Below are example articles taken from the toolkit for owners corporations.
Approval has been given for works in the subject lot
Background
If this article has been included in your report it means a document has been sighted giving approval for works in the subject lot. That document should be attached to the report or the Contract for Sale.
This is an important issue for buyers because the terms of that approval will usually bind you if you become the owner, particularly where a by-law has been passed.
In relation to the works themselves, if there are issues of concern which are not identified now, it may mean you have no practical recourse against the vendor, particularly if the terms of approval have not been followed when the works were undertaken.
That means issues of this kind need to be identified now. If they are present, they should be resolved with the vendor prior to the time you become the owner.
To assist you do this, we have prepared this article to provide you with information that will help you identify and understand any issues of concern.
Because those issues are often complex, we recommend you seek advice from your lawyer/conveyancer about any issues that may apply to your lot.
1. Approval related issues
There are usually 3 different factual situations as follows:
1.1 Approval for works undertaken
In this instance, works have been approved by the owners corporation and already undertaken by the vendor.
In many instances, the owners corporation will not have inspected the works after they have been undertaken. That means there has been no ‘sign off’ that the works have been conducted in accordance with the terms of their approval. That does not mean that the owners corporation cannot require rectification works to be undertaken if at a later stage, it becomes aware that the original works were not conducted in accordance with the approvals.
Where that occurs, in most cases the cost of the rectification works will be charged to you as the owner if you are the owner at that time.
That means you should get an appropriately qualified tradesperson to check the works with the approvals given to ensure they comply. In some circumstances it may also mean checking whether appropriate council approvals have been obtained.
In other circumstances, it may mean employing a specialist tradesperson. For example, if the works related to installation of an air conditioning unit/system, an expert in that area preferably in relation to the brand installed should provide a report.
It is important your advisors also check whether any warranties still apply to the works undertaken. If they do, your lawyer/conveyancer should ensure those warranties are assigned to you at settlement of your purchase.
Your lawyer/conveyancer may also consider including a clause in the Contract for Sale. The clause would include a warranty from the vendor that all works were conducted in accordance with all necessary approvals.
1.2 Works are still to be undertaken
In this instance where approvals have been given and works have not yet commenced, you should retain an appropriately qualified expert to advise you on whether the terms of the approval go far enough.
For instance, the approval may prohibit major renovation works. The expert you retain may take the view that the works can only be conducted if major renovation works are undertaken. That means amended approvals will need to be sought from the owners corporation.
In other situations your expert may be of the view that council approvals may be required for the works. Owners corporations and individual owners can become concerned if councils become involved in approval processes. This is particularly because council involvement can often trigger unrelated orders relating to such matters as fire safety for the complex.
Of course, you should also cost the works to ensure they are within your budget.
1.3 Works are underway but not yet completed
The issues referred to in parts 1.1 and 1.2 above apply in this instance, both to the works already undertaken, and to the works still to be undertaken.
In addition, it is likely you will be asked to take an assignment of any building contract. Your lawyer/conveyancer will be able to advise you on issues arising from such an assignment.
2. Repair/maintenance and replacement issues
The terms of the approval will also require you to keep the approved works in good repair, nearly always at your cost.
They may also require you to replace items if they have worn out. For example, if an air conditioning unit cannot be repaired, you may be required to replace it at your cost. That could be expensive.
Your lawyer/conveyancer will be able to interpret the terms of the approval to let you know the extent of your ongoing obligations. Once you are aware of these details you should arrange for appropriate experts to inspect the works to let you know:
- their current state of repair;
- where necessary, the likely cost of bringing them into a state of repair and maintaining them at that required level; and
- if they need replacement, the cost of that replacement.
3. Insurance related issues
In some situations, the terms of the approval by the owners corporation will require you to keep the works undertaken/item installed insured. Even if the terms of approval do not require insurance, you should keep in mind that these works are your works whilst you are the owner of the lot, and may not be covered by existing insurance policies.
That means if they are damaged or destroyed, you may not be able to rely on your own insurance policy or any insurance policy held by the owners corporation to compensate you for their loss/cost to rebuild/replace.
Enquiries should be made of the vendor as to the insurance position. You should also speak to your lawyer/conveyancer and insurance broker to discuss the matter.
A by-law has been passed imposing on individual owners obligations in relation to repair and maintenance of particular items in their units
Attached is a by-law which absolves the owners corporation from repair and maintenance related responsibilities in relation to items described in the by-law. Some or even all of the items described may be present in your unit.
Your lawyer/conveyancer can explain to you the extent of this clause. You will need to understand whether the by-law extends to repairing, maintaining as well as replacing items.
For example, if one of the items is an air conditioning unit and it breaks down and cannot be repaired, the by-law may require you to replace it at your cost. That could be expensive.
