Strata reports - buying Sydney apartments

Figured this story was worthwhile sharing given the topical nature of apartment problems in Sydney.

Friend of mine is (was) in the process of buying a property (~15k from the CBD near a station on the airport train line). Offer made, offer accepted on Thursday. Agent keen as you can imagine to get deposit paid ("please pay your 0.25% ASAP and come in to sign contract" etc etc). Friend's husband has been overseas the past week and said earliest it can be done is Monday.

Building is about 10 years old, looked reasonable, decent rental yield - the negative gear would not be onerous, probably slightly positive for them after tax.

The strata report came back today. Estimated structural building, balcony, basement rectification works plus re-waterproofing of every unit bill of $1 million (~$56,000 per unit) has been identified as being necessary (half the items written as urgent, the other half as essential). Some items were not even quoted because they could only be assessed when walls are ripped out, so the final expected bill is going to be much higher. Special levies were proposed for the next three years, plus another one to make up for a deficit in the admin fund (sinking fund had $120k in it).

Friend texted the agent saying "no thank you". She said to me that's "the best $330 I've ever spent, but I shouldn't have had to spend that in the first place". We started talking about consumer protections - you have more consumer rights buying a toaster from Harvey Norman that you do spending the best part of a million bucks on a place to live.

The agent texted back and actually asked for a copy of the report! She told him (in more colourful language) to pay for it himself.

- For a first home buyer as they were, the whole process has left them feeling like they were being scammed from start to finish. Should it be this way? The buyer has to find this out for themselves when a seller is trying to offload a "defective" product?
- The law is moving in the direction of requiring agents to provide the building and strata reports, but there are so many loopholes it is useless. This agent said "oh we can't find it and the one we might have is a few years old so we can't give it to you. It might take a while to find so in the meantime, come in and sign the contract and we can get the process moving".

Speaking of law - this seems a bit like criminal law.... a guilty crim shouldn't tell their lawyer that they did it, because the lawyer has to be honest in court and it would change their defence strategy. A seller shouldn't tell their agent there are issues because the agent has to be honest too?

Anyway. This is a good reminder to do your diligence. Thanks a million.

 

Your friend dodged a bullet!

 

Sydney apartment buyers more cautious, agents say, as it’s revealed a fourth building has been abandoned

Due diligence is essential, the onus is on the buyer, otherwise they may suffer the consequences of "caveat emptor" ...

 

The question is should it be that way? Can a buyer of an OTP contract do due diligence before a sod is turned? Why can the whole industry (builders, developers, certifiers, agents etc) get away with no consequences, and it's the buyer holding the can?

It's like lambs to the slaughter... No one is accountable for what amounts to professional negligence (i.e doing a half arsed job).

 

Bexley? Kogarah?

I'd love to turn up to an open and ask the question, " Are there any known issues with the unit/complex that you are aware of?"

 

It is very likely that the vendor did not tell the agent which is why he asked you for your copy. So I’d guess not so much the agent covering up but a vendor failing to disclose.

 

Recently I was interested in buying a lot in strata block. Through a solicitor the strata report was going to cost me $300.

Anyways, I know the strata managers of the place I was interested in, so I rang them and asked if I paid them $30 could I browse the reports of SP WXYZ. I said to the lady there, "you know me coz you manage my lot in SP ABCD".

She replied "sorry datto due to privacy you first have to get an authority from the vendor's solicitor". What the? Just that will probably cost me $300.

I think these reports should be provided by the vendor with their contract of sale.

 

A few stops down on the airport train line.

 

No, it won't, Datto, It won't cost a cracker. Because the vendor wants to sell it to you, so the vendor will get the solicitor to send an email to the strata manager authorising a strata search (and the vendor will then absorb the cost...), and then you and/or a strata searcher can book a time with the strata manager and turn up and search the database.

But you will have to pay for the strata manager's time in 15 min blocks, printing fees, and some other ******** whilst you suss out what's going on in the block.

You should also do a search on the lots that are directly above and/or below the lot you are interested in, just in case, for example, some ferals reside there, and have decided to install floorboards, and their offspring have butter fingers when randomly holding boxes of snooker balls at any given hour, or some entrepreneurial disrupters have decided to allow short term lets in their lot for holiday makers to have parties each weekend.

 

Be interested to know if the listed price will change given the new details coming to light...

 

I'd suggest a few possible outcomes from this:
1. Property is withdrawn from sale and re-launched with a different REA (after the first REA has a falling out with the vendor).
2. Listing REA retains the listing but price is lowered and full disclosures made.
3. Vendor decides to hold and fix issues and then sell in a few years when all this is behind them. Some strata search companies, depending on the price you are paying, will only go back 2-3 years - and this will not show up.

 

Agent called my friend back on Friday. Telling her he's got another 3-bed unit down the road for sale and this one "definitely does not have strata issues".

Granted that was a ballsy move but she didn't take the bait