Living a Strata lifestyle can be an amazing experience. Neighbours aplenty, amenities at your door, manicured gardens, concierge, café, swimming pool, gym and entertaining areas, all neatly packaged to provide comfortable living and/or generous rental returns.
Whether you’re currently living a Strata lifestyle or considering it for the future, it is important to understand how healthy the management of your Strata building is so as to best ensure your investment meets your expectations. Here are 8 Strata health check questions to ask.
1. Is there a Strata Manager?
The Owners Corporation and Executive Committee will often appoint a Strata Manager to work on their behalf. An effective Strata Manager will work to create a communicative, safe and mutually respectful community whilst also managing day to day operations including building upgrades, compliance and rules, regulations and legal obligations.
2. Is the Committee elected annually?
Each Owners Corporation will hold an Annual General Meeting (AGM) during which they elect an Executive Committee to hold the office-bearing positions of Chairperson, Secretary and Treasurer. A full Committee comprising of a cross section of lot owners who are actively committed, engaged and involved in maintaining both their and your investment will bring beneficial outcomes.
3. How regular are the Committee Meetings and Annual General Meetings (AGM)?
Regular Committee Meetings and Annual General Meetings provide the ideal forum for the voicing of issues, solution seeking and proactive decision making. Committee meetings should be held regularly, whilst AGMs should be held annually. A consistent record of delaying an AGM can be a sign of management issues whilst a missed AGM may be cause for more serious concern.
4. Is the Administrative Fund healthy?
A healthy Administrative fund will provision levies to cover the total everyday expenses throughout the year. When a healthy fund sinks into deficit, immediate action will be taken to recover the deficit and if the cause is likely to be ongoing, levies will be raised accordingly. It is important to be aware of any deficits, as you are purchasing a portion of the debt when you invest in the Strata lifestyle by becoming an apartment lot owner.
5. Is the Sinking Fund healthy?
Sinking Funds cover the cost of future capital expenses for both expected (long term) and unexpected replacement, repairs and maintenance in new and older buildings. Common expenditure items include security and safety upgrades, concrete cancer remediation, window and façade renovation, and replacement of common property items like carpeting, roofing and lift upgrades. Legislation disallows the transfer of funds between the Sinking Fund and the Administrative Fund, (and vice versa) so it’s critical that alternative funding solutions are available to ensure essential work can be completed without delay.
6. Is Strata Finance available?
Calculating Sinking Fund levies to cover future (and often unexpected) repairs, replacement and maintenance can be a complex task. It is reported that ‘1/3 of Stratas in NSW do not have sufficient funds available in the Sinking Fund to meet building maintenance and repair requirements’* so it is good practice to have a Strata Finance plan in place so that if the Sinking fund falls into deficit, cash can be injected promptly, to ensure replacement, repairs and maintenance work can be completed without delay. Additional benefits of Strata finance include streamlined cashflow, delay minimisation and possible taxation benefits.
7. Is the building fully insured?
Adequate building insurance is vital for protecting the building, common property and by extension, the investment of apartment lot owners. The building should be regularly appraised and updated by a registered valuer or Quantity Surveyor, and insured for at least the recommended value. If this is not done, it would be good to question why not?
8. Is compliance reporting in place?
Compliance with legislative requirements is mandatory and reduces the risk of exposure for apartment lot owners. Well documented and up to date reporting confirms that all legislative requirements continually being met.