Across Australia the growth of strata title buildings is continuing. Over the Christmas break NSW residents would have looked on in horror at the structural defect concerns raised at the Opal Tower building in Olympic Park causing an evacuation of the complex. While the Opal Tower situation is obviously an extreme one, it did get me thinking about what to look out for when buying a strata unit.

The most important thing you can do is to do you your due diligence. This is absolutely crucial and cannot be emphasised enough. Don’t hide under your desk avoiding it like Ollie the labradoodle (see photo).

Three key areas to consider are:

1. If you are buying off the plan you should research the builder and the developer.

Use the Fair Trading licence check to see if they have the appropriate licence and whether they have had an disciplinary action taken against them, look at their website to see what other developments they have been involved with, go out and look at those other developments and, if you can, talk to an owner occupier to see if they have had any building related issues.

Studies have found that approx. 80% of new buildings have defects. As a potential purchaser you should be aware of this and be investigating what approach the builder has to remedying building defects. For instance, have they previously gone back to site to repair the defects or have they been dragged kicking and screaming to site to face their obligations?

This research won’t protect you against building defects but at least you will know what the developer and builder’s approach to defects will be.

2. Seek legal advice and have your lawyer or conveyancer obtain a strata search.

In all too many of the cases that I see lot owners did not want to spend the money to obtain a strata search and they have had an unpleasant surprise.  After you obtain the strata search, read it. That’s right, don’t just obtain one, actually read it. What you want to see is a well -run scheme with no to few disputes. The strata search should at a minimum contain financial reports for the scheme, meeting minutes and also indicate if there have been any disputes in the scheme, and in particular with your lot. Reading the report may lead to further questions such as:

(a) is there enough money in the capital works fund – if not you may find a special levy in the future to cover a repair.

(b) why there is such a large amount being spend on consultant’s fees? Does this mean there are issues with the building? Does it mean professional services such as lawyers have been engaged and if so, what for?

(c) why has a dispute arisen? What steps are being taken to resolve it? Will it mean there will be a special levy in the future?

This is not to say that any of the above is necessarily a negative. It just means that if you know there may be an issue you can budget for it or consider it when deciding whether or not to buy the lot. For instance, if you know the vendor has complained about noise you should consider that you may also have the same issue. If you can see that pets are banned, do you really want to have to challenge the by-law doing so?

3. Read the by-laws for the scheme.

They are part of the contract for sale. They are the rules by which you, or if you are fortunate enough to have an investment property, your tenant must live by. The by-laws may for instance restrict pets, restrict smoking, restrict the use of your lot or enable certain works to be conducted. By reading the by-laws you will understand what the rules of your new community will be.

You should also read the by-laws to double check to see if any works to your potential new home were authorised and, if they were, on what conditions. This is important. Why? If you go into a 1980’s building and notice that the bathroom has been completely renovated then it is extremely likely that the common property was altered in doing so. If so, the lot owner should have obtained a by-law to authorise that work. In the case of bathrooms common property involves the waterproof membrane which is damaged when tiles are removed and replaced. Most works by-laws require the owner of the lot (which would be you if you purchased the lot) to be responsible for any damage caused due to the renovations. If for instance the waterproof membrane fail in the future you may be required by the by-law to remedy it.

Again, I cannot emphasis how important research is. It may not save you in all cases but at least it should mean that you are going into the purchase with your eyes wide open.

Again, I cannot emphasis how important research is. It may not save you in all cases but at least it should mean that you are going into the purchase with your eyes wide open.