It might have taken you years to find that perfect apartment: north-facing, solid brick walls and a sparkly new kitchen.
But just as you turned on the taps to check the plumbing and scrutinised the floor boards for signs of water damage, you need to think about the state of the entire apartment block before buying into it.
The lobby might have flashy new tiles and the windows might be squeaky clean, but it’s important to scratch below the surface and make sure the building is being run well and there is money to spend in case things go wrong.
Buying an apartment is obviously different from buying a house. As the owner of a house you are solely responsible for the repairs on your property, from replacing leaky pipes to cutting down dangerous trees.
If you own an apartment, you rely on a collective – the owners corporation – to make sure the broken-down elevator is fixed or the dirty windows are cleaned.
Before signing on the dotted line, it’s important to look into the building’s strata scheme to detect any problems there may be, explains Darel McBride, the managing director of online building inspection network Easy Path Inspections.
‘The key things you should be looking for is the administration and the sinking fund,’ McBride says.
The sinking fund is a pool of money reserved for emergencies and major works on common property.
‘A lot of people ask me how much money should be in a sinking fund, and if there’s some kind of formula, but it really depends,’ McBride says.
The more facilities the building has, the more costs there will be, and a prospective buyer should factor in things like elevators, gardens and swimming pools.
There might also be a good reason a sinking fund has little money in it, and that could be if major works were recently undertaken.
A sinking fund should also come with a long-term maintenance plan, which should mention major repairs the building will require over the next 10 years as well as the expected costs.
But prospective buyers interested in a unit in a building with less than about 10 apartments, may be surprised to find there is no 10-year plan at all.
That’s not necessarily a bad thing, according to McBride.
‘While bigger apartment buildings should have a 10-year plan, we tend to find smaller schemes don’t tend to have one,’ McBride says.
He says owners in smaller apartment buildings tend to wait until things need to be repaired and when the time comes it is still practical to sit down and have a discussion together.
Strata insurance is also something all prospective buyers should investigate, says McBride, but be sure to clarify how exactly it relates to the building.
‘You need to know exactly what the strata insurance covers, not just that the strata plan has insurance.’
A clue that there may be problems with the management of the building or its finances, is when repairs are being skipped, and Annual General Meetings (AGMs) are a great way to find these things out, says McBride.
‘With AGMs we are looking for a history of events in the past and what issues have been raised but haven’t been fixed.’
He says the AGM minutes should effectively go back to the beginning of the plan, but he says looking back three to five years is a good idea. Darel McBride’s advice to those buying an apartment:
1. Don’t bother with a pest inspection for an apartment in a building. A pest inspection will only ever be for that particular unit and you can’t see what’s going on in other units anyway.
2. Instead, look at a strata inspection report and it should tell you whether there has been an annual pest inspection.
3. A building inspection is also limited to the one apartment not the entire block, but a strata report will alert you to any building problems that have been raised, and any repairs that have been completed or overlooked.