Before Buying into a Strata Development

What information is available to prospective purchasers?

Section 119 certificate

As part of their due diligence before buying into any strata development, buyers should obtain a unit title certificate (commonly referred to as a ‘Section 119 certificate’) from the owners corporation.  

This certificate details:

• The name and contact details of each member of the owners corporation executive committee;
• The name and contact details of the owners corporation strata manager;
• The place where the owners corporation’s records can be inspected, and the name and contact details of the person to be contacted to arrange inspection;
• For each insurance policy held by the owners corporation: 
  1. The type of insurance policy held;
  2. The name of the insurer that issued the policy; and,
  3. The amount of the liability covered by the policy.
• For the general fund and the sinking fund, at the date the certificate is signed:
  1. The amount of the current contribution to the fund for the unit;
  2. The date the contribution for the unit is due;
  3. Any special contributions to the fund;
  4. The period the contribution for the unit is for;
  5. Whether the contribution for the unit is in credit or outstanding;
  6. Discounts (if any) that apply for early payment;
  7. The interest accrued on any outstanding levies; and,
  8. The balance of the funds for the owners corporation.

Generally, the seller of a residential strata title apartment or townhouse will provide this document to a potential purchaser, however it should be noted that the certificate is only valid for 60 days, and therefore an additional certificate may be required in the event of an extended sale period, or for settlement purposes.

In the event of a commercial property sale, the purchaser will normally request a Section 119 certificate.

In any case, provided that the present owner’s permission is granted (in writing) to the prospective purchaser, a certificate can be made available to the buyer for a fixed nominal fee at any time, either through the buyer’s solicitor/conveyancer, or directly with us at Civium.

Inspection of the owners corporation’s records

Buyers should also inspect the records of the owners corporation before buying into the development, including: correspondence, meeting minutes, and any other documentation filed by the owners corporation.  Such an inspection allows the prospective purchaser to see if there are any records of outstanding matters that may affect them once they become part of the owners corporation.  Examples of such matters are detailed below.

This process can be arranged through the buyer’s solicitor/conveyancer, or alternatively through Civium.

What should I look for?

Particulars of the unit for sale

Buyers should find out if the specified boundaries of the unit in the registered units plan are compatible with their own expectations after having inspected the property being offered for sale.  Buyers should be aware of their unit boundaries and those of the common property in the development, paying particular attention to items such as balconies and storage spaces, as the units plans for particular developments will vary as to whether such items (or particular components of them) are deemed to be part of the individual units, or the development’s common property.

You should also investigate whether there have been any additions or alterations made to the unit, and whether these have been approved by the owners corporation, or indeed any appropriate building authorities such as the ACT Planning and Land Authority (ACTPLA).

The state of the broader complex

In addition to paying attention to the property being offered for sale, buyers should also consider the condition of the broader complex, the extent and quality of amenities contained within the complex, and the materials used in the construction of the common property.  

All of these factors are undoubtedly influential in the decision of the buyer to purchase within a particular development in the first place.  However, the buyer should also be aware that the maintenance, repairs, and eventual replacement of these items in the common property are the responsibility of all owners, and as such will be reflected in their unit levies. 

Management

Buyers should find out as much information as possible about the management of the complex itself, for example:

• Does the complex have a professional strata manager appointed, and an elected executive committee?
• Is the complex properly insured?
• Are there any outstanding matters that may give rise to special levies being required? (E.g. unscheduled capital works on the complex, such as building defects)
• Does the complex have any repeated history of insurance claims for storm damage or water leaks? Or repairs and maintenance expenses for drainage or sewerage repairs?
• Are there sufficient funds in the complex’s sinking fund to cover long-term projects, refurbishments, repairs and maintenance?

Owners corporation rules

As well as the management structure of the development, buyers should also familiarise themselves with the rules of the owners corporation to ensure that these are consistent with their own expectations and lifestyle. 

Costs

Any purchaser looking to buy into a strata development needs to be aware of how much they will need to contribute in unit levies, sinking fund contributions, and any potential special levies, as part of their shared ownership in the owners corporation.

The likelihood and extent of any variations to these contributions may also be found in the owners corporation records.  Potential purchasers should consider whether they can afford such levies in totality, as well as their ability to meet the periodic payments required throughout each year for such levies. 

Outstanding debts to the owners corporation 

In addition to the above future ongoing costs of owning a unit within a strata development, purchasers must be particularly vigilant in ensuring that any (and all) liabilities of the unit to the owners corporation are settled as part of the broader settlement process.  

Any liabilities of a unit to the owners corporation are transferred from owner to owner, and therefore it is the responsibility of the prospective purchaser, and their conveyancer, to ensure that all such liabilities are identified and settled as part of the transfer of ownership.