[Podcast] 6 tips for investors when buying a strata property with Amanda Farmer

With more of us trading backyards for balconies and courtyards; apartment and townhouse living has become the norm for more Australians.

At the same time, budget constraints mean that many investors buy apartments rather than houses.

And since there is no doubt that apartment living is going to become more prevalent moving forward, you really need to understand your rights and responsibilities when owning an apartment.

Where does your apartment end and where does the common property start?

Who is responsible when things go wrong in the common areas?

And what six things do you need to know before buying into a strata building?

That’s what I’m going to discuss in today’s show with strata law specialist Amanda Farmer.

The inspiration for this chat came from an article I recently read about a Melbourne schoolteacher who thought she done all her homework when buying her first property.

She looked around her chosen area in Melbourne is northwest, found an apartment building she liked and commissioned to building inspection report before she bought the property.

But now two and a half years on, she’s facing financial ruin.

Her block’s owners are taking its builders to court over allegations of severe defects in its construction, and she’s having to pay for both repairs and her share of spiraling legal fees.

Sure, she had a pre-purchase report done by an expert – but he only examined her apartment, and nothing of the building in which it sits, or its communal areas, which all owners are responsible for.

She didn’t realize, either, that she should also have ordered a strata report that would have revealed, through the minutes of the Owners Corporation, the ongoing battle with the builders.

This is a tragic story – a 32-year-old financially ruined through owning the wrong apartment.

But it’s a story I’ve heard before, so I hope you’re going to get a new insight into what you need to do before buying into a strata property in my chat with Amanda Farmer today.

What you need to know when buying a strata property

If you’re considering buying or already own an apartment, townhouse, or villa unit, whether as a

Let’s begin with the obvious – what is a Strata unit?

Effectively it means:

• you own your unit or apartment as well as sharing ownership and responsibility for common property
• if you own your unit, you are automatically a member of the owner’s corporation which has responsibility for common property and makes key decisions affecting the strata scheme
• you contribute to the cost of running the building by paying quarterly levies
• you also have to pay money into a capital works fund, for future long-term expenses such as painting the building or replacing guttering
• there will be lifestyle restrictions in a strata scheme.

6 THINGS YOU ABSOLUTELY MUST KNOW ABOUT WHEN OWNING A STRATA PROPERTY:

1) By-laws
Includes pets, air conditioning units, noise, renovation works, hard flooring, washing, landscaping, use of swimming pool/gym, short-term letting, rules around moving in or out

2) Levies
Quarterly levies can range anywhere from $200 per quarter for a small, self-managed building (ie: with no strata manager’s fees) to in excess of $5,000 per quarter for a city penthouse in a luxury harbourfront building with concierge service and numerous facilities.

3) Lot property vs. Common property
When you purchase a unit in a strata building, you are essentially purchasing air space. That air space is known as your “lot”. Anything outside of your lot is either someone else’s lot or “common property”.

4) Meetings
Important decisions are decided in meetings: eg - whether to add to, alter or erect a new structure on the common property for the purpose of improving or enhancing the common property.

5) Strata manager
The duties of the strata manager include receiving and distributing correspondence, issuing levy notices, arranging tradespeople, keeping the owners’ corporation’s books and records in good order, including financial records.

6) Committee
A decision of the committee is taken to be a decision of the Owners Corporation, though a committee cannot decide on anything that can only be decided by the owners in general meetings.

Links and Resources:

Michael Yardney

Amanda Farmer- Director Your Strata Property

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Some of our favourite quotes from the show:

“I’m actually proud that Australia was the country that was the beginning of strata law.” – Michael Yardney

“I know that if I buy a house, I’ve got to do a building and pest inspection because it’s my responsibility – if there’s termites or if there’s rising damp, I’ve got to pay for it. What if I buy an apartment?” – Michael Yardney

“Jim Rohn taught me that neglect is like an infection.” – Michael Yardney

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