What is a strata inspection report, and do I really need one?
A strata inspection report can be your saving grace when it comes to buying property. Whether for investment or commercial purposes or as your personal home, making a property purchase can be an intensely emotional journey. The excitement and anticipation make it easy to rush through the process and overlook important details.
Working with an independent licensed strata manager who can get you a strata inspection report allows you to look at your potential purchase objectively and present the hard facts you need to make a fully informed decision.
Strata expert Craig Baylis, from Coastal Strata (a property investor himself who has also delivered over 10,000 strata reports to his clients) joined our latest podcast episode and shared his valuable insights from over two decades of experience, helping you avoid costly mistakes when it comes to strata schemes.
What does body corporate and strata scheme mean?
Strata schemes, often referred to as body corporates or owners’ groups, are commonly found in multi-unit complexes where owners own their individual parts of the property such as a retail store or a residential apartment but share common areas like gardens, carparks, driveways, and gyms. Owners pay a regular body corporate fee to cover the upkeep of these common areas and other costs that might occur.
They can be small complexes with few amenities that are easy to maintain. Large strata complexes typically have a range of amenities, such as swimming pools, gyms, and lifts, which enhance your experience as an owner or tenant but tend to have higher maintenance or body corporate fees. Complexes like this often operate like big businesses, with significant budgets and complex management structures to handle the required maintenance tasks and administrative duties.
What is a strata report?
Strata reports offer you a comprehensive look at the property’s financial and legal aspects and the overall condition of the strata scheme.
Licensed strata managers assist you as a potential buyer by providing comprehensive strata reports. They understand property bylaws and sift through extensive data, strata records and information that isn’t evident during your inspections. They don’t give you advice but provide factual information and point out potential risks that you could be facing which are vital for informed decision-making.
Financial Health and Levies
The strata report outlines the financial status of the strata scheme, providing details on the administrative fund, which covers the property’s every day running costs, and the capital works fund (previously called a ‘sinking fund’), which is like a savings account for major maintenance in the future or unexpected emergencies. It will show if the strata scheme has done routine and preventative maintenance and are raising enough money to cover the upkeep.
Appointed strata managers will look for cases where the owners aren’t raising enough money or spending more than they’re receiving, ultimately increasing levies or body corporate fees and resulting in additional costs for the owners.
Details of past and planned maintenance or repair work on the common property can indicate how well the property is being maintained and if there are any significant upcoming expenses.
It will also give you an idea of any impact upcoming maintenance will have on you or your tenant and the extent of the disruption it may cause.
Body Corporate By-Laws and Renovations
The strata inspection report outlines information on the body corporate’s specific by-laws (rules), which can include regulations for tenants on pet ownership, renovations, noise levels, and other aspects of living in a communal environment.
For example, when renovating an apartment, you must understand what parts are considered common property, for example your front door. Any changes to these areas require approval from the strata committee or owners’ group since they affect more than just your own unit.
Some internal changes can directly impact common property elements. For instance, renovating your bathroom often involves messing with waterproofing and tiling. It is typically classified as common property because these aspects are integral to the building’s structure and integrity and must be done according to stipulated requirements.
You should carefully consider the body corporate’s by-laws—the rules governing what’s allowed in your building, before buying. Some buildings already have by-laws permitting particular renovations, while others might require seeking specific approval.
If you do buy and want to do some renovations, it’s best to plan your renovations transparently and seek all the necessary approvals upfront to ensure everything aligns with the strata scheme’s rules. This way, you avoid any legal or structural headaches down the line, ensuring your renovations enhance your home or business without stepping on any toes.
Short-Term Rental Rules in Strata Complexes
Short-term rentals such as Airbnb are subject to varying regulations across complexes in Australia. The regulations are determined by a combination of state laws, strata by-laws, and local council policies. Each strata complex may have its unique set of regulations regarding short-term rentals, which are established by the owners’ group. It is essential to familiarise yourself with these regulations if you plan to use your property for short-term rentals, as they can significantly impact your plans.
Besides the strata rules, you’ve got to look at the bigger picture, including state and local council regulations. State policies might give you broad guidance, but the nitty-gritty details can change depending on local council rules, meaning what’s permitted in one area might not be in another area.
If you’re considering a strata property for short-term rental terms, make sure to involve an expert who can help you understand the strata’s by-laws and the local council’s requirements to avoid legal headaches or future disappointment.
In addition, strata inspection reports also cover information on any current or past legal disputes involving the owner’s corporation that could impact your buying decision, the meeting minutes if anything noteworthy came up, and whether the complex has adequate insurance.
You might want to know if you have noisy neighbours that often get complaints or any disputes between tenants before you buy. Sometimes the drama is not worth it!
How to get a Strata Report
Overlooking details in a strata inspection report may not seem like a big deal until you get hit with a special levy or an unexpected cost to fix something in the complex.
Having a professional strata expert like Craig and the Coastal Strata crew get you a strata report on a potential purchase means you have all the support you need to make your strata purchase work perfectly. It will also help you avoid any costly surprises!
Whether you are buying a unit as an investment or your home, you absolutely need to avoid the body corporate mistakes often made by unprepared buyers.
If you want to listen to the podcast that this post is based on with Aaron and Craig, you can catch it here.
