Buying into a Body Corporate: What prospective buyers need to know!
As the unit market in Brisbane switches into recovery mode, we are receiving more and more enquiries from investors and homebuyers looking to purchase a unit or townhouse. One of the most common questions we are asked is: “What do we need to know about buying into a body corporate?” Brisbane buyers advocate, Matt Reeves explains:
The vast majority of unit and townhouse complexes in Brisbane are part of a Community Titles Scheme (CTS). In a CTS, each lot owner automatically becomes part of the body corporate which manages the common ownership of the property. Being a member of a body corporate brings significant financial and legal responsibilities, and can be a source of conflict. It is therefore important that prospective buyers understand exactly what they are buying into.
Body Corporate Disclosure Statements – What is required by law?
Section 206 of the the Body Corporate and Community Management Act (1997) requires owners of properties in a CTS to provide prospective buyers with a body corporate disclosure statement. The disclosure statement needs to be given to the buyer BEFORE entering they into a contract of sale.
The body corporate disclosure statement provides basic information about the body corporate including:
- the name and CTS number of the body corporate
- the real property description of the lot
- the name and contact details for the manager and secretary of the body corporate
- whether or not there is a body corporate committee
- the body corporate fees payable for the lot
- if there are any improvements on common property for which the buyer will be responsible
- if there are any body corporate assets
In many cases the information contained in the Disclosure Statement does not contain the level of detail necessary for buyers to make an informed decision. It is then left to the buyers to perform any further due diligence.
As buyers advocates, we understand the value of performing a more detailed investigation, and routinely recommend a comprehensive review of the body corporate records to all clients purchasing units or townhouses. Furthermore we recommend that a special condition be added to the contract of sale allowing us to terminate the contract without penalty should the results of the body corporate search not be to our satisfaction.
It is best to use an experienced strata agent to perform the body corporate search. From experience we have found that identifying what is NOT in the records, can be as important then noticing what is!
What to look for when performing a search of the body corporate records
When reviewing body corporate records it is important to pay particular attention to the following:
Body Corporate Financial records
- Levies: Are there any proposed changes to levies, and if so, what are the reasons for these changes.
- Bank accounts: What is the current balance of the administrative and sinking funds? Is there enough money to cover the costs of building maintenance and upgrades? Are any lot owners in arrears?
- Certificate of Currency: Is the building currently (and adequately) insured? Check that the building is insured for replacement value; and find out whether or not there is flood and public liability insurance.
- Claims: Have any claims been lodged by (or against!) the Body Corporate.
- Certificate of Classification: Is the building compliant with council regulations and can it be legally occupied?
- Pool Safety certificate: If the complex contains a shared pool, is it compliant with safety regulations?
- Fire Safety Certificate: Is the complex compliant for fire safety?
Minutes of Meetings
- Increases or special levies: Are there any unforeseen maintenance works, upgrades or other problems in the complex?
- Caretaking agreements: Is there an onsite manager, and have there been any disagreements or complaints?
- Administration agreements: Is a body corporate manager employed, or is this role performed by the committee?
- Court action: Has legal action been instigated by (or taken against) the body corporate.
- Harmony: Are there any major disagreements within the committee, or between lot owners? Have there been any breaches of the by-laws
- Building defects: Is the body corporate aware of any major structural or pest problems?
- Extraordinary General Meeting (EGM): Has an EGM been scheduled and why?
- By laws: Will complex regulations interfere with how the purchaser wants to use their lot or common property. What is the policy regarding pets?
- Exclusive use areas: Does the lot owner have the sole use of any courtyards, balconies or parking spaces?
- Sinking fund forecast: Has the body corporate budgeted for the ongoing maintenance of the building?
There are undoubtedly some risks associated with buying into a Body Corporate. By performing a comprehensive review of the body corporate records, buyers can gain the best possible understanding of the complex they are buying into. Being fully-informed gives buyers the confidence to proceed to settlement when a suitable property is found, or evidence to terminate a contract if anything unexpected is revealed!
For more information regarding buying into a Body Corporate consult the Queensland Government website: click here
If you are interested in using a Brisbane buyer’s advocate to help purchase a unit or townhouse in Brisbane please don’t hesitate to contact us. We’d love to help!