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I'm about to buy into a strata (second one – first one was an investment, but this one's to live in) but my solicitor handling the purchase has raised a few issues regarding the strata report that he's received.
Firstly, a large number of the 120 (!) pages are apparently unreadable, so he's had to go back and request a readable copy. (Are strata reports normally that large – I would normally expect a 30-odd page report. There are 80 units in this strata).
Next, of those readable pages, the solicitor has pointed out that it looks like the admin fund may be tens of thousands in debit, yet the sinking fund is about 150K in credit.
There was one further issue regarding some possible defects which are the subject of legal action against the builder (the insurance company being involved), however one cannot find out what they are as the details are in the unreadable pages.
Realistically, with regards to this strata report, wouldn't there an obligation of sorts to the strata manager/agent to provide a full report, and definitely one that's readable?
It also strikes me as odd that the admin fund is in debit (my solicitor is guessing, from the readable pages, that it has something to do with incurred legal fees) – can this result in an unworkable strata as such?My solicitor (and I) are awaiting the revised report but could this be the hallmarks of an OC/EC not managing the funds properly (and the strata manager/agent playing games [with the unreadable report]), or simply a case of all things going wrong at once and I'm reading too much into it?
–Phil.
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Interesting – and I'm hoping some of our professionals will hop in on this one. I would say that a basic element of the obligation to provide the report would be that it was readable otherwise, techinically, it hasn't been provided.
However, one thing I would say is that given a choice between incompetence and conspiracy theories, I would always go with the former.
Lack of diligence by blissfully ignorant and badly organised ECs – often under siege from their owners at times of crisis – will turn problems into disasters. The result is, eventually, people like strata managers and building managers either just give up or weren't all that on the ball to begin with (because the strata plan in crisis goes with the cheapest option rather than the best one).
And that's how you end up with unreadable documents. Having said that, if there's a defects claim involved, any dirty underhand developer trick is possible.
Now I have a question for you: do you really want to buy into this building? Unless I could see what the problem was and how to fix it easily, that dot disappearing over the horizon would be me.
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
A low admin fund can be a sign that a problem has been dealt with, just as much as it's an indication that it's a problem that might exist. Obviously, you need to get to the bottom of this but, despite my comments about disappearing off over the horizon, a building that has had problems but has resolved them can offer real bargains if you get them on the upswing, when their reputation is depressing prices.
No building has no problems – the issue for the potential purchaser is whether they have been dealt with or are a continued drain on finances. Good luck!
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
Phil T said:
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Firstly, a large number of the 120 (!) pages are apparently unreadable, so he's had to go back and request a readable copy. (Are strata reports normally that large – I would normally expect a 30-odd page report. There are 80 units in this strata).
Next, of those readable pages, the solicitor has pointed out that it looks like the admin fund may be tens of thousands in debit, yet the sinking fund is about 150K in credit.
…..
–Phil.Hi Phil,
The report does sound rather large and you are more on the money expecting about 30 pages, or less. One thing i have noticed is that different people / companies give a different amount of detail in their strata reports. As important as shopping around for the property you think is a good buy is shopping around for a strata inspector who offers a quality report at a good price.The admin fund being in deficit and a sinking fund with good credit reminds me of home, the deficit is a big red warning light as there will be some management issues behind the cause. My SP ran a deficit in the admin fund for two years straight with a loss of equity being the end result. Following those two years it is now the highest levy ever and the hole in the admin fund was plugged by transfering money from the sinking fund to the hole. The dent put in the sinking fund will not be addressed; robbing Peter to pay Paul. We still have poor financial management.
Perhaps your time is better spent looking at property with a better management than looking into the issues with this particular property but Jimmy gives some nice advice as you can get some real bargains on the upswing, you just need to be sure that the upswing has started — that will take time so one decision seems to be where is your time best spent.
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