DEVELOPERS are deliberately under-quoting the strata costs of some off-the-plan developments by as much as 50 per cent, according to industry experts.
The ruse to lure buyers is one of the biggest ‘bug bears’ for the strata industry, say operators.
Buyers could get a nasty shock once the building is complete and the real costs emerge.
With apartment living on the rise in Perth, the problem is tipped to grow in coming years and experts are urging buyers to make sure they check the strata costs of similar developments that are already built and talk to strata experts beforehand.
Jeannette Anderson, founder of strata report compiling company Strata Data WA, said developers under-estimating costs was a real “bug bear” for the strata industry.
“The developers sometimes set unrealistic budgets,” Ms Anderson said.
“When they have sold 60 to 70 per cent of the apartments they transfer ownership [of the strata company] to the owners.
“In the first year of the handover, the owners have to do the budgets and they get a list of the facilities.
“Once they’ve crunched the numbers, levies sometimes rise by 50 per cent.”
Local strata expert John Angus, author of Understanding Strata Titles, said this happened mostly in large apartment complexes with special facilities.
“With new developments, there is that danger that the budget and levies have not allowed enough,” Mr Angus said.
“It happens quite often when people buy off-the-plan.”
Mr Angus said selling agents were required to disclose the proposed strata plan, by-laws and estimated expenses for the first year but some of the costs may increase in the second year as maintenance requirements kicked in.
“There may be less expenses in the first year than in the second and ongoing years,” he said.
Mr Angus said while the problem still happened quite often it was being countered by the development industry increasingly consulting strata experts on costs.
Strata Community Australia WA president Andrew Chambers said developers sometimes underestimated prices for marketing reasons.
“It’s not good to have big strata levies,” Mr Chambers said.
He said it had been happening for a number of years, although not on a large scale.
Mr Angus said buyers could talk to specialists to find out whether estimated levies were well-considered.
Urban Development Institute of Australia (WA Division) chief executive Debra Goostrey said fees could sometimes change if there were rises in external costs or extra services were added once residents moved in.
‘The initial strata fee calculation is undertaken either by the strata manager or by an experienced person based on the current maintenance costs in other similar buildings,’ Ms Goostrey said.
‘Things can change, especially if there are large rises in external costs such as electricity between when the contract being signed and when the building is occupied.
‘The rule of thumb is the bigger the common area and the more facilities, the more it will cost to light, heat and maintain but on the positive side you get to use all of those facilities and offset the costs by sharing them with others which is a great outcome.
‘Sometimes strata fees can appear to be undervalued because services are added by the residents soon after they occupy the building so it is important to go to budget meetings and read the information provided by the strata manager.’
The UDIA advised purchasers to:
???????????????????????? Ask who calculated the strata fees and ensure that they are experienced.
???????????????????????? Ask around to see what other people pay in strata levies and understand the difference a pool, spa, gym and lift make to maintenance costs.
???????????????????????? Check the contract and/or ask the sales agent when a strata manager will be appointed.
???????????????????????? Be aware that the calculations can be undertaken up to two years prior to moving in and, while some price rises are factored in, make allowance if there is a sharp rise in energy or labour costs.