney:
Financial Health
When looking into the strata records, one of the most important checks for a buyer to undertake is the overall financial viability of the strata scheme. Are there any debts, special levies or major upcoming works that will blow the budget? It is essential to check the balance of both the administration fund and the capital works fund. The administration fund is for the day-to-day expenses (and it is acceptable for this account to be run fairly lean) whereas the larger capital expenses such as painting, balconies, paving, and roofing works should be accounted for in the capital works fund. The capital works fund must be at healthy levels to account for any planned or unplanned large capital expenses. Buyers must factor in the number of units inside the complex compared to the fund balance and assess if the owner’s corporation is keeping up with the required maintenance. When the capital fund balance is insufficient, special levies may need to be raised for any large-scale repair or maintenance works. Check if there have been any recent special levies struck or the possibility of upcoming levies within the strata minutes. Each unit will be required to pay its share of special levies based upon the “unit entitlement” allocated to the unit in question. You can find out the unit entitlement from the Strata Plan in the Contract. It is also important to check the value the building has been insured for and whether there is a valid certificate of currency. To see if the insured amount is sufficient, there should be a recent valuation which should be in keeping with or less than the sum insured.
Proactive Strata Management
Buyers should gather enough information to determine if they are happy with how the strata is being managed. This includes researching the strata management company to ascertain whether they have a good reputation and are likely to be responsive. Buyers should also consider if the owners corporation are forward thinking and proactive in their management style. Search for records such as the 10 year capital works forecast and see if the owner’s corporation are actively taking on board the maintenance requirements and are investing in the upkeep of the complex. Another factor to check is the state of harmony within the building. Check for any legal disputes and other matters affecting the complex. Consider whether the owners corporation meets their compliance obligations and takes on proactive reporting. For example, check if the Annual Fire Safety Statement, Asbestos Register and insurance are up to date.
Combustible Cladding
New laws requiring the removal of combustible cladding came into effect in 2018 following the fire disasters of the Lacrosse Building in Melbourne in 2014, and the Grenfell Tower disaster in London in 2017. To understand if an apartment block has combustible cladding or if an assessment has been commissioned, buyers need to conduct several checks. These include asking the strata manager and the vendor about any inspections, orders, resolutions passed or other information relating to fire safety. You should also inspect the strata records which includes reviewing the strata minutes for any decisions made about investigations and compliance matters. You can enquire with the local council directly about any outstanding compliance or fire safety orders relating to the building. And finally, you can organise your own independent building inspections for a professional to report upon the cladding and building materials.
Water Penetration
Amongst the range of defects that occur within strata complexes across Sydney, water damage is one of the most common. For example, in 2021 insurer CHU’s published an article stating that 45% of residential strata claims were the result of water damage. To obtain a clearer picture of the extent of water related damage, how serious it is and who is responsible, strata management company, PICA Group suggests firstly understanding where the problem originated. This includes looking at the records to ascertain whether the problem originates from within the unit or if the source of the problem is in the common areas such as in the car parks, stairwells, gardens, foyers. If the problem originates in the common areas, then this will most likely be the responsibility of strata to rectify. However, extensive water penetration problems can cost a strata scheme hundreds of thousands and sometimes millions to fix and individual owners may have to wear higher levies or special levies as a result.
Neighbouring Properties
As with buying any property in Sydney, buyers should also investigate the properties surrounding the complex. There are obvious and less obvious factors which could impact upon the use or the future value of the property. For example, research if there are there any recent development applications for any surrounding developments which could obstruct views or light. Check if any of the property or neighbouring properties have been or are likely to be acquired for major Government infrastructure projects such as WestConnex or the Metro. A large number of properties throughout the Inner West now have tunnels below them or find themselves located close to smoke stacks. Most Sydney property buyers are aware of the flight path. Other items to check are the proximity to any major power lines, electrical substations, water courses and industrial properties for example.
If you feel out of your depth conducting this level of research, you should seriously consider investing time in selecting the right property team who will be able to undertake the right levels of research for you. Your property team should include a conveyancer or property solicitor, a strata inspector who will undertake detailed reports for you and of course, a Sydney buyer’s agent who will help you track down vital information as well as find the right property in the first place.
Call Nick Viner, Principal on 0405 134 645 today.
