Strata Levies Liabilites on Purchase

Why do you need to break the news to him? Doesn't he get his mail?

 

Disclosure statement mentions repairs and states its to be paid by the sinking

No i handle his accounts...he is an essential worker and been locked down and locked out.. the purchase was interstate.

I have just read The Current Disclosure Statement which mentions first repair and states this will be paid for by the sinking fund.

Second repair...agree to pay...but don't agree to the amount.

Hoping this is an accounting error.

 

Discuss it with the strata manager.

 

Sorry @Property101 but when you fail to disclose important details, like what the first and second repairs were, and then that the second repair was emergency (which there likely wouldn't be a vote for as strata manager/committee can likely just approve) you won't get clarity in any answer from the forum.

If the second repair/emergency occurred after the day of settlement your friend is liable, if prior then the vendor "should" have paid out of disbursements .

As for the sinking fund there will be long term planned works, interior/exterior painting (this could run from $12k to $250k depending on tbe size of complex) so you may see $50k in the sinking fund as being "very healthy" but by the time the projected works fall due they are often delayed as usually the funds aren't there/enough or a special levy has to be made.

Every complex I own in most owners are short sighted, I've managed to creep up the Capital Works levies over the years (citing inflation) but most seem to rather have $5 extra a week to blow on a coffee and IF we need money "we will just have a specially levy" instead

One complex in particular has $150k in capital works fund, (exterior re painting will cost $180k+) I've pushed for the funds to be invested in like a balanced Superannuation fund so that as a minimum it keeps up with inflation, but no it sits in a non interest bearing account going backwards

 

Something doesn’t add up!

So you say you heard it second hand, and he is beside himself after hearing about this large extra bill!
Then you go on to say!

Unless you have power of attorney or are the owner of the property, neither lawyer nor strata manager will speak to you on the details of this matter.

I think your friend should simply type them an email asking for the minutes of the meeting that determined the levy. The 90 seconds this will take will be worth the effort and give you all the information you need to take this matter further.

Always try and settle everything the easy and cheap way first. Everyone on line has given you the same advice. It is most unlikely you can simply not pay UNLESS There are no minutes of agreement to determine the levy. I’m aware of one block of 20 units with $600,000 in the bank but has an extra levy for every extra item that they wish to do as they are using the bank account for a major refurbishment in the future and the majority agree not to use it. This upsets the owner occupiers as they see the investors putting in tax deductible contributions to build an appreciating asset. This is not illegal if the majority of owners agree.

 

Thanks very much for sharing that information very interesting.

But from our side he would not have purchased the property knowing the minute he walked in the door he would be up for $4,000 he doesn't have.

Also have yet to speak to the accountant and ask what is required from his side for taxation i would assume that a large amount to a sinking fund would need to be supported by some documentation?

He has given written approval to strata management for me to act on his behalf as he has had major surgery and is definitely not up for all of this.

 

Understanding now.

We didn't request minutes as we took Disclosure Statement as word.

When disclosure statement referred to the repair to be paid by sinking fund...this didn't necessarily mean that new owner wouldn't have to contribute.

And as was mentioned before the previous owner may have voted on how this would be handled.

But unfair in all this is the new purchaser hadn't even received his welcome pack so had no say and knew nothing about anything, didn't receive the right to vote in time.

Previous owner had signed off so...?

My biggest concern with strata levies is:

Scenario:

Purchase new property Strata Levies...$10,000.00 per year.

Live there 30 years...so paid $300,000.00

All associated costs over 30 years come to $100,000.00

So basically $200,000.00 unspent plus interest.

Sell

New owner comes in like us above...still has to contribute to building levies...accepted...but

Who is actually the lucky person who finally gets access to using these funds?

If we are in at the 30 year mark and most buildings need repairs....Roof, Plumbing, Pool, Electrical rewiring etc..

So when you come to this buildings age you would assume that the funds would finally be released for major repairs/upgrades?

So that's our thinking...but now know this is voted on and at meetings, so important to be active in this regard.

Thanks everyone for your input.

 

Arent these all known risks when buying into something with body corp?

 

Don't think, it's dangerous.

Beginner's mistake - your solicitor should have requested the strata minutes unless you were under time pressure and didn't do your due diligence. Why take the vendor's word as gospel rather than undertake the searches?

 

Agreed mistake...we were under a lot of pressure due to purchaser having operation at exact time of purchase.

Wrongly thought that the Disclosure Statement was true word and summary...no further searches necessary.

 

I guess the take-away, as @Scott No Mates says, ask your Solicitor once they receive the contract to review and advise on any upcoming levy type expenses and pay them to do all the necessary searches.

 

In NSW, if there is no amended to the contract with regard to special levies, then any special levy struck prior to the contract date is the responsibility of the current owner, if it is struck after the contract date then it becomes the responsibility of the new owner.

- Andrew

 

Given that the OP is from WA , I have assumed the property is also in WA.

Normal purchasing in WA involves the standard Offer & Acceptance (O&A) Form.

WA real estate transactions normally only involve a conveyancer (unless it goes pear shaped) and if using a solicitor a Buyer would need to be pre-armed with the clauses they want included in the contract (O&A).

(NB: the Conveyancer and/or solicitor only get a copy after signing, unless pre-arranged).

It might seem horrific to Eastern states counterparts where contracts are exchanged, however, having bought and sold on both sides of the country I like the WA O&A system for its simplicity, cost effectiveness and not being able to be gazumped.

So, in general all the talk about having a solicitor check the contract is somewhat moot in WA after the O&A has been signed. However, a sale is also subject to full disclosure so it is pretty hard to hide something unless the Buyer chooses not to read what is being disclosed.

I only mention this for the education of those not from WA, as I often see comments that have no bearing on West Australian contracts of sale.