We recommend that you arrange for the items covered by the by-law to be inspected by an appropriately qualified tradesperson to ascertain:
- their current state of repair;
- where necessary, the likely cost of bringing them into a state of repair and maintaining them at that required level; and
- if they need replacement, the cost of that replacement.
You may also wish to check with your insurer whether the items are covered under the insurance policy you intend taking out to cover the contents of your unit.
If any items are still under warranty, your lawyer/conveyancer may wish to seek from the vendor warranty documents in relation to items that have been recently insured. You should discuss this with your lawyer/conveyancer.
Buying into an older strata complex
Background
Strata legislation was first introduced to New South Wales, and indeed the world, in 1961. Prior to that date, apartment living in New South Wales generally consisted of company title complexes, where owners bought shares in a company which owned the entire complex. The shares gave them an exclusive right to occupy a specific apartment in the complex.
Many company title complexes have been converted to strata title, and still survive to this day.
For modern day buyers it means that they have opportunities to buy into apartments which may be over 100 years old. Even those complexes built after strata legislation was first introduced in 1961, are now approaching 60 years of age.
For buyers contemplating purchasing a lot in an older complex it is important to take into account that generally the ongoing repair, maintenance and upgrade expenses are higher than in newly constructed complexes. That is because there are at least two further layers of expense. Newly constructed strata complexes generally only have one such layer.
1. Keeping the original structure in repair can be expensive
The first layer of expense relates to the fact that the complex could be up to or even over 100 years old. Because of its age, it is often more expensive to conduct repair and maintenance works.
Sometimes it is difficult to obtain materials to repair these structures which means they have to be created by hand (for example, doors and windows). In some much older structures, skills used in constructing the original building have sometimes been lost and new techniques need to be developed to complete repair and maintenance work.
In many cases, older complexes are of historical significance. That means there may be statutory and planning requirements preventing changes to be made when upgrade works are required, particularly to facades.
For example, in modern strata complexes when exterior windows require replacing, the more modern and less expensive aluminium window surrounds can be used. In older complexes, with lap and sash wooden windows, statutory authorities generally require replacement windows to be of the same type. In that event, the construction and installation processes can be expensive.
For buyers, it is generally impossible to arrange for thorough inspections of all of the original structure to be undertaken. This is because of access restrictions to the whole site, and because invasive inspections involving techniques such as drilling will not be permitted.
It is also important to keep in mind that the developer who converted the complex to strata title will not have renewed/upgraded all of the original structure. Council may have only required fire safety and WH&S upgrades to have been made, and then only to the standard applying at the time of the conversion.
That means buyers are often taking a chance of incurring expensive age-related repair and maintenance issues when they buy into an older complex. Common issues of concern with older strata complexes include:
- Electrical services. Often switchboards need upgrading not only to deal with age related issues, but also to cater for the heavy loads modern appliances such as air conditioners apply;
- Window, roof and guttering/downpipe repair/replacement
- Driveway repair/replacement
- Building foundation works including issues of rising damp
- Fire safety and WH&S/asbestos related expense
Any of these works can be expensive.
Ways for a buyer to identify age related repair and maintenance issues
Strata records inspection
In the same way that a buyer of an older motor vehicle will want to investigate its repair and maintenance history to make sure that it has been well maintained, so buyers in older strata complexes can establish through an inspection of the records of a strata complex, the repair and maintenance history of the complex.
We can look for evidence of expenditure on items such as the ones referred to above.
That means when undertaking inspections of the records of an older complex, Metropolis accredited inspectors will report on the repair and maintenance history for the last 7 years.
Of course, they can only do that to the extent that records are made available to them. It is relevant that strata managers are not required to keep strata records for more than 7 years.
Building inspections
With older strata complexes we always recommend a building inspection be undertaken to identify age related concerns. You should check that your inspector is familiar with strata complexes. The repair and maintenance issues are very different to free standing homes.
2. Service upgrade related expenses
Older strata complexes have a second layer of expense. They relate to installing 20th and 21st century service related additions to an older complex which was never designed for such additions. This could include fire safety devices, modern plumbing, electrical upgrades (for example to ensure there is enough capacity to run air conditioners), intercoms and the internet. These additions often can become the subject of extra expense because of their non-standard nature in the context of the original development.
It is particularly common for upgrades relating to installing modern equipment/facilities to be more expensive.
Installers will often charge more to upgrade facilities such as intercoms, Foxtel, and internet broadband because of age/conversion related issues in older strata complexes.
Buyers can ask their building inspectors to specifically comment on whether it is apparent that service related upgrades have been undertaken. Metropolis strata inspectors can often also provide such information from their inspection of the records as mentioned above.
Conclusion
Some of the most desirable and iconic accommodation in New South Wales is to be found in older strata complexes. The comments above are not meant to deter buyers from purchasing lots in this type of accommodation. Rather, they are meant to inform buyers that they should be aware when buying into an older complex that ongoing repair, maintenance and upgrade costs are often more expensive than those in a newly constructed complex.