When you’re looking to buy as part of an established development, strata reports can be a window into what’s happening within a property and the overall health of a building.
But understanding the ins and outs of these reports and jargon can be tricky. Having a professional review them on your behalf is essential, but it can get costly. Especially if you’re viewing a few different potential properties and having to pay per report.
It’s good idea to know what to initially look out for in a strata report, so you can know when it’s worth bringing in the professionals to help you make a final decision.
Understanding the OC Certificate
An OC Certificate is an essential tool on your journey to purchasing a strata-titled property. It covers everything from owners’ corporation management and financial overviews to maintenance issues (past and ongoing) and the overall condition of the building.
Understanding the strata report will help you:
- Make an informed decision about whether this is the right property for you.
- Gain financial transparency as you’ll see what the strata fees and associated costs are.
- Understand any risks associated with the property, such as any upfront or ongoing repairs.
Key Financials to Check in the Owners Corporation Certificate
Strata schemes rely on regular levies paid by unit and property owners, which are split between administrative expenses and long-term maintenance through the maintenance fund.
Long term maintenance funds may be quite large if they have been accumulated over a number of years, so it is worthwhile checking if they are in an interest bearing account.
When reviewing a strata report, it’s important to assess the owners’ corporation’s financial position to determine whether these fees are adequate to cover potential costs down the line. The report should also let you know whether special levies are regularly applied to cover large financial oversights. If this is the case, it could be a red flag for poor financial management.
Key financials to check include:
- Administrative and capital works fund balances.
- The capital works fund forecast, including its level of detail.
- Whether current levies are sufficient to meet predicted expenses.
- Planned upgrades or major repairs to common property.
- Insurance coverage.
Governance and Rules Overview
The governance and rules of a strata property shape how the building is managed and how residents should live within it. The OC report outlines the bylaws, decision-making processes, and management structure of the owners corporation.
Reviewing these details will help you identify any restrictions, understand your rights and obligations, and assess whether the strata is well-governed or prone to disputes or poor management practices.
Building and Maintenance Issues
Ongoing building and maintenance issues can significantly impact the liveability of your new property. The AGM minutes should cover past significant work and any potential building-wide maintenance in individual lots and common areas.
Some issues to look out for include:
- Ongoing, deferred or unresolved repairs.
- Planned major repairs with a budget that doesn’t look like the current financial forecast will cover it.
- Structural issues such as concrete ‘cancer’ (spalling), major cracks or building shifts.
- Ageing or out-of-date building services such as lifts or fire systems.
Any Current or Pending Disputes
The strata report will disclose any ongoing or pending disputes involving the owners’ corporation, residents, or any contractors. Disputes can signal poor management or maintenance issues, and they’re worth checking in the report.
While it’s essential to check the nature of any disputes, if you can see a long history of disputes that seem to take a long time to resolve, it might be a red flag for potential future issues.
According to section 159 of the OC Act: The owners corporation must report to the annual general meeting in relation to—
(a) the number of complaints made under this Division; and
(b) the nature of the complaints; and
(c) the number of matters on which action was taken under this Division; and
(d) the nature of the matters in respect of which action was taken; and
(e) the number of matters in respect of which an application was made to VCAT in respect of an alleged breach of an obligation imposed on a lot owner or occupier of a lot by this Act or the regulations or the rules of the owners corporation; and
(f) the nature of the matters referred to in paragraph (e); and
(g) the outcome of each action or application.
Red Flags and Warning Signs
The OC report is there to help you decide on your property purchase with confidence.
Knowing what to look out for can help you decide whether to have the report professionally reviewed or to pass and move on to another option.
The red flags the AboveOCM team advise you look out for if you’re going through this process include:
- Low or insufficient capital works funds to cover forecasted maintenance needs.
- Recurring maintenance issues or deferred maintenance, especially for building essentials like fire systems.
- Any major building or structural issues.
- Lengthy, recurring, or pending disputes or legal issues.
- Frequent or excessive special levies.
Looking for Some Professional Support?
A careful review of the OC report supports a confident buying decision.
If you’ve had a look through the report yourself and feel good about taking the next step, the AboveOCM team are here to help confirm your next steps.
Reach out to us today to find out more.
