Buying property with other people
PROPERTY prices are on the rise in the inner suburbs, where most of the value is in the land, and, as a result, more buyers are going to find themselves priced out of the house market.
They will turn to townhouses and apartments as a more affordable alternative. In many cases, they're not only buying the title to a property, they are also taking on a wider responsibility to other owners in the development, by joining an owner's corporation. Before you buy in a development with an owner's corporation, it is essential to understand your potential financial liabilities and other responsibilities as a member.
An owner's corporation is made up of the owners of all the properties in a development and is responsible for insuring, maintaining and improving the common property.
Many corporations engage professional managers to run the organisation's day-to-day affairs on their behalf.
Common property may include external walls, roofs, fences, rubbish bin enclosures, driveways, shared courtyards and shared laundries. To pay for the upkeep of common property, members of an owner's corporation are generally required to pay regular contributions. They may vote to include additional levies to fund one-off outlays such as repainting the building's exterior, repairing the roof or replacing the windows.
Before bidding at auction or negotiating a private sale, you should obtain an owner's corporation certificate which should form part of the vendor's statement and tell you whether the corporation is planning any cosmetic or structural works, along with their estimated cost. Even when the cost is divided among a large number of other owners, your share may be costly.
Given you are already spending hundreds of thousands to buy the property, the cost of works to common property may be the straw that breaks the camel's back. The certificate should also detail your share of ongoing fees, which will help you budget for your holding costs over the long term.
Once you've bought, it's essential to take out insurance. While the owner's corporation is responsible for insuring the common property, that is as far as its liability extends.
As an individual owner, it is advisable to take out insurance to cover the contents inside your property and include a public liability element in case a third party is injured on your premises. If you're a landlord, it's a good idea to take out landlord protection insurance to cover you in the unlikely event that your tenant maliciously damages your property or leaves without paying the rent.
The owner's corporation is also responsible for setting and administering rules which govern the activities of residents in relation to the common property. Depending on the corporation, these rules may govern issues such as affixing external air conditioning and hot water units, colours to be used in external repainting, acceptable uses for balconies, covering of floorboards to minimise noise, disturbance to other residents and pet ownership.
The greater the number of apartments or units in a development, the more owner's corporation members there are, and the harder it can be to reach agreement on issues. Some owners are highly motivated, while others prefer to keep a lower profile and may deal with the corporation via their property managers.
By knowing your financial liabilities and responsibilities to the corporation before you buy, you'll be well poised to enjoy the benefits of owning your townhouse or apartment from the start.
Posted by Tony Slack - Geelong Advertiser on 30th May, 2013 | Comments | Trackbacks
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