If you are in the market looking to purchase an apartment /strata unit there are three vital questions you should get answers to before making your purchase. These questions are not about the number of bedrooms, bathrooms, floor area or the price. Your taste, living needs and budget will determine these factors. Of vital importance to you, before you buy, is your knowledge of the operation of the strata complex. The success of your investment to a large extent, hangs on the management practices of the strata corporation. So here are the questions you need to ask your Realtor before you purchase your unit.
Is the Common Area Insured?
The areas outside of the four walls of your unit are considered the common area. The parking lot, laundry room, hallways, the roof and so forth are common to all owners. For these areas, some strata corporations are in default of these insurance policies. Others have chosen not to insure at all. If you buy into an uninsured complex and a major damage such as fire, propane tank explosion, hurricane, earthquake, should occur to these facilities, you most likely will be called upon to contribute to the repair of the damage or loss. Here is what’s more alarming, certain financial institutions will refuse to grant you a mortgage if your complex is uninsured. An insured strata complex is better for your peace of mind and investment.
Is the Water Metered Separately?
Many strata complexes have maintained a system of having only one main water meter for the households and common area. Therefore, a single payment of the monthly bill is made from the maintenance fee of all owners. The disadvantage of that system of operation is that it takes only one defective toilet bowl left running a couple days to send the water bill up an extra five to ten thousand dollars. Then everyone pays for that extra usage. Were private meters in place, only the errant owner would pay the spiked usage. If you select a single-metered strata corporation, be prepared for excessively high water bills – that you have no control of – from time to time. This fear of excessive high water bill sometimes is a deterrent to prospective purchasers when it comes time to resell your unit
What is the Compliance Rate of the Owners?
Many stratas are in a state of disrepair because their monthly revenue is insufficient to cover their expenses. This results from too few owners paying their maintenance fee on time. The compliance rate is the percentage of owners whose accounts are up to date. A well-run strata will have a compliance rate in excess of 80%. If maintenance fees are not being paid on a timely basis the strata cannot afford to effect vital maintenance, pay utilities bills, and even pay insurance premiums. Furthermore, a low compliance rate may point to poor management of the complex in matters of accounting records, budgeting and even supervision of staff. I have found that the compliance rate of a strata corporation is a vital index of the quality of management.
The quality of management of a strata ultimately has a direct bearing on the market value of your property. In order to protect your investment you need to ensure that your unit and the complex as a whole, are properly cared for. These three questions can shed a spotlight on what you are about to experience when you buy your next strata unit.