$2.7million Strata repairs...!

Ouch. Another reason to stay away from that type of investment.

 

I live in a Melbourne Docklands tower which is currently undergoing a multi-million programme of remedial works. The key issue is defective fire stopping between apartments where the walls between apartments abut the slab over. The fix is to cut away the adjoining ceiling, do the necessary, reinstate ceiling and repaint, requiring the apartment to be vacated for two weeks. Multiply by 500 and this is a hugely expensive operation which will take about 18 months to complete.

Thankfully this is costing us owners nothing and we all in the debt of a past OC chairman who shortly after appointment picked up that we were nearing the end of the defects liability period and this needed to be pursued at VCAT. The then building managers - appointed by the developer - did nothing to instigate or support this process. Another few months and we would each be looking at five figure bills.

This story a few days ago:

Residents in a new Melbourne apartment building could be forced to evacuate following the discovery of combustible cladding on the facade of the residential block, which has no sprinkler system to protect it.

Owners of the 78 units also face hundreds of thousands of dollars in a repair bills after being issued with a show-cause notice asking them why they should be allowed to continue living in the eight-storey building. The flammable cladding was detected at Harvest Apartments at 144-150 Clarendon Street in Southbank during a major audit of central city buildings by Victoria's building regulator.
...
An emergency order was issued by the council last Friday requiring smoke detectors to be installed in bedrooms of 12 apartments within 24 hours. It also demanded that heat attenuation screens be installed on windows on the southern side of the building within ten days.

"Tenants that do not wish to follow the conditions of the order will need to evacuate," Port Phillip mayor Mayor Bernadene Voss said.

Melbourne apartment building tenants faces evacuation after flammable cladding found

 

Im not sure how the developers get away with this, surely during construction there are checks in place to make sure everything is good! Even for a GF on the Gold Coast the council come and inspect the rough in for the electrical wiring before the walls are covered?! Yet in Melb they can build big towers with flammable cladding...... Crazy.

 

It's pretty dodgy what a large amount in a bag under the table can accomplish.

 

I looked into a pyrmont unit 2 / 3yrs ago where the whole roof top BBQ area had to be ripped up, waterproof membrane changed, planter boxes pulled out and waterproofed and new tiles and handrails reinstated and some new facade windows on the balconies.
$5.8 million later the area looks fantastic.

The issue is they use a private certifier, who is paid by them and isn't going to rock the boat too much otherwise they lose the client.

 

Sounds like the same building.

 

I remember you @Tony3008 from sommersoft days. lucky you have a good OC chairman. Majoirty of OC chairs and building managers in my opinion are not worth the money to hire.

 

Hmmm... come to think about it, the first unit I owned had a waterproof membrane issue too... one block then the next... it felt like long ago...

The common stuff though is blocked plumbing.... happens all the time. 34k or more.... (we have very deep foundations.... it was going to cost a bucketload to get past that). Tree roots and people shoving stuff into the plumbing they shouldn't.... (like... how does a t-shirt get into the plumbing!?)

 

We had a look at this block a few years ago when the units appeared to be going cheaply .

That is until you found out there was an upcoming special levy in the 100k's and they didn't know the full cost when we looked .

Cliff

 

That's pretty fortunate.
Good to hear that it sometimes works out. Surprised they didn't claim they went bust in the meantime.

 

I own in a complex which requires carpet replacement and paint.

Had to attend the strata meeting recently as the strata kept on rising - only a few people out of 40 owners typically attend this complex's meeting. I wanted to ensure the strata remained the same (or brought down), and if tidy up was required, a special levy be raised - it was going to be less than $1,000 per unit.

A few of the regular attendees were adamant on raising the strata by 10% - 3-4 times inflation!!!! There idea was this way the balance would be built up and eventually the strata could be brought down. They were totally against the special levy. My thinking was - why would you increase the strata - which is likely to be a permanent change - and instead arrange for the capital when needed. - and $1k wasn't much at all!

I arranged for our PM to send an email to all the units they manage in the complex, managed to get a proxy and two of the owners to come attend - we managed to keep the strata as is for the time being, with a potential special levy to come.

 

Depending on the exact state of the balance sheet I'd have been in favour of a levy increase. IMO having to raise a special levy for anything that could reasonably have been predicted - such as recarpeting or redecoration - represents a big fail on the part of the OC committee.

 

You see lots of unit blocks with the flash new modern render all falling off or other similar type of problems.

I saw a bunch of town houses near me where i can see all the termite damage on some rear properties, yet they still sell them all at full tilt....

Look closely at all things when buying places with strata and common areas.

 

Minor issues as in paint and carpet should all be within normal budget.

 

I have one where the projected total bill is $10m over 3yrs ...FML
we are 2 years in already ... have sunk too much in special levies
council wanted whole block (there are about 4 low rises and 1 high rise with lifts) to upgrade fire safety measures incl replacement of existing lifts
was my 2nd purchase so still quite newbie at the time - based it on emotion, the numbers never worked ... learnt a very expensive lesson

 

Normal levies are tax deductible for investors, a special levy is not!

 

Really? I'd think they should be....

 

Tax was not a driver for me

 

I do not think you would be right in regard to the special levy, it may have different rules and treatment, for what reason specifically do you say it is non deductible ? What was the money from special levy being spent on ?

PS the normal levy should allow for maintenance, it is normal for them to increase, it is also able to decrease, the OC controls this, whats needs looking at is why the increase is being proposed.

 

Less than 5 seconds on google .....

Rental properties 2012-13 | Australian Taxation Office

Body corporate fees and charges
You may be able to claim a deduction for body corporate fees and charges you incur for your rental property.

Body corporate fees and charges may be incurred to cover the cost of day-to-day administration and maintenance or they may be applied to a special purpose fund.

Payments you make to body corporate administration funds and general purpose sinking funds are considered to be payments for the provision of services by the body corporate and you can claim a deduction for these levies at the time you incur them. However, if the body corporate requires you to make payments to a special purpose fund to pay for particular capital expenditure, these levies are not deductible. Similarly, if the body corporate levies a special contribution for major capital expenses to be paid out of the general purpose sinking fund, you will not be entitled to a deduction for this special contribution amount. This is because payments to cover the cost of capital improvements or repairs of a capital nature are not deductible; see Repairs and maintenance and Taxation Ruling TR 97/23External Link. You may be able to claim a capital works deduction for the cost of capital improvements or repairs of a capital nature once the cost has been charged to either the special purpose fund or, if a special contribution has been levied, the general purpose sinking fund; see Capital works deductions.

A general purpose sinking fund is one established to cover a variety of unspecified expenses (some of which may be capital expenses) that are likely to be incurred by the body corporate in maintaining the common property (for example, painting of the common property, repairing or replacing fixtures and fittings of the common property). A special purpose fund is one that is established to cover a specified, generally significant, expense which is not covered by ongoing contributions to a general purpose sinking fund. Most special purpose funds are established to cover costs of capital improvement to the common property.

If the body corporate fees and charges you incur are for things like the maintenance of gardens, deductible repairs and building insurance, you cannot also claim deductions for these as part of other expenses. For example, you cannot claim a separate deduction for garden maintenance if that expense is already included in body corporate fees and charges.