In a fast paced city lifestyle there are plenty of areas that unconscious spending – the takeaway meal here, the unused gym fee there, parking fines or automated late fees – add up to emptier pockets.
But the unconscious spender is nothing compared to the uninformed strata holder who wonders where their money has vanished to.
Here we’ve outlined the three key times smart unit owners know when and how to avoid the major strata living money munchers.
1. Before You Buy
Keeping hold of your money has a lot to do with due diligence.
Smart unit owners:
Don’t take the agent’s word for it
It is not an agent’s job to be across the unit blocks by-law details or have an opinion about the state of major infrastructure. So while they may tell you that the strata committee will welcome you and your pets or stained external concrete is nothing to worry about, that may not be the case. The lifts in a building that is more than 20 years old, for example, are probably coming to the end of their economic life and will need to be replaced at owners’ expense but it won’t feature in agents’ sales spiel.
Get a strata inspection and review the financials
The Institute of Strata Community Australia (SCA) recommends prospective buyers engage a professional to ‘search the books and records of the owners’ corporation, to view the finances and see any issues the owners corporation is facing’. The thousands of strata owners who did just that before they bought and saved themselves from a ‘special levies hell’ would concur.
IUM has specialised in thorough strata inspections for 20 years.
2. After You Buy
Smart unit owners:
Understand the by-laws. Period.
Money munching delays can happen when there is a dispute over who is responsible for what.
State legislation spells out standard by-laws. But each strata committee can amend and add to these rules, which mean by-laws will vary from block to block. Smart unit owners understand the rules and work out who is responsible so action can be taken when problems arise.
Take a step towards improving governance and good management with a Strata Governance assessment
An assessment will help you, among other things; understand if your unit’s future value is being well managed. It will help reveal how well equipped your owners corporation is to make the best decision for your unit block – your collective asset.
Avoid being a being a passive owner
Once you purchase your unit, find out who the decision makers are on your strata committee if something goes wrong in the building. Attend AGMs so you can understand the block’s main issues and consider joining the strata committee so you can influence governance improvement and seek collective asset enhancement advice from experienced managers.
Plan for a bright future
While it’s important to ensure the property is in good condition today, it’s also just as important to ensure that the owners’ corporation has saved for future maintenance expenses.
In NSW, now new laws require owners corporations to produce a 10-year budget for their capital works to prove it can cover upcoming expenses. Given many of these are underfinanced, the new laws may force a number of owners corporations to raise levies.
Manage special levies when they occur
Previous reports have found up to 65 per cent of capital works funds in NSW – money kept in reserve by strata committees to pay for maintenance – are underfinanced.
It is not unusual for repairs for anything from ‘concrete cancer’ in seaside suburbs to rectifying 30 years of neglect of amenities to cost more than $1 million in some Sydney suburbs.
All owners corporations require owners to contribute to an administration fund to cover day-to-day expenses such as electricity bills and gardening and a capital works fund to pay for capital expenditure on such items as painting and major repairs to common areas.
But if major unexpected repairs are required to a property, or the money in a capital works funds falls short, a body corporate has the right to raise a special levy to cover costs.
A special levy can only be imposed if a resolution is passed by a majority of owners at a general meeting. But once the majority has ruled, everyone has to pay, even those who voted against the levy.
Strata committees, under the advice of experienced managers, can handle special levies and large maintenance works to mitigate budget blowouts. A coordinated approach will always assist in saving time and money.
Order a section 184 certificate
Previously known as a Section 109 certificate, this document is designed to assist owners in understanding the levies, special by-laws, outstanding levies and the current managing agent among other key information. A copy of it may save you a lot of money and heartache if you uncover a badly-governed and managed block.
Ensure they get building and pest inspections
Engaging an inspector with experience of units and unit complexes is important because they know what to look for in terms of current conditions and expected short and mid-term problems to be aware of.
Read between the lines
AGM and committee meeting minutes can make very important reading. These documents reveal if repairs are actioned quickly, how the strata committee members work with each other and whether there are disputes between owners and what consistently constitutes these disputes – whether it’s noise or building defects, ageing amenities, pet or parking issues – that make for an unharmonious environment.
3. When you are ready to sell
Buyers who understand the importance of the collective asset avoid inharmonious environments with special levies looming for works that a ‘stitch in time’ could have saved.
In the best case scenario, good governance and consistently strong management will have enhanced and protected smart unit owners’ entire unit complexes. This would help to raise the equity in their individual unit.
Years of good decision making by strata committees and experienced management will be revealed in the due diligence prospective buyers undertake and ultimately affect a unit owners final selling price.
TIPS TO AVOID THE STRATA MONEY MUNCHERS
- Know a property’s by-laws before you buy to ensure there are no restrictions that affect your lifestyle.
- Understand the new NSW strata laws and how you can take advantage of them.
- Attend your strata committee meetings or make sure someone who is attending has your “proxy”. Decisions made at meetings may cost you tens of thousands of dollars.
- Join your block’s strata committee, and ask them about good governance policies. An experienced strata manager who you can trust understands not just maintenance but protection and especially enhancement of your unit complex is invaluable. Make sure your strata committee is up to date with the performance of your property’s manager.
If you’re not happy with your current strata manager, we would be delighted to speak with you as soon as possible about your owners corporations goals. We can meet on site, take a tour of your unit block and discuss the best ways to go forward